Fintech

Stream it. Own it. DJ Justin Blau sees music’s future in crypto.

Royal is a marketplace for music NFTs where fans can take ownership stakes in their favorite songs.

 DJ Justin Blau, also known as 3LAU

DJ Justin Blau, also known as 3LAU, performs at a music festival.

Photo: Altamira Film

Justin Blau was hanging out with the Winklevoss twins in Mexico in 2014, as one does when one is a world-famous DJ and producer who turned down a career on Wall Street to pursue music. That's when he got hooked on bitcoin.

"I was super excited," Blau told Protocol. "I just bought some and kind of put it away."

Blau, also known by his stage name "3LAU," was intrigued by the promise of blockchain technology. Tyler and Cameron Winklevoss had grown famous as pioneers in crypto investing, having parlayed some of the settlement they won after suing Mark Zuckerberg over the creation of Facebook into an early bet on bitcoin. The year they met Blau, they founded Gemini, now one of the largest crypto marketplaces. But Blau saw a different opportunity — to merge the new tech with his main passion.

His interest grew as NFTs suddenly became a hot trend. "I got really excited about what that would mean for music" and how "music NFTS should manifest in some form of ownership," he said.

That led to Royal, a music marketplace that plans to sell music rights as NFTs founded by Blau and entrepreneur JD Ross. Royal, which Blau and Ross plan to formally launch later this month, will let users buy shares of a song, and earn royalties based on the popularity of the music.

"As the song becomes more popular, and that song begins to generate more income, you actually have a right to those royalty streams as the owner of the asset," Blau said.

What happens if an artist reneges on that agreement? Just like in the traditional music world, there could be legal consequences, Blau said.

In an interview with Protocol, Blau talked about his journey from musician to entrepreneur, why he turned down a job offer from BlackRock to pursue music and how he's exploring new ways for musicians to make money from their work, in collaboration with their fans.

(This interview was edited for clarity and brevity.)

How will Royal work? Let's say I'm a musician and created some songs. I don't want to go to the major labels. How do I join?

When we open up the platform to all artists, Royal would enable you to tokenize and monetize a completed musical work. Let's say you made five songs. You can tokenize those songs and assign ownership to your fans. Those fans can pay for these tokens. Let's say you have 100 limited editions of each of those five songs, and you sell them each for $100. You're a small artist. You can sell any percentage of ownership in that music to your fans and generate about $10,000 per track.

Artists that have existing songs out there that are popular might command a higher price point, might release more tokens. It's really up to the artists to figure out what they want their pricing to be. Essentially it gives fans unique ownership of the music.

What does it mean for a fan to own the music? We're talking about a fraction or a part of that work, right?

The artist would assign a percentage of royalty revenue rights from streams. You as the fan, if you own those assets, can actually claim income from those streams as they're generated to the artists. So as the song becomes more popular, and that song begins to generate more income, you actually have a right to those royalty streams as the owner of the asset.

Do I have to own crypto to participate?

In the long term, no. In the long term, you'll be able to purchase things with U.S. dollars. The distributions of income will likely be in USDC stablecoin in the short term. But we want to make it accessible for everyone. Obviously, initially, some of the first assets we issue will be Ethereum-based assets that are actually going to be distributed for free. With my upcoming song release, I'm actually giving away 50% ownership in my next song to people who are on Royal. But in the future, you'll be able to use multiple methods of payment and you won't need to know too much about crypto to participate.

So every time the song is streamed, it generates revenue which is then shared with the fans …

With Spotify, every million streams represents anywhere between $3,000 and $6,000, depending on the month. Depending on the rights the artist owns, which is a very important part … in this case, I own all the rights to the song, so it's very easy for me to split the song [royalties] evenly with my fans. Every month I get a distribution from all the streaming services, and I just send half of that distribution to a smart contract that each of those assets has a claim to.

Whether I was giving ownership to my fans or not, mainstream streaming services would pay me for the streams. I just take that and assign half of it to fans. After it comes to me, I pay it out to them. It's similar to how, in the regular music world, if I work with a collaborator and other artists — a singer, a vocalist, another DJ. Typically, if you're the main artist, you get paid first and then you are obligated to pay out those other artists. So we kind of treat fans in this regard as, like, collaborators in the song.

What if the artist doesn't forward the promised royalties?

An artist can choose not to pay collaborators, but there would be litigation.

Justin Blau Justin Blau got hooked on bitcoin early. Then he saw crypto's potential in the music industry.Photo: Justin Blau

Let's step back a bit. How did you discover the world of bitcoin, blockchain and NFTs?

Yeah, that's a great question. It's my favorite story to tell. In 2014, I met the Winklevoss twins in Mexico on spring break while I was DJing. I just became really close and friendly with Cameron and Tyler Winklevoss. They invited me to LA to stay with them for Grammy week.

That was around the time they were building Gemini, their exchange. That was the first time I discovered bitcoin. I was super excited. I just bought some and kind of put it away. I didn't get too engaged again until 2017, during the Ethereum explosion when I started to explore the ways that Ethereum specifically could disrupt the entertainment world. But the tech was too early. Then I actually started working on an NFT project. Back then, that was basically a crypto music festival project, where you could scan QR codes at the festival and earn collectible assets on the Stellar blockchain.

It worked and everything was great, but we were in a bear market and festivals are really expensive. We ended up kind of shutting that idea down even though it was an amazing demonstration of collectibles on-chain and knowing that fans were excited about that.

Fast forward to 2020 when NFTs started manifesting as art for the first time again in a long time. I got really excited about what that would mean for music. That's when I started developing audiovisual NFTs, and ultimately decided that music NFTs should basically manifest in some form of ownership. That's kind of the inspiration for Royal.

How did the conversation with the Winklevoss twins influence your interest in bitcoin and crypto?

They're just huge fans of electronic music. It wasn't like a direct conversation. It was more that I was staying at their house and they were just talking about it. So I was just curious. It wasn't like, "You should go do this. You should go buy bitcoin." It was more just them getting excited about it, talking amongst each other and then me asking some questions.

You turned down a job with BlackRock to pursue music. Can you talk about that decision to pursue a music career?

At the time I was in college and wanted to go work for a bank or an asset manager. My career just started to take off online thanks to internet blogs and music websites that supported my work. And, you know, the opportunity cost of not pursuing your passion is quite high, especially when I was already kind of achieving some success. I really wanted to go for it. So my economics professor at the time actually helped me convince my parents to let me pursue music full time. That's when I started just going full time [as a] DJ.

While I was a DJ, I did study finance in college, specifically in structured products and derivatives and all types of things like that. With crypto, once I started getting involved, I got really involved. It was like the future of the financial world. Legacy banking systems didn't make sense anymore and I was, like, all in. So even though I was DJing over the past decade, I've always taken interest in elements of the financial world.

So were you already familiar with bitcoin and crypto as a finance student?

I had heard about bitcoin in like 2012 but I didn't really get involved till 2014. I didn't get involved in the DeFi world until last year when these DeFi protocols actually started running.

Fast forward several years: You're now melding your interest in music with business. How did you explain that to your parents?

These days, they're very excited, of course. That's kind of what they always expected to happen in my life, somehow merging my two passions.

Why the name Royal for the platform?

Royal just came from "royalty." Also the backstory is my co-founder JD [Ross], we went to college together. We've been friends for 11 years. JD started another company called Opendoor which is now a publicly traded, $12 billion company. We were best friends in college and he actually paid me in a bottle of Crown Royal whiskey to play at his frat basement when I was like 19 years old. So it also comes from that.

How will you measure success, especially after your experience with the music-festival business?

I think the environment is substantially different this time around. There's a lot of high capital interest costs in running music festivals. This is more of a digital product so we have a lot of time to build it. I think our success metrics are just sales volume.

Musicians have wanted to get into NFTs but there haven't been that many ways for them to. Music as an art form hasn't been tokenized that much relative to visuals. So we just wanted to create a platform that made sense for musicians. We want this platform to be useful not just for crypto-native users. We want it to be an entry point for new participants in the crypto ecosystem.

Can you share some of the conversations you've had with artists? How did you explain Royal and the crypto world? What were their questions and concerns?

I would say most artists actually understand it pretty quickly. Instead of explaining it in crypto terms, I always just explained it in like regular record-deal terms. Instead of signing a record deal with a record label, you're basically creating a deal with your fans.

Your fans are your record label, basically. Fans are monetizing your music. They own a piece of it. They will help market it. They will share it with their friends, a more grassroots approach to music distribution and promotion than a record label. Artists seem to really understand it pretty quickly.

What about the fan side? What kind of feedback have you received from them and were there insights that were valuable for you?

Everyone seemed to respond extremely well to the concept of real IP ownership, on-chain, of music. If you scan through my tweets you'd see pretty amazing feedback from fans who are just excited to have a more meaningful connection to the music they listen to. Today, the world treats every listener as contributing the same value, which is just not true. Some people extract a lot more emotional value out of a song than others, based on how many times they listen to it, based on where they listen to it. Some people walk down the aisle at a wedding to a song, right? There's a lot of power behind music that isn't being captured and then we just hope to kind of bridge that gap.

Drill down on that a little bit. How is that significant for the business model and the ecosystem that you're building?

There's no price discrimination between people who have different relationships to music. Let's say my friend is getting married and he wants to walk down the aisle to one of my songs. Maybe they want as a memory to own the digital asset version of that song because they have a really close connection to it. If they just stream it on Spotify, 100 times, 1,000 times, that will generate only so much money. But they have a close relationship to that song and they might want to participate in the music in a really unique way. That type of buyer might be interested in owning one of these assets for emotional significance, the same way someone wants to own a CryptoPunk for emotional significance or speculation.

That's kind of the process that we see happening where people will want to own their favorite songs. And it will mean a lot to them when they own a limited edition of those songs digitally.

It's kind of just like owning real records and vinyls back in the day. People would collect vinyls because it was tangible. It was a significant way to collect music. A lot of times those vinyls would trade up a lot in the aftermarket if they stopped being printed or if they were hard to find. Just like anything else, creating digital scarcity surrounding music is going to introduce a lot of really interesting market dynamics.

The music industry is becoming interested in this technology. Snoop Dogg is reportedly going into this space. How would you describe the competitive landscape and how are you approaching it?

We were the first to tokenize music on a significant scale. Snoop Dogg's team reached out to me back then. Pretty much everybody reached out to me back then. So from a competitive landscape standpoint, at Royal, our understanding of product and what the world really wants is quite extensive. A lot of people are talking about tokenizing music but most people aren't talking about tokenizing rights and IP. I think that's what separates Royal from a lot of other projects.

How do you view the big push for regulation in crypto, blockchain and DeFi? What are some of the things that you worry about when it comes to regulators stepping in??

I think that most regulators have a very rudimentary understanding of the actual technology, and it's really important for experts to guide regulation. Regulation is important and good to weed out the scammers and the bad actors. But it can also be prohibitive to innovation. So it's just really important that Capitol Hill listens to a lot of experts in the field and doesn't just make rash decisions.

There's not a lot of clarity and that clarity needs to exist for innovators to really push. I'm hoping that clarity comes. We're lucky to have a lot of amazing people that we work with, that we trust in that realm.

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