In this week’s interview, we chatted with Grammy Award-winning DJ Andre Anjos, aka RAC. RAC, who makes electronic and dance music, has been involved in crypto in one way or another since 2016. Most recently, he tokenized his latest album and sold it on digital goods market place ZORA. The token, which has the ticker TAPE, is linked to a physical, limited edition cassette tape that token holders can redeem. It was listed for $20 and to everyone’s surprise, especially Andre’s, tokens shot to over $800 and are now trading at around $200. In 2017 RAC partnered with ConsenSys-backed Ujo Music to put his album Ego on the Ethereum network so that fans could buy copies directly through him, without going through intermediaries.
His very next crypto venture, as he revealed on this podcast for the first time, will likely be to launch his own RAC tokens as a way to reward and incentivize his fans.
Many have seen cryptocurrencies as a way to decentralize the financial system, thanks to the innovation of digital scarcity. RAC says that digital scarcity can also help disrupt the music industry. His experiments have so far showed how distributed networks can be the underlying infrastructure that helps artists can sell their creations directly to fans; how tokens on open markets can help more accurately price goods and help them benefit from secondary trading of their products; and now how digital assets can help strengthen communities.
Camila Russo: I always start this podcast with the question of how you got into crypto. In your case, it’s especially interesting because you’re still obviously a full-time artist and musician. You’re not working in crypto, but still really interested in it and experimenting with it. I’m really interested to know, what got you into this space and what kind of kept you here?
Andre Anjos , aka RAC: It’s always interesting because I think everybody has like their own story. Everybody has that, where did you first hear about Bitcoin story. For me, so just maybe to give a broader perspective. I had always been interested in computer science, so I took a couple courses. I was always very into computers. It’s just a part of my life. It goes hand in hand with music production, so it just made sense for me to kind of stay with it.
Especially with distributed networks, I’d always been kind of interested in this and I sort of followed things here and there, I’ve never worked in that world, but it was something I was just interested in. Naturally, I had heard about Bitcoin at some point, but I didn’t have a financial background. It wasn’t something that I immediately looked into. I don’t even really remember where the first time I heard about it, maybe, I don’t know, maybe 2013, 2014, an article or something popping up. I was vaguely familiar with it.
But it really started in late 2016 where, I don’t know what led me to it. I think I was just like, okay, maybe now’s the time to check it out. I had sort of gotten a little bit more into investing, and I had gotten into stocks and things like that, so I was, trying to become a little more well versed in that. I maybe looked into Bitcoin a bit and I think I had a moment where I realized, oh, the technology behind it is actually really interesting. Without really understanding the financial side of hard money or any of that, I was pretty interested in the technological breakthrough that it was.
Because, in my own experience in music, I had seen that digital scarcity or the lack thereof can wreak havoc. Like when you can infinitely copy music, what that can do to an industry that depends on that sort of scarcity model. I think just from an ideas perspective, I guess, it was interesting, how can you create something is actually provably digitally scarce.
Through digging, I stumbled on this video of Vitalik Buterin talking about, it was probably like some kind of Devcon speech, talking about this idea of taking that Bitcoin blockchain idea but generalizing it to anything and making it programmable.
Again, it wasn’t really the money thing, because that wasn’t my background. I was, okay, currency is an interesting application of it, but there’s so much more to this and so that sent me down a rabbit hole. I was like, okay, who is this? This kid is clearly a genius, let me dig into this. The more I read into it, I was like, oh, there are so many interesting applications for music and really the back end of music, not necessarily on the consumer side.
CR: Like the distribution side?
Music on Ethereum
RAC: Yes, like the distribution, but also the piping of the music industry is filled with middlemen. It’s one of the worst. It’s actually one of the more obvious examples of, where this disintermediation could actually have a really profound impact. But we have a really entrenched industry that is very resistant to change. I see it as ripe for disruption, I guess and Ethereum seemed like a very logical application of that.
“I see it [music industry] as ripe for disruption, I guess and Ethereum seemed like a very logical application of that.”
As I dug more into it, I kept thinking about all these different applications that you could do. I felt like, surely there are some people that have done something here. That’s when I discovered Ujo Music, which was a part of ConsenSys. I reached out to them and I think, this is maybe three or four months before my album was going to come out. I was like, why don’t we just try to release this on Ethereum, it could be an interesting project? They had already done one single with Imogen Heap back in the day. I knew as possible, it was just like, okay, let’s do this, let’s do a full album.
The idea is very simple. It’s literally just putting it up on IPFS and basically, set up a smart contract that if people give $10 of Ether to this contract, you get sent an IPFS link and you can download mp3 files or WAV files or something like that.
It’s very simple. I mean, this exists, technically, elsewhere iTunes, Bandcamp. There are lots of services that provide this, except that they take a percentage of it. So this was an interesting direct connection type of a thing. So for me, it was more of an experiment. It wasn’t exclusive, it wasn’t the only place you could get the album.
CR: How did it work out? How many people download it through there?
RAC: I think maybe I want to say in between the 300-500, I’m not entirely sure. So not a lot, but not bad. I wasn’t mad about it. But it was, I learned a lot from it and my objective was really to have it be more of an experiment and talking point, basically, so at least to start a conversation about this.
I think 300-500 people maybe, but we very quickly realized that especially for my fan base, which are not crypto natives, I mean, they’re savvy, but not like crypto savvy. And having to go through Coinbase to buy Ether to transfer, and at the time we had this it took like a week to get to wire funds into Coinbase. The whole process of getting ether into Metamask and do all this stuff.
To me it was the coolest thing ever. But from a user experience, not that great.I think despite that, it was a great success. I’m really proud of that.
I have this funny memory of it, again, because I remember having a meeting with Spotify and that was like, literally the first thing that they asked me about, it was like, what’s this Ethereum thing? What are you doing with that? I was like, “ha-ha.”
“I remember having a meeting with Spotify and that was like, literally the first thing that they asked me about, it was like, what’s this Ethereum thing?”
CR: What did they say?
RAC: Oh, no, I think they were just generally interested in it. It was just a friendly thing. It wasn’t like, I don’t think they’re threatened by it. It was more is like what are you doing? What is that?
But I had this other memory of so I was actually in Japan and we were doing a full day of interviews and that type of thing. I had a translator and I felt kind of bad for her, because she had to translate when people kept asking me about Ethereum and trying to talk about Ethereum through a Japanese translator and communicate all this stuff and all these ideas. It was a bit tricky. But again, it was generally, interesting to see the amount of interest around this simple idea. I think it was it was a very successful experiment.
CR: Was it the first time you were able to sell an album in this way directly to your fans without having to go through a middleman? That’s pretty remarkable even if you had to have this like bad user experience, it was still kind of a direct contact with them.
RAC: I think it was more about showing that it was possible, and you could extrapolate from there, we could take it up further.
CR: I’m interested to go deeper into what you mentioned about the music industry being so ripe for disruption. Because I think, in DeFi and I think maybe even in crypto in general, you focus a lot on finance and that’s kind of the low hanging fruit and that’s where you see so many, fees and steps, put in between your transactions with the middlemen.
I don’t think a lot of people really think about the music industry as also ripe for disruption with blockchain technology. Most of my listeners won’t be as familiar with that industry, so we’d love to hear more about that. Who are these middlemen? How are you losing out because they’re there? And how do you think this technology can actually help?
Disrupting the Music Industry
RAC: I feel I could easily spend four hours breaking this down, but I’ll try to sort of condense it. But I think, more broadly speaking, basically, every step of the way, there is somebody taking a percentage of gross revenue. Let’s talk about streaming. Streaming, right off the bat, there’s 30% off the top. Then from there, there’s another distributor that takes another 10-15% off the top of that and then that eventually goes to the labels and then you have a label deal. So these were the people that generally fund these projects and so they’re taking financial risk by paying to basically make the music and promote it and all that stuff.
They usually take anywhere from like 50-85%. Again, these are pretty wide ranges, there’s all kinds of deal structures. Let’s say, 50-85% of that gets cut in half and then maybe at that point, it goes to the artist. Then the artist, like if you have a collaborator, or if you have a producer or something like that, that’s another percentage that goes to them first. Then maybe, at one point after all of that is paid back, it eventually goes to the artist. You can start to see, if you just starting to add this stuff up. It’s very difficult to make a consistent income on these things. And that’s just streaming.
Then if you go to, say publishing, again, maybe for context, every song that is made is split in half. There’s what we call the master side, which is the recording and that has certain attributes, has certain rights to it. Then there’s the other side, which is the sort of essence of the song and that’s what we call publishing. These are like the lyrics, the intangible notes, the music, that’s the publishing side. Then that’s another thing where at every step of the way, there’s somebody taking 50, sometimes have 70% of gross revenue, of all income.
Basically, every dollar that comes in, the artists gets paid last. And they end up getting, maybe, I want to say just roughly 15 to 20% on a good day.
“The artists gets paid last. And they end up getting, maybe, I want to say just roughly 15 to 20% on a good day.”
CR: Oh, that’s interesting. But is it, for example, for writing my book, I got an advance and then I’m supposed to, if I paid back that advance, then I start earning a small percentage of sales? Does it work that way, are you able to get an advance from publishers?
RAC: Yes. It’s probably very similar. By the way, the book is great. I haven’t finished yet but it’s great so far.
I imagine it’s somewhat similar. I don’t know exactly how the deals are structured in the publishing industry, but it is similar. It’s like where they’re giving an advance in exchange for ownership over the asset, over the album. But the wording is tricky. This is where the music industry, they get very creative with their language and the contracts. They’re like, okay, we’ll take 50% of the master. But that’s only 50% after all these other people take their cut. It’s creative wordplay that makes you feel like you’re getting a lot more, but it’s not really.
With the advanced, specifically, there’s one kind of game that the music industry loves to play. Which is, they say, it’s a recoupable advance and we split it 50/50. But it’s not actually really 50/50, so you pay back this loan at a 50% rate. I don’t know how this works in the publishing industry or in the book publishing industry. But basically, let’s say they give you $100,000 up front, but you only pay that back at a 50% rate, so the album has to earn $200,000 to actually be paid back.
I mean, again, to be fair to them, they’re taking financial risk, they’re putting resources into it. You don’t have to pay it back. They front you a lot of money and you don’t have to pay it back. I don’t want to paint the entire industry as this evil corporation. It’s a lot more nuanced than that. But I think, we’ve sort of been in this… Basically, the music industry in the 50s essentially started as like, basically by the mob.
RAC: Seriously. You look back, people will argue with that, but basically the deals were so advantageous to the industry side that we sort of been chipping away at it over the years that we were at a point where it’s a lot better. Artists have a lot more power now, but it’s still very lopsided.
I feel like I’ve been talking complaining about the music industry for a while. But basically, where crypto comes into this, is that this is an entrenched industry, they control 80% of music. If you want to create a platform, you have to play ball with them, you just can’t, due to copyright laws, and they just control the industry. It’s very difficult to work with them and actually get a fair deal, basically. That’s what I mean, I think it’s ripe for disruption through technology they can’t control.
“I think it’s ripe for disruption through technology they can’t control.”
There’s a lot of these back end systems where it’s like, well, why do we need distribution fees? That’s sort of a legacy part of the industry where people maybe, when you manufacture CDs or vinyl or whatever, there was a cost there and maybe that warranted taking a percentage out. Or they negotiated rates with Walmart, it’s like have your CD upfront, things like that. That was maybe where distribution had a role, but these days, it’s less so. It’s a different model now.
We’re still kind of coming out of that late 90s era, and still slowly adapting to the modern age. When I first got into crypto, it just made sense to, well, we can build an alternate system where we just bypass all this stuff.
Why do we need all of this? If we can sort of create the data structure basically to support it and it’s all open and people can build applications on top of it. We can sort of build that underlying infrastructure that’s fair and then we can let an actual free market flourish, because we currently don’t have that.
“We can sort of build that underlying infrastructure that’s fair and then we can let an actual free market flourish, because we currently don’t have that.”
CR: How would this system actually work?
RAC: I can’t say that I have all of this figured out by any means. There are a lot smarter people than me working on this that are working very hard to solve a lot of these problems. But basically, in its essence, kind of what I said is like opening it up to a free market, where if you have the data structure, like the ownership, maybe the files, if you have all of this in a containerized format, maybe a mix of Ethereum for the smart contract layer, if you will, and then IPFS for the data. I could see a situation where people, if you have that open-sourced and available to all, I could see a situation where you could see other applications built on top of it and you could build a more fair, decentralized Spotify streaming service on top of it.
There are a lot of people that are already kind of doing this. But I think the main idea is a shared open-source infrastructure underlying, let’s fix that first. This is one of the things that Ujo was really trying to work on. Then from there, then we can start to talk about like the consumer layer stuff. But we were still not even remotely close to that.
“But I think the main idea is a shared open-source infrastructure underlying, let’s fix that first.”
CR: It’s interesting, because now, we’re starting to get to the point you made earlier about digital scarcity. Because I think, that’s the big difference of with having this technology, is that before you could have that peer to peer community, or structures for sharing and downloading music. But the problem was that it was really hard for artists to monetize that and music was able to get infinitely reproduced and artists would get nothing. But now, we have a solution with scarce digital assets.
It does seem like the solution should be there somewhere, creating this open protocol for fans to buy their artist’s music and for artists to get properly compensated and to cut down middlemen wherever it makes sense. Sometimes it does make sense to have someone who can put money up and they invest in you and they deserve a cut, but so many others maybe don’t and are just making the process worse.
DAOs Replacing Music Labels
RAC: There’s all kinds of avenues to do this. It’s going to get really interesting, like when you apply market dynamics to this, because, especially with all these DAOs. I could see a sort of “label DAO” type of situation where people start a DAO for releasing music and then people could pull capital and pay for these basic costs in exchange for a certain amount of ownership.
“People could start a DAO for releasing music and pull capital and pay for these basic costs in exchange for a certain amount of ownership.”
But again, opening that to a market as opposed to sort of being at the mercy of some companies that are quite aggressive in that. It democratizes it in a really interesting way. I’m really interested to see where this goes in the next while.
CR: I should maybe, modify what I said maybe it doesn’t completely get rid of middlemen, but it does completely change who those middlemen should be and just democratizes middlemen as well. Now instead of a label, you get a DAO or something.
RAC: I think that’s all we’re asking for is a free market. We just don’t have that.
[ … ]
Paid subscribers have access to the full transcript, including sections on:
“But what it proves to me is that when you apply market dynamics to something like this, price discovery, love it or hate it is a great way to find the value of something.”
“The one thing I love to say about this is, turns out music does have value. We’ve been pricing it incorrectly for 20 years and I think it’s about time we apply a free market to music and then we can actually be paid appropriately.”
“We’re sort of exploring ideas around community tokens and maybe incentivizing people or like rewarding people that participate in these projects with another token”
Yield farming boom
“All these other projects that had VCs and like other stuff be like oh, this kind of changed the game now. Now we really have to appease the community.”
“People are finding that these smaller communities are actually much more enjoyable than just yelling into Twitter all day.”
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