In the history of popular music, no organisation looms as large, or catches more flak, than the record label. This is not without good reason. Though labels were foundational to how the music industry became the cultural and economic juggernaut that it is today, the use of outdated or exploitative contracts, stagnant business models, and falling artist royalty payments – despite massive growth in industry revenue – has left many musicians questioning the benefits of ‘signing’ to a major label.

Web3 promises an alternative, an escape hatch for independent artists looking to leave behind a hugely consolidated environment for fresh territory. Early success stories of artists self-releasing, retaining full ownership of their music, and earning as much as they could before (sometimes more) helped solidify a vaguely ‘anti-label’ narrative. Doing it “without the industry” became a rallying cry. In this new paradigm, labels were the problem and web3 the solution, or, in a milder version, the nature of web3 simply rendered traditional labels irrelevant.

Against this backdrop, the recent proliferation of web3’s very own record labels might come as a surprise. Nonetheless, an increasing number of platforms are offering the same bundles of upfront capital, networking, artist management, PR, and distribution support that fundamentally characterises the record label. Some define themselves as such, some do not, but whether it’s Coop Records, Good Karma Records, or The Hume Collective, something new is clearly taking shape in the web3 music industry.

Milo Lombardi, better known to the world as Nifty Sax, was one of the earliest pioneers in web3 music. A classically trained saxophonist, his Spheres collection was an essential blueprint for how musicians could take full advantage of web3’s capabilities to release engaging music NFTs. Not long after that initial drop, Milo, and co-founder Robin Spottiswoode, launched Nifty Music, the ‘web3 music accelerator’ behind some of the most well-crafted, and best-selling, music NFT collections in the world.

“It's a complete service,” says Milo. “We create the project together with the artist, and then we can provide the strategy, the marketing, the technology, the whitelist, up to the creation of the project itself – i.e., the royalty structure and the generative aspect of the artworks.”

Asked whether it would be accurate to describe Nifty Music as a record label, Milo takes a moment before responding. “It is, in a sense, a label – but not in web2 terms. It's something new.”

One of the key differences that Milo sees is in how Nifty Music has built a following. “If you look at a proper label,” he says, “you will have a style, a sound coming from that label because that’s what they’re looking to put out.” By comparison, Milo and Robin don’t restrict themselves to any specific genre. Instead, a Nifty Music release is distinguished by how each collection is made. “We don’t really care about the style of music,” he explains. “What people look for in our drops is how cleverly they're put together – there's still a style but it's not in the sound of the music, it’s the style of the drop. Maybe that's what a web3 label is: a style of drops that collectors can rely on.”

“It is, in a sense, a label – but not in web2 terms. It's something new.”

— Milo Lombardi, Nifty Sax, co-founder of Nifty Music

Another thing that’s notably different is Nifty Music’s approach to the financial side. Gone are the traditional record contracts that give labels an 80% cut of each sale and the artist 20%, gone is the transfer of ‘master rights’ that gives the label ownership of an artists’ recordings for decades, or in some cases perpetuity, and gone are the long-term obligations that commit artists to multiple releases.

Instead, the first three artists who released with the company retained an astounding 80% cut of each primary sale. Moving forward, Milo says they’ve settled on a 35/65 split on primary sales in favour of the artist – to put that in context, even Kanye struggled to negotiate a 22% royalty cut with his label. It is also worth noting that the artist is under no obligation to stick with Nifty Music after their collection drops. In fact, Milo says it’s their goal to help artists learn how to do it all themselves should they wish.

“That's our ethos,” he says. “Ideally an artist who passes through us will have learned everything there is to know about making it on their own.” In keeping artists fully informed on the release process and developing the skills needed to go independent, Nifty Music's relationships with artists must necessarily be built on respect, shared vision, and mutually-realised gain – rather than on contractual obligations. Over the long-term, this creates a highly mobile artist; able to fluidly move between independent releases and label backing depending on their needs. For labels, this shifts their incentives to discovering new talent rather than focusing on already-established artists.

The Nifty Music Academy is testament to this ethos, an educational arm of the company. Rather than the one-on-one working relationship they cultivate with artists like Violetta Zironi and Fifi Rong, who now have the freedom to strike out on their own, the Academy works with groups of twenty or so musicians to offer a similar learning experience but on a larger scale.

“It gives them all the same strategies and technology that we give to our professional artists, but in a classroom kind of environment,” says Milo. “That way we can help more people at the same time.” For these students, Nifty Music takes no percentage but instead charges a single upfront fee, the same as any short academic course, payable at the beginning of the course or after their first drop.

“Ideally an artist who passes through us will have learned everything there is to know about making it on their own.”

— Milo Lombardi

Enterprises like Nifty Music are web3-natives, built by people who have been present in the space from its early days. At the same time, web2 labels are not sitting idle – increasingly, major industry forces are turning their attention to the potential of NFTs and making inroads into the web3 space.

Tony Barnes sees this as a potential positive for artists looking to scale up. A music industry veteran who is now co-founder and CMO at Karta, a metaverse gaming studio with clients like Unilever and Fnatic, he notes that “record labels do invest large sums of money into developing an artist and, when it is done right, can do it on a global scale. Labels are not very good at the early phases of an artist’s career, but once an artist has a solid fanbase and community, then they can be excellent at taking an artist to the next level.”

A music career is a multi-faceted endeavour that becomes ever more complex as artists scale up. Managing a highly successful music artist – one that consistently writes and records new material, regularly tours internationally, and undertakes global media campaigns - generally takes a team comprising several specialised contributors. It’s at this level where some form of label support becomes more important.

Indeed, traditional labels are well placed to provide a bridge between the hundreds of millions of music consumers who use streaming subscription services in web2 and the small, passionate collector communities we see in web3. If even a small percentage of streaming subscribers can be converted to collectors, or if web3 artists can be given wider web2 exposure, then the space as a whole may benefit.

Of course, stepping into web3 is not an easy transition. There are fundamental differences between web2 and web3, not only with respect to the technological and legal structures, but also in terms of the philosophical underpinnings. As Cherie Hu argues, founder of the music research DAO Water & Music, a clash of ideologies seems certain between those who have helped build web3 to its current state and web2 businesses looking to migrate. Tony anticipates similar issues, noting that traditional labels have a “major lack of understanding and mistrust of this space at senior level, and the tendency to apply outdated models to new technology.”

Rob Abelow has a foot in both camps. He’s the owner of the independent music label Roll Call Records and recently founded Dopr, a web3 music discovery. He suggests that these knowledge gaps will be filled by third parties. “More traditional label setups can offer significant value to artists,” says Rob. “But if they do not have web3 expertise or infrastructure, that should be offloaded to a team which does.” It's an approach that Rob says he’s seeing “happen more and more.”

“Labels are not very good at the early phases of an artist’s career, but once an artist has a solid fanbase and community, then they can be excellent at taking an artist to the next level.”

— Tony Barnes, co-founder of Karta

In some sense, the entry of labels into web3 was inevitable as soon as music artists began to successfully utilise the technology. Exactly how web3-native labels will grow over time, or how web2 labels will fare in this space, is difficult to predict. Much will ultimately depend on artists and how they themselves define ‘success’. In a sense, web3 is a vindication of Kevin Kelly’s 1000 True Fans hypothesis: with the internet, creators only need to find a thousand core fans to earn a comfortable wage.

However, for web3 artists who dream of stadium gigs and sold-out world tours, or even more than a five-figure salary, the resources of major labels still hold the key. “[Major labels] have huge teams,” says Tony. “Passionate and experienced experts in 50-plus markets in the world – digital, marketing, commercial, brands, radio, press – all working on a local level to promote an artist and their music.” It’s this success at scale where ‘doing it on your own’ is unlikely to cut it.

At the same time, listeners themselves will also play a large role going forward. To date, web3 music has embraced a DIY, almost ‘punkish’ aesthetic of lo-fi music production, unfiltered dialogue between fan and creator, and stripped-back concerts streamed on Twitter Spaces. By comparison, web2’s pop stars seem to exist beyond the realm of mere mortals, their music lavishly produced and their concerts bursting with spectacle. As these two fan groups intermingle, it’s hard to say who will influence who. Should web3 music consumers begin to place a premium on slick, professionally-produced content, then, once again, some sort of loosely defined ‘label’ will almost certainly be needed. At the same time, the direct connection and distinct lack of pedestal is a key part of what makes web3 a thriving environment for fans and simultaneously taps into the growing role of authenticity in our online lives.

“Labels, or something that looks like labels, will likely continue to be integral in scaling artists,” says Rob. However, he adds that “labels will continually need to re-evaluate how they can provide value to artists as the market changes.” As web3 music and the organisations that support it continue to take shape, one thing is certain: this space has reinvigorated an ongoing conversation regarding the balance of power in the music industry, a conversation that may ultimately result in a fundamental reset of the artist-label relationship.