Music NFTs Part 5.5: Fun With Data
This is sort of like the epilogue. I created a formula to help me try to apply a value to NFTs I bought. This is what I came up with.
Okay, this is probably the last NFT related post for a while. I've been going at it strong for close to 2 or 3 weeks and daddy needs a break. Thanks for hanging in there with me. In Part 5 I shared my playlist. In Part 2 I compared some of the platforms. The main takeaway being MintSongs.com is drastically better than Sound.xyz and Catalog.works in the unit pricing department. Where Sound and Catalog want unique unreleased material and a higher price point, Mint Songs will allow artists to mint NFTs of songs that they released already. That exclusivity from Sound and Catalog prices out A LOT of potential buyers and we can see that manifesting in one of Catalog's investors supporting the market with bids. How important is exclusivity? The Nas fans who broke Royal.io’s servers are probably an indication. It isn’t that important.
I actually really like Catalog's platform. I like that the music is new. I HATE that I need four figures to participate. Sound is a little closer to my price point 0.1 ETH per edition. But even that is more than I want to spend on any one track. What's interesting is a lot of these artists are on more than one platform and I'll share an example of that later. But for now, I wanted to compare the "value" of editions between Sound and Mint Songs.
To do that, I sort of had to create my own methodology. Here's my thinking; I'm very aware of what a CPM is in media buying after spending over four years in media sales. The formula to calculate CPM is this:
(Campaign cost/Total Impressions) x 1,000
So for example, if I spent $4,000 and get 250,000 impressions in a digital video campaign, my CPM would be $16. Is that good? Since I have quite a bit of inside knowledge on ad pricing and don't want to get in trouble with my former employer, I'll punt to Turn it Blue for an estimate on averages.
A CPM is really just a price. It's important to view it that way. An ad buyer could spend $5 million on an advertising campaign. In some cases it might be hard to assess how effective that campaign was in leading to conversions. The CPM is a simple way to determine if it was good or bad. If the person who spent $5 million on ads did so at a $10 CPM and a competing company spent $2.5 million on a similar campaign but only paid a $4 CPM. The $2.5 million dollar buy was a much more efficient campaign because the buyer got more impressions for half the price. Get it?
Valuing the NFTs
Is there a way to create kind of a pseudo-CPM type of metric to analyze the value of the music NFTs? I tried. Rather than campaign impressions, I substituted monthly Spotify listeners for the artist. In the place of campaign cost, I substituted drop valuation. The drop valuation is the price per edition multiplied by the total editions minted. So the full calculation looks like this:
((Edition price x editions)/Monthly Spotify Listeners) x 1,000 = Pseudo-CPM
Reminder, the lower the Pseudo-CPM, the better deal we're getting as buyers. For example, when I did these calculations, capshun had an average monthly listener figure of 99,838. His drop "Illuminate" on Mint Songs is priced at 0.05 ETH, or about $165. There are 10 editions in the offering. So that calculation works like this:
((10*165)/99,838) x 1000 = $16.53
And this is how I justify going bigger Mint Songs over something like Sound. Because the price of the music when adjusting for drop valuation and Spotify audience is a no-brainer. I compared all 20 of the Genesis artists on Sound with most of the artists I put on my Spotify list. I added a couple of recent artists on Mint Songs who have decent followings so I didn’t limit it to just what I like. I analyzed 40 drops in total. Here are the Top 10 Pseudo-CPMs from those 40 artist drops:
Rows in bold are Mint Songs. Mint Songs has the Top 5 Pseudo-CPMs and claims 7 out of the Top 10 for good measure. Now, it's important to remember that this is an art not a science. I will also disclose that I chose Ayotemi as my first Artist Profile long before I ran these numbers. And to prove that I'm not picking tracks purely on the Pseudo-CPM, I haven't purchased anything from Dyl and the reason is because his music just isn't my style. Artist Profile 2 was YATTE. YATTE ended up #13 on this list. Here's another important distinction; I picked the lowest priced available editions from Mint Songs for each artist to calculate these Pseudo-CPMs. Sound sells out all of their drops so I used the data that I had available to me. That's where this is an art not a science. Ayotemi has tracks on Mint Songs that are priced way too high and they'd totally change the way that Pseudo-CPM looks if we used those. That's why the music itself is what is important. But I'd thought I'd share this with you if it helps.
The Price is Wrong Somewhere
If you're wondering if any artists have been on both Sound and Mint Songs... yes. AbJo sold out 25 editions on Sound for 0.1 ETH per. Pseudo-CPM of $611.56. He also has an offering of 50 editions on Mint Songs at 0.01 ETH per. Pseudo-CPM of $122.31. I don't own one. At this time I don't plan to buy one. But that could change. I'm just sharing what I find.
Disclaimer: None of this is investment advice. I’m not an investment advisor. I have no job. I live in my mother’s basement. That last part is a lie. I live in my wife’s basement. Everyone talking about NFTs could be a magic internet money charlatan, myself included. Do your own due diligence and allocate your investment capital according to your own personal risk tolerance. Digital trinkets and shitcoins are probably all going to zero. Remember: nobody cares about your personal wealth more than you do. Always consider the motivations of those who give you advice and only make decisions if they're good for you.