Introduction

Inspiration

In 1997 David Bowie made history by packaging-up royalties from 25 of his albums as asset-backed securities and issuing them as what has become know as the "Bowie Bonds". Purchased by Prudential Insurance for $55million, the Bowie Bonds enabled the starman to to buy back his entire catalog and yielded a 7.9% APR for Prudential up to maturity a decade later. Imagine the musical renaissance if any artist across the music industry could access such powerful financial instruments...

A David Bowie Brixton ten pound note honoring the music legend and financial pioneer

Fast-forward to 2021, and while it is increasingly rare for record labels to offer advances to artists, there is more money locked in DeFi than the entire music industry made all year. Just as independent artists leveraged web 2.0 to manage their own distribution and promotion, with web 3.0 there is an opportunity for artists to regain financial control of their careers. NFTs offer the tooling to open-up financing for artists from the fiercely independent, to well-established legacy acts.

The NUSIC NFT music bond is designed as a standard to enable music creators to receive advances on future streaming income, giving fans and investors alike an opportunity to define the next generation of music, while sharing their success. Conceived as a chain-agnostic standard to be utilized across existing and emerging NFT marketplaces, our goal is to empower any musician, artist or institutional rights owners with sophisticated tools to maximize gains from their copyright.

What it does

Music streaming is a digital-first technology, which has numerous verifiable data sources, therefore NUSIC bonds are focused on future streaming income, rather than music publishing in its entirety. Any rights owner with a Spotify for Artists account can mint an NFT bond, and by providing a collateral deposit for a single quarter the smart contract is able to offer a face value over the term of the bond, computing a rating based on artist popularity and quarterly collateral deposits.

The artist can fractionalize the bond, so they can offer it up as a collection on their NFT marketplace of choice. By making regular collateral deposits, a NUSIC bond issuer is able to maintain the rating, indicating the risk profile of the asset to the NFT holder. The rating engine is inspired by the work of rating agencies such as Fitch, Moody's and Standard & Poors, but designed for DeFi, meaning that the top ratings or investment grades are only possible through overcollateralization:

The rating names differentiate from established bond ratings. Maintaining the minimum collateral payments means the bond is rated in the top speculative grade, while there is a one quarter grace period before dropping to the lowest rating. The NFTs are dynamically updated over time to visualize the current rating through the color hierarchy referred to above.

Example Rights Owners

We've teamed-up with world-renowned producer, DJ and artist Howie B to issue the first testnet bond as a demo, he's looking to produce a new music video with visual artist Hiraki Sawa in the run-up to the release of his next album in 2022. Financing this project with the NFT bond offering will have the knock-on effect of boosting Howie's YouTube following and Spotify listeners, which may increase the bond rating over the term. Let's bring the Howie Bond to mainnet in 2022!

"The music industry has completely transformed in the twenty-first century and NUSIC: NFT Bonds gets musicians ahead of the curve in this brave new landscape... I've been waiting for something like this to come along for years and am delighted to be the first artist to utilize this exciting technology"

Howie B

How about if a live act has been impacted by covid, and needs a helping hand financing their next tour? We've modelled what a band like The xx could expect to raise in an NFT bond offering based on their current number of listeners...

Finally, what would happen if the estate of an established legacy artist was to offer an NFT bond? The Johnny Cash estate could use these funds to re-master and re-release his entire catalog, buy back outstanding rights from third parties or simply re-invest the proceeds back into the yield maximizer to compound the raise from the NFT music community.