The Future of Artist Royalties: A Fight Between Platforms and Protocols

Legacy streaming services like Spotify and Apple Music operate on a pooled royalty model, which dilutes per-stream payouts to ~$0.003. Their core innovation is user aggregation, not fair value distribution.\n- Key Flaw: Artists are suppliers in a take-it-or-leave-it marketplace.\n- Key Metric: Top 0.1% of artists capture ~90% of streaming revenue.

Smart contract platforms like Ethereum and Solana enable immutable, on-chain royalty enforcement. Protocols such as Sound.xyz and Catalog bake royalties directly into the NFT's transfer logic.\n- Key Benefit: Royalties become a programmable, unbreakable feature of the asset.\n- Key Constraint: Requires marketplaces to respect the protocol, leading to ecosystem fragmentation.

The endgame isn't pure decentralization, but sovereign value layers. Base and Farcaster demonstrate how scalable L2s plus social graphs can create platform-like experiences with protocol-grade economics.\n- Key Innovation: Composability allows royalties to flow through Uniswap pools, Superfluid streams, and community vaults.\n- Key Metric: Farcaster frames enable direct artist monetization with < 1 cent transaction fees.

Royalty protocols like Manifold or EIP-2981 are opt-in standards, not enforceable laws. Marketplaces like Blur and OpenSea have already demonstrated they will bypass them to win on price. Without a critical mass of liquidity locked to royalty-respecting venues, artists have no leverage.

• Market Share: Royalty-optional marketplaces often command >60% of NFT volume.
• Network Effect: Liquidity begets liquidity; once a dominant marketplace flips the switch, others follow to compete.

Protocol-level solutions like 0xSplits or Royalty Registry add complexity for both creators and collectors. Minting becomes a multi-step process of configuring splits and verifying on-chain enforcement. Platform-level solutions (e.g., a checkbox in a dashboard) will always win on simplicity.

• User Drop-off: Each additional step in minting can reduce completion by ~20%.
• Aggregation Bias: Wallets and aggregators prioritize total price, not royalty compliance, burying compliant listings.

Established platforms like Spotify or Apple Music have spent billions on licensing deals and legal frameworks. A pure-protocol approach has no entity to sue, negotiate with, or regulate. For major labels and IP holders, this is a bug, not a feature. They will partner with centralized gatekeepers who offer legal certainty.

• Deal Size: Major label advances are in the hundreds of millions, dwarfing crypto-native funding.
• Compliance Cost: KYC/AML, tax reporting, and copyright takedowns are existential requirements, not protocol features.

Platforms win by bundling services: discovery, promotion, fiat on-ramps, and community tools. A royalty protocol is just one feature. An artist choosing a platform is choosing an ecosystem. Protocols like Sound.xyz show the hybrid model may be the real winner, using the chain for provenance but the platform for the experience.

• Sticky Ecosystem: Platform lock-in via integrated tools creates >70% user retention.
• Feature Gap: Isolated royalty protocols cannot match the R&D spend of a $10B+ tech company.

Marketplaces like OpenSea and Blur have made royalties optional to win market share, destroying a $1.9B+ revenue stream for creators. Their business model is to capture users and liquidity, not enforce creator rights.

• Value Extraction: Platforms treat royalties as a cost center to be minimized.
• Race to the Bottom: Competition on fees leads to a 0% royalty standard.
• Centralized Control: Enforcement is a policy decision, easily reversed.

On-chain mechanisms like EIP-2981 and Manifold's Royalty Registry hardcode royalties into the NFT smart contract itself, making them immutable and platform-agnostic.

• Code is Law: Royalties are a smart contract function, not a ToS clause.
• Creator Sovereignty: Artists set terms that persist across all marketplaces.
• Interoperable Standard: A universal spec for the entire Ethereum Virtual Machine (EVM) ecosystem.

Protocols like Sound.xyz and Zora are building new economic layers where royalties are the primary feature, not an afterthought. This enables novel financial primitives.

• Revenue Streaming: Tools like Superfluid enable real-time, perpetual royalty splits.
• Secondary Market LPing: Platforms can share fee revenue with creators, aligning incentives.
• DeFi Integration: Royalty streams as collateral for loans via NFTfi or Arcade.

The future is a composable stack separating minting, marketplace, and royalty enforcement, led by projects like Manifold (minting), Reservoir (liquidity), and 0xSplits (distribution).

• Specialization: Best-in-class protocols for each layer.
• Composability: Artists mix-and-match tools without vendor lock-in.
• Liquidity Aggregation: Protocols like Reservoir aggregate orders across all marketplaces, making enforcement universal.