Hype beasts, the ‘Yeezy’ problem, and $950 cassette tapes: How crypto startup Zora is helping musicians create new revenue streams

Andre Anjos, known to his fans as RAC, won a Grammy for his 2017 remix of the song “Tearing Me Up,” but this success has not made it easy for the Portland musician to make a living. He blames a digital economy that fails to value the labor of songwriters and other creative artists.

“The music industry is fundamentally broken,” says Anjos. “Everyone says ‘Spotify is going to save us’ but I don’t believe it. They’re not profitable, which is why they’re pivoting to podcasts.”

Frustration with the digital economy has led Anjos, along with a handful of sneaker and hoodie designers, to embrace a new startup in a bid to create a new revenue stream based on a resale market for physical items. In Anjos’ case, a frenzy among his fans resulted in a limited edition cassette (like the one seen below) of his new album selling for $950.

The startup is called Zora and its founders claim it has solved what they call the “Yeezy problem”—a reference to the phenomenon of Kanye West releasing a limited edition pair of Yeezy sneakers for $200, only to have a handful of people snap them up and resell them for $2,000.

The premise of Zora is to let artists and designers capture part of that resale value by creating a digital token that can be redeemed for merchandise, or else sold to someone else for a higher price. In the case of a bidding frenzy, the creator not only pockets a higher ultimate price, but part of the fees collected when the token is resold.

Zora’s head of business development, Dee Goens, says Zora is primarily aimed at “hype beasts”—those consumers who are super fans of a given brand or creator. Other creators using Zora include Jeff Staple, a Nike designer famous in sneakerhead circles, who has been selling limited edition shoes on the platform. (The pair below fetched $2000 after being listed initially at $160).

Goens, who has a background in influencer marketing, says Zora is also in talks with the NBA and its players to sell used game jerseys.

While fans are the core of Zora’s user base, its business model also relies on encouraging speculators to buy the digital tokens, and creating a burst of trading activity when a new piece of merchandise drops. These speculators can hold the token for up to a year in hopes of getting a better price. When the token is finally redeemed for the underlying piece of merchandise, the token is destroyed.

Both Goens and Zora founder’s, Jacob Horne, are veterans of the cryptocurrency giant Coinbase. They deployed blockchain—the same technology that powers Bitcoin to create a tamper-proof record of ownership—to create the tokens that are used as proxies for the merchandise on Zora.

The blockchain element adds a layer of security, but also complexity to Zora’s buying process: those wishing to obtain a token and try sell it for more must create a digital wallet on Zora and fund it with so-called stablecoins (digital versions of the US dollar) from Coinbase. This process is likely to prove daunting to casual consumers, though the “hype beasts” among them may decide the rigamarole is worth it. Meanwhile others who simply want to purchase the item can use a credit card.

Zora is not the first company to use cryptocurrency tokens to try and drive up the value of scarce goods. Vancouver-based Dapper Labs is selling an array of digital merchandise tied to famous brands like Dr. Seuss and the NBA, and touting them as unique items stored on a blockchain. In a similar vein, a company called Nifty, backed by the Winklevoss twins of early Facebook fame, is letting artists sell unique digital prints and painting.

These digital goods ventures, however, represent a tiny niche market and it’s unclear when, if ever, mainstream consumers will embrace them. Zora, however, may be in a better position for a breakout since it is selling physical stuff—shoes, cassettes, hoodies and so on—that fans crave and that can’t be found elsewhere.

For Anjos, aka RAC, a platform like Zora—which he concedes is very much an experiment—represents a chance to capture the resale cash that has long been pocketed by middlemen.

“It turns out music does have value,” he says.

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