NFT Agreements that Turn Fandom Into Investments

Peter Speroni
Intellectual Property Attorney
Mike Whelan
Chief Community Officer

In the world of Non-Fungible Tokens (NFTs), old contract rules define new forms of digital ownership. The overlap of two systems isn’t without problems, though.

IP attorney Peter Speroni joined the Contract Teardown to illustrate the conflict between old and new. He walks through Royal’s Song Token Purchase agreement. This contract divided up rights to musical artist Nas’s recent song releases, turning them into investment vehicles.

Peter asks important questions about NFTs and art, including:

  • Ownership of different types of music distribution,
  • The value to investors when they don’t own distribution, and
  • the impact of NFTs on the music industry and the nature of fandom.

THE GUEST: Peter Speroni is an accomplished Intellectual Property Attorney specializing in music, film and entertainment contracts and licensing agreements.

THE HOST: Mike Whelan is the author of Lawyer Forward: Finding Your Place in the Future of Law and host of the Lawyer Forward community. Learn more about his work for attorneys at

If you are interested in being a guest on Contract Teardown, please email us at

Watch, listen, or read the transcript below for Peter’s helpful insights.

Episode Links

The Contract: Royal Song Token Purchase and Assignment of Streaming Royalties Agreement
Guest’s Links: LinkedIn | YouTube

Interview Transcript

Mike Whelan In this episode, Peter Speroni tells us how contracting for NFTs is changing the music industry. So let’s tear it down. Peter Speroni, welcome to the Contract Teardown Show. How are you today, sir?

Peter Speroni Good. How are you?

Mike Whelan A little worried, I got to tell you, because we are getting into nerdy things that there is a chance that either I’m going to get really excited or you’re going to bore me to death and I’m going to pass out. I don’t know which is going to happen, but just the mystery. I mean, I just want to keep this mystery alive. We are talking about Web3 and NFTs and I know all you lawyer types just I mean, your ears just like turned to nine. So let’s do it. We’re talking about a document as we do. This is the Royal Song Token Purchase and Assignment of Streaming Royalties Agreement. Peter, what the heck is this thing?

Peter Speroni This is, is a NFT launching platform that works with musicians such as Nas, the legendary hip hop musician Nas, who is the subject of this agreement here. And what they do is they put together NFT collections for musicians and then they draft up the terms and conditions of what’s going to be extended to that NFT. And then they facilitate the sale and the marketing of the NFT to the people on the platform and, they launch tokens. So this is their agreement between Nas. There’s two songs that he released as NFTs: Ultra Black and Rare. And this governs the Rare song NFT.

Mike Whelan Okay, before we get into what in the world that all meant, tell me about you. What’s your background? What brings you to documents like this?

Peter Speroni So my background. So I am co-managing partner of Yates and Speroni Law Group. We are a boutique intellectual property law firm. We specialize in trademarks, copyrights, licensing, musicians, artists, filmmakers, content producers, social media influencers, you name it. If you’re entertaining, we handle your intellectual property. I’ve worked prior to becoming an attorney. I went to law school at 36 years old. So prior to becoming an attorney, I’d worked for about 15 years in the music industry, everything from music publishing to music management to a little bit on the record label, side production, etc., and really have a robust and unique understanding of how musicians create the copyrights that the record labels exploit and create revenue streams from and publishers. What brought me to the space was I noticed the hype and the craze and what we call in the web3 world as FOMO, fear of missing out, when everybody was purchasing NFTs for so much money and not asking a lot of questions. I just simply sat back and said, Okay, let me take a look at a few of the music-related NFT projects and see if I can start to break down some of these contracts. So we are now IP for the metaverse. So before a token is minted, we are clearing the IP to make sure that what you’re actually minting to the blockchain is authentic versus rushing to the gate, finding out that there’s a co-writer that may be involved you didn’t know about. And then you have minted a copyright infringement lawsuit to the blockchain, which is not authentic at all. So that’s how I got into this space. And I’ve been in the space for about two years covering it on my LinkedIn.

Mike Whelan But you are using words that mean things that people may not know. So I’m going to step back and I’m going to give the most cartoonishly oversimplified definition of what I understand NFTs to be. You’re going to tell me why it’s wrong and then we’re going to use this document to go through what it actually is. The way I describe NFTs to my wife, who then hilariously tried to convince my mom to mint some NFT, which was awesome. The way I describe an NFT is it’s a baseball card with a rights attached, and a lot of the value in the thing we’re talking about is actually in the rights that are attached. And so a document like this is like, let’s figure out what those rights are. Why is that oversimplification totally wrong? Give me background on what this document is talking about. If I understand correctly, it’s somebody going to a website and saying I want to purchase the ability to listen to the song and whatever else comes with it. Tell me about what they’re doing with a token as opposed to just releasing it on iTunes.

Peter Speroni Yeah. So actually the oversimplification that you provided is actually spot on. I mean, we’re talking about what’s called minting nonfungible tokens. So that’s minting; recording it on a blockchain and assigning a unique code to whatever it is you want it to represent. So whether that’s a baseball card or whether that’s possible intellectual property, whether that’s ownership in land, whatever it may be, that unique digital code recorded on the blockchain, which is forever, represents whatever you say that it represents. This agreement is talking about the representation of streaming royalties from Nas’s song Rare, which was released as an NFT, and it is extending streaming royalties to his fans. So so it’s buying into, investing into the likelihood that the song or the album will be successful. And in exchange, you put a little upfront money first. Not a little, actually. We’ll get into that in the hopes that the streaming royalties will pay you back on the back end. At the same time, you can take your actual physical NFT and you can flip it on a secondary market like Opensea to which you no longer own it. You don’t have rights to the streaming royalties, but you sell them to another buyer.

Mike Whelan Right, so the access can be passed on. It is not fungible. It doesn’t die, but it can be it can be passed on. And I, I think about, you know, to step back to my practice, I went and had to chase down some real estate documents to make sure who owned this piece of property. I went into this old, you know, attached to a courthouse, these giant books. And these essentially were taking that representation. That book told me something. That deed told me something about who owned it. We’re doing a similar thing where, you know, just kind of doing it in the virtual world. But that creates an interesting relationship with a contract because the contract is defining what all those rights and rules are, and then we’re putting it over on this permanent space. So let’s look at the contract. We’re going to start with section two. It is called ownership of song tokens. So somebody is going and they’re buying the baseball card with access rights tied to it. What do you think about this? You know, relatively again, this might be a theme throughout, this relatively long section, defining what we might intuitively think is simple but isn’t. What do you think about section two?

Peter Speroni So yeah. So this is important and this is something that people do need to understand when you’re talking about, you know, and later we’ll get into the intellectual property aspect of it. But the ownership in the song token itself really, yeah, it’s the physical thing. I own the NFT. It’s not talking about all the necessarily things that are necessarily encompassed within it, but you own the NFT, you have the right to freely sell it, you have the right to freely transfer it and otherwise dispose of that song token So that’s the actual, the thing, the physical thing. And this particular clause is describing that – the physical thing of the NFT itself. So it’s a lot of hoop de la, I think that’s a word. And then in section B here, the purchasers rights to the streaming royalty, which we’ll get into in the next section. He’s talking about what the physical thing encompasses.

Mike Whelan Let me clarify real quick. If I’m understanding correctly, there is not an actual physical thing. They’re not going to send you a baseball card. But there is this is a representation of a bundle of rights, right? Like so the representation lives online. Yeah. Is that right?

Peter Speroni Yep. It lives, well, it’s recorded on the blockchain and it is there forever.

Mike Whelan So there’s a symbol somewhere, a token that says here is the bundle of rights. And like I said, section two is talking about what the ownership of that token is. Move me from section two to section three and what those rights are that somebody is purchasing.

Peter Speroni Okay. So, so we’re talking about rights to streaming royalties. And this is really important here because we’re talking about investment mechanisms. This is’s website. I’ve actually been quite critical of the approach of saying, you know, invest in your favorite musician’s music because before we just listen to music because, you know, it helped us grieve or it helped us dance on a Friday night at I mean I have musicians that I’ll cruise around in my Jeep just listening to just for that purpose just to sort of like cancel out the world and stuff like that. So the connection to music being the universal language and someone who’s worked in it forever, I want this, that, that element of things to be maintained here. And so part of my criticism of the industry is that they’re holding it out there into invest in your favorite musician. And I think that that’s wrong. I think that that’s not good for music. But however, there are opportunities and we we’re looking at section three with the right to streaming royalties. So this is a component that would be folded it up into the physical ownership of the NFT itself is what we were just talking about in section two. But if we want to break down what streaming royalties mean and look at the percentages of streaming royalties that you would be entitled to, you can rest assured you’re not going to make your money back. Some of these nfts dropped initially and everybody had FOMO. They wanted to jump in and buy, buy, buy, and they ran three tiers of this particular NFT collection for each song, Ultra Black and Rare. Those tiers had different percentages of streaming royalty rates that are associated depending on the tier. And then they add into that actual ownership of the NFT perks, merchandise, backstage passes, meet and greet, stuff like that. So, so the community effort was there. However, you don’t need Web3, as they call it, for those things. Just join a fan club. I mean, we were already doing that kind of stuff. So those extra perks are not the featured sell here. It’s more investing in the long term into the artist. Streaming royalty is really important to understand for people that are called investors, although I hate that, is because streaming royalties pay out pennies on the dollars compared to most other public performance royalties. They don’t pay much. You know, the breakdowns. I mean, sites like Spotify pay out far less than other streaming sites. I mean, that’s a well-known and documented fact. So if you’re paying, you know, $5-6,000 for an NFT that promises you streaming rights, your next question should be, well, what streaming platforms? Because if it’s just Spotify, that’s going to be far less than if it’s on another kind of streaming site. But even just streaming in general, if you’re owning point zero, I believe this one’s 0.0018% of a streaming royalty. That is, I can tell anyone who’s ever been a songwriter, if you’re owning that much of a royalty in your BMI account on a quarterly check, you’re probably going to get $0.30, $0.40 or whatever that’s dependent on. Of course, if this particular artist and song hits the Billboard charts, right, if you get a Top 40 hit, everybody’s happy. This particular song didn’t even make the top 100. So there’s no more promotional dollars that go into a musician once their song flops, because the record labels and the people behind it say, no, we put up some money, didn’t do it, no one’s going to be interested. So the right to streaming royalty section lays out your rights to get the royalty from the streaming, but they don’t specify the streaming sites, which is one of my transparency issues here, because it doesn’t necessarily have to mean all of them, and it’s not going to be much money at all, especially on an unsuccessful song.

Mike Whelan Yeah. And I’m thinking here as someone who somehow ended up in media, you know, the creating of the thing and giving somebody a place to buy it, there’s a gap between those two things. That is what we call distribution. It’s just getting out in front of people and making it. And to your point, like that takes money. That’s a machine. And you’ve got to feel that that investment is coming back. When I look at section four, the Reservation of Rights, it seems like they’re doing a lot to preserve different methods of distribution. Like, I actually own that, you know, me as the provider, as the buyer, I don’t own the song, I don’t own any other types of distribution. It seems like this is really carving out. Actually, you don’t have much. What do you think about Section four and the Reservation of Rights?

Peter Speroni I am glad you brought that up because that is so important here, because one of the industry pitches of NFT technology when it relates to musicians has always been and still is, although I’m very critical of it, is that musicians that have been screwed by the big record labels back in the day can now cut out the record label and sell directly to their fans. Well, let’s hold up on that for a second, because record labels, major record labels and music publishing companies are entirely seasoned. They do serve a purpose and they do take more because they exploit the revenue in order and exploit and used in this industry. But it has a bad connotation. But it really it’s not for purposes of copyright. You want your copyright exploited. That’s more money for everybody. They serve a function. So part of the criticism here is in the reservation of rights is the old format would have been to have your record label pay you a couple hundred thousand dollars as an advance and then the record label would recoup that advance and pay out the artists on a royalty. Right. This one says, well, we don’t need all of that. What we’re going to do is we’re going to put that original advance. We’re going to impose that risk onto our fans, the purchasers in this agreement, and those purchasers are going to front up all the money. Now, these two songs, just to give you some figures here, roughly generated about $600,000 off of initial sales. Now, let me tell you how unheard of that is for two songs for an artist, even as legendary as Nas is. Nas definitely has that clout. He’s got a 30, almost 40-year career. He’s a legend. Absolutely. But to look at $600,000 as an advance when you’re 30-40 years into your career and not currently charting. That’s a lot of money. So inside the record label fronting it, that advance now is posed on the fans. And then they simultaneously say, you don’t get any rights to exploit that copyright and create revenue streams, which make sense because fans aren’t good at music business. They’d be working in music business if they were good at music business. So the fans, that make sense, but you’re expected to front all this money and not be able to do anything with the copyright. So the reservation rights clause here is really clear that you have no rights, the underlying lyrics, melody and composition of the song, that you don’t have any distribution rights, you don’t have any publishing rights, you don’t have really any say in the music business strategy of this copyright whatsoever. You own the token and you have a portion of streaming royalties when you own it. Royalties are different from ownership, though, so you can own a portion of streaming royalties and still not own the copyright you don’t hear. So the reservation rights is telling all the fans that bought it. Just to be clear, you don’t own any of the actual components that make the copyright. You get a small percentage if it streams well, which you didn’t.

Mike Whelan Yeah. And to your point, these may not even be fans, right? If a fan is trying to support an artist, they’ve got their own motivations for doing it. It might not be money, but since they’re presenting this as an investment vehicle, that might not even be the good that people are looking for, but they’re still taking advantage of that reality. So we’ll talk about the sophistication of buyers in a minute. But before we do, I want to talk about six. So Royal is a platform. It is a marketplace and part of the purpose of a marketplace, you remember the old days with eBay when they would say, oh, this is safe, this is secure, we guarantee there’s all these labels all over the place. They were trying to create enough trust for a transaction to happen. That’s what marketplaces do. That’s what Royal is doing. And here in section six, Royal seems to be saying, forget all that. We’re not responsible for anything. What do you think about section six and how it impacts this purchase?

Peter Speroni It impacts that, this purchase in so many ways, because this is problematic for me to say, it’s basically like, in other places in the agreement, it talks about how they work with, they can decide, but they don’t necessarily have to decide the third-party website that actually calculates and keeps detailed accountings of the streaming royalties. So that’s the question, right? If you own .0187% of a streaming royalty, well, what does that mean? What does that look like on an Excel spreadsheet? How is that broken down? Where are those sources of income coming from and who’s keeping track of it? Royal saying we’re not responsible for that. And if our third-party vendor that screws up their site goes down there, you know, you know, doing whatever they want to do, but they’re not giving our purchasers detailed accountings then not our problem. You’re exactly right. I mean, what kind of assurance is that for people that are hoping to maintain a relationship with Royal? You’d like to have transparency. And this is the one area where everyone’s going to really, really, really get in trouble at the end of the day, because the SEC is all over the enforcement and regulation of investment mechanisms, investment contracts and streaming royalties are on the chopping block here because there is an anticipation that you’re going to make a future revenue off of the sale through an investment contract, which it was manifested in the streaming royalties. So, the problem, once it’s registered once it’s required to be a security, the disclosures and transparency that are required to those investors who are fans are far higher than if it’s a commodity. So if Royal saying we’re not responsible to give you those disclosures and transparency and it turns out down the road, and they’re likely to be registered as a security, then that’s going to be a nightmare for them to try to make work on the back end, especially if they didn’t vet the third party accounting vendors. So the disclosure, the lack of disclosure and lack of transparency in the industry is what alarms me the most, because it’s like, where is the money going and what happens when something goes wrong? In the anonymous blockchain world, as they keep saying, the decentralized world. It’s a nightmare of a customer service phone call. You don’t know who has it, who’s doing anything with it. So it’s really interesting and how they’re going to try and make that work on the back end and what impact that will have on.

Mike Whelan And to your point, like, as we think, big picture, this thing exists in a world that already exists. Right. There are already systems in place. I mean, for investments, to your point, even small investments, there are protections. There are, there’s a difference in liability between an unsophisticated party and a merchant liability. I mean, it’s like a core of contracting that if you should know better, we’re going to hold you to a higher standard. As I think about this kind of document and specifically the contract drafting exercise, this, I’m assuming, is presented as sort of a click-through. This is not written for my mom to go invest in the streaming rights to Nas’s music. This is written as a button you’ve got to push to find the legal to see this. I worry. And my question to you is, are you taking people whether they’re motivated by fandom, which means they could be any level of sophistication, they may not care about NFTs or investments at all. What they’re actually trying to do is just hang out with their buddy Nas or because they turn this into an investment vehicle. These are maybe sophisticated and, you know, investors who are trying to diversify where their risk is by putting in new asset types. Great. If I’m drafting contracts, how do I do that? Right. How do I meet the obligation when I know this is designed for the super ninjas who do this all the time and for my mom, who just loves Nas, you know? Yeah. How do you fight for that?

Peter Speroni Well, that is such a key point is because you don’t know. I mean, I’ll tell you right now: fans of Nas, when this was launched last year, I mean, we’re talking before the crash. So these initial NFTs went out for thousands of dollars and they were immediately flipped on Opensea on a second secondary marketplace for triple the amount. So, you know, you’re seeing some gold for 10,000. And, you know, I mean, it was a lot of money. Those weren’t fans of Nas and maybe some of them were. But think about what the recipe would have had to happen for them to actually be fans of Nas. You would have had to be a fan who had an NFT, who knew what an NFT was way back before anyone else did. You’d have to have an NFT wallet, a crypto wallet, a crypto address. You’d have to know about this industry in general. I went actually to go way back in the day to purchase one of these. I don’t own one, but it was an absolute nightmare to try and hook my wallet and all this kind of stuff. So it’s just chaos. They actually shut down their website on initial launch and they delayed it because there are so many people trying to get in there. So to answer your question of how do you write the contract, this is why I’ve always said in the Wild West, as we call Web three, slow down and ask questions. Who are you writing the contract for? If you’re writing for a class of people that are, like you said, the ninjas that are going to be actually investing, well, you know what they’re going to do? They’re going to follow the Billboard charts and they’re going to follow the tours and they’re going to know if they know anything about music, that the promotional dollars behind a particular song, which is like rare or ultra black NFT, start to decrease the minute they’re no longer promoting it. So as an investment mechanism, ninja, you’d say that’d be a good time to sell. You’d sell at the peak because you know, he’s coming off tour well so that’s one kind of contract versus my issue is this is advertised on Royal’s website to the fans in that fans fans fans fans. No no no no don’t advertise it that way. It’s not for the fans. If you’re looking at it to flip it on the secondary market, you’re not a fan. If you truly want to relate to your fans, you want them to be part of your community forever. But the second that they sell this on a secondary market, they’re no longer part of your community. They made a few bucks off of it. So the language and what I’m starting to see now in contracts is that that’s the first question. Who are you writing this for? Do you want this to be an investment mechanism or do you want this to be about a community-driven effort to relate to your diehard fans like never before? I think it should be the latter in most circumstances, especially for artists that are looking for that connectivity with their fans like never before. I think that that’s the the promise of NFTs is the community-driven effort somewhere along the line NFTs took off into this investment space and it didn’t have to be that way. They don’t have to be investment mechanisms. They can be nontransferable tokens, meaning once you own it, you own it forever. Here it is. It sits in your digital wallet and it represents something and whatever it represents, you can no longer you can never sell. That kind of stuff for me allows the technology to be in the background and the experience of what you get by owning it to the forefront. And if it’s music, then the song’s got to be great. The experience has got to be great. I think a lot of that is lost in translation in the investment.

Mike Whelan Right. And, you know, and a lot of this we can’t solve, right. Like we drafting attorneys can’t solve. But one thing we can solve is at minimum, being responsible and knowing this is really targeted to at least half totally unsophisticated consumers, at least in the way that we’re talking about it. Be responsible, draft the way a Google or an Apple does that you know, this is for consumers. Don’t hide it in a button somewhere and use the where to for is in here to for, that’s not who it’s for. So I appreciate you bringing this. I think this is a super interesting area where community intentions and legal intentions, contract intentions overlap. So I appreciate you bringing it to us. For people who want to learn more about this, you mentioned your LinkedIn will make sure the link is in the show notes, but what’s the best way for people to connect with you?

Peter Speroni Yep. So I mean, probably would be LinkedIn. Honestly, I’ve been reading a lot of user policies from other social media websites these days with the whistleblowers that have now testified in front of the Senate. And I started to delete the majority of them that I was using before. Due to those reasons as a privacy IP attorney, I found it best to just go with one for a bit. LinkedIn would be my go-to. I’m accessible there and then all my contact information and my link tree is on there as well. So email address, all.

Mike Whelan We’ll make sure that’s included over at the blog post in the show notes. If you go to, you’ll find it there. And if you want to be a guest on the Contact Teardown show, just email us, we’re at community@law Thanks again, Peter and we will see you all next time.

Peter Speroni Thanks for having me.


Peter Speroni
Intellectual Property Attorney
Mike Whelan
Chief Community Officer

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