Sally Yoon is an IPilogue Writer and a 2L JD Candidate at Osgoode Hall Law School.

 

On February 4, the Recording Industry Association of America (“RIAA”) sent a demand letter to HitPiece.com’s lawyer and its founders, demanding that it stops infringing music creators’ intellectual property rights.

HitPiece.com was generating controversy prior to the demand letter, with several users calling it a scam NFT site. Non-fungible tokens (“NFTs") are one-of-a-kind tokens stored on blockchain that can be sold and traded. As NFTs have gained popularity, scam sites are becoming more common. These sites use strategies like the “rug pull” and phishing scams via social media to drain cyptocurrency from fans’ wallets. Several musicians have expressed frustration over their songs being auctioned as NFTs without their knowledge, resulting in the site’s response on Twitter:

“Clearly we have struck a nerve and are very eager to create the ideal experience for music fans. To be clear, artists get paid when digital goods are sold on HitPiece. Like all beta products, we are continuing to listen to all user feedback and are committed to evolving the product to fit the needs of the artists, labels, and fans alike.” (also pictured below)

The site is now offline, but the RIAA made it clear that this will not “absolve [HitPiece.com] of liability for their prior conduct.” The letter, which describes the site’s actions as “outright theft” and “outrageous as it is brazen,” further demands that HitPiece.com “provide[s] a complete listing of site activities and revenues to date, and account for all NFTs and artwork auctioned off.”

Music NFTs Create New Possibilities for Artists

Music NFTs come in various forms, including but not limited to audio files, concert tickets, and merchandise. In addition, music NFT marketplaces, such as Royal, enable musical works to be tokenized and monetized, giving fans unique ownership over music.

The traditional music industry has long experienced issues with artists not receiving their deserved share of revenue from their music, which is split between various people including record labels and producers. Moreover, with music consumption shifting primarily to digital via streaming sites during the pandemic, artists were found to be paid as little as $0.0033 USD per stream—that is 250 streams to earn a dollar. NFTs offer a potential solution to this longstanding problem. By cutting out the streaming platforms and selling directly to fans, NFTs allow artists to receive most of the revenue from their work.

A decentralized fan-funding platform is particularly beneficial to new artists since it helps them mint their first NFTs and establish a consistent demand for their works. Through the platform, musicians can raise the amount of money they would have received as an advance from a major label. Additionally, famous artists like Snoop Dogg have used NFTs to improve their relationship with fans and explore new creative opportunities to engage with them.

Concerns Regarding Music NFTs

Despite the upsides, artists and their fanbases remain apprehensive about NFTs, especially as they continue to grapple with issues of unauthorized use. Within a week of the HitPiece controversy, users exposed another NFT platform offering artists’ music on its site without their permission.

In many cases, works being turned into NFTs already exist in other forms, so individuals should be careful when making use of these works as an NFT and consider the involvement of third parties. Whenever dealing with third parties that own or control works, individuals must ensure that the third party has provided the rights necessary for the work to be included in an NFT.

Looking Forward

NFTs could enable the creation of valuable works in the music industry and provide artists with the opportunity to interact and engage with their audience in novel ways. However, scam NFT sites like HitPiece.com show how easily copyright infringement can occur, turning some of the primary advantages of music NFTs on their head. Therefore, respective trade organizations ought to respond to scams with a speed that matches that of the growing NFT market. As we continue to traverse through the early world of NFTs, riddled with unanswered questions, users and creators must continue to keep relevant legal considerations in mind.