Steve Aoki on the blockchain, the metaverse, and the business of music

I have always been fascinated by the constant back and forth between tech and the music business, but every time that happens, the business model of music changes. My theory is that whatever is happening to music today is a preview of what will happen five years from now. The movie that won the Oscar for Best Picture was just released by Apple TV Plus, which was years before the other streaming services.

I'm talking to Steve Aoki. He is a DJ, producer, record label owner and prolificentrepreneur. Steve has been in the music industry since 1996, so he has been through a lot of big tech transitions, and now he is heavily invested in another, with Web3 the Aokiverse. Over time, it is meant to be part of the metaverse. Of course.

I talked to Steve about how he makes his bets, what the business of music is like today, and where he sees it going in the future. Steve calls the Aokiverse a social club that will combine Web3 and Web2 experiences. What does that mean? How is he going to manage that community? I wanted to know how he was thinking about the energy use and climate impact of his project.

We talk a lot about how Steve manages his time and all the different roles he plays, and at one point, he even manifest a future musical collaboration. I think you will like it.

Okay, Steve Aoki. Here we go.

The transcript was lightly edited for clarity.

The founder of the Aokiverse is Steve Aoki. We are here to decode.

What are you talking about guys? Thanks for having me.

I'm very excited to have you. I am fascinated by how art and business work together. My belief is that the music business will continue after five years. There is a lot going on in music right now. I want to talk about the Aokiverse, but I need to start with a foundation so people can understand how the business is working. What was your business like before the NFTs? What was the job like for you?

Investing was a main part of my business. After DJing for a while, I started doing small investments. My family has been involved in restaurants since I was born. I went into that world a little bit after I said, "Oh, I might as well invest in something like that." Nine out of ten restaurants fail, and if you open a nightclub or a restaurant, there is a 90 percent chance it will fail.

I learned how to position myself in that space. I started a fund with Emmitt called Eminoki. We were just getting into the late stage of investing in things. All of the investments we made were very successful. We got into the company.

Did you do it?

It was a friends-and- family situation where some people were selling stock. I was able to get in because there was a small chance that I would be able to participate. About five or six years ago, I got into that. I started investing in alternative investments in the 2010s. If you talk to my business manager, you're supposed to work at a triangular business model, where your private equity and alternative investments are at the top end of the triangle, and your safe investments are at the bottom.

Yes, the pyramid.

It would be flipped if it was up to me. It is more fun to get into passion projects. That is how I started. I consider my record label and myself an investment. Private equity is that. I have someone else at the other end of the stick that gives me sound advice.

That balances you out?

At this point, it is more like a square than a pyramid. I do a lot of work in the virtual currency. Around the year of 2018, I got intocryptocurrencies. I spend a lot of money on art. There are some amazing pieces in my house. I don't sell. I am a bag holder in the end. I hardly ever sell so the NFT community loves me. I try to get some cost basis back, but it's rare that I sell. I sweep the floors. I don't just buy a project if I believe in it. I learned something. I will buy art because I will have it hanging on my wall. I have invested into some very high-end toys and I have a whole room of them.

It has to have a level of value for me when it comes to investing. It has to have a connection to the past. I'm more likely to invest in something like that than a stock that's going to do well. My business management will handle that. One of the differences between investing into a coin and an NFT is that. The front end of the technology is more important than the back end. The way we identify with culture is called NFTs. It's a way we communicate. Most people who are confused about NFTs don't see that. They are like, "You identify with a JPEG?"

The name is funny. People think non-fungible token is a bad name. You can't swap them for another.

Electronic dance music is referred to as EDM. A definition of what you are getting is called NFT.

So that's your investment side, right? I want to explore how NFTs and the music industry are colliding. Tell me how the music part of your business works. It is a business that doesn't make a lot of sense and people are confused about it.

Outside of shows, the business of music is not important.

Really?

Yes. It's rare if you get a big sync. That is how people get their money.

Is a song used in a commercial or a movie?

Yes. Some big movies might low-ball you because they are so big. If you get a commercial for Tide detergent, you will get paid a hundred grand a side. You get paid on the master side if you are involved in the publishing or writing of the song. 99% of the artists who make music and put it out there can't survive off of streaming income. You know more about how much we make on a stream than I do. A fraction of a penny is what a stream is.

It is something like 0.008.

Most of the people making music don't get a lot of views or streams on YouTube. Even if you are a big artist, I might get some really high streaming numbers on a few songs, but it is only a few songs. It is a very low income stream.

I would not be able to have the lifestyle that I have if I were not on the road. I don't know the percentage.

As an artist, you find other ways to make money outside of the music business. Everyone is paying when they set a standard. It doesn't change much if you get a small amount of money. It is not enough to get a level up there.

NFTs are giving musicians a different way to engage with their audience. The NFT community is looking into music as an art form. Music is art, which we can all agree with, but it is not considered an art on the financial side of collecting. You don't collect music. You can listen to it for free. It has always been that way.

You have been running a record label for 27 years. Since 1996?

Yes.

The 90s were crazy for record sales. There was no streaming and CD sales were through the roof. The business got turned upside-down after the introduction of Napster and mp3s. We are now in the world of Spotify. I have a vinyl collection, and I'm sure you have a bigger one, but people still collect physical music. No one has a collection of digital music. How did you survive that?

Is it a label?

As proprietor of a label or as an artist.

One of the first things our label and the artists did was give songs away for free. Management would say what? No! I knew this was where the business was going to go even if it didn't make sense and it felt like everything was getting chopped off in terms of how much money we were making. I knew that artists would make more money if more people listened to their music.

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Nilay Patel is the host of a show about big ideas and other problems.

One thing that I have always had in my back pocket is the idea of being a little bit earlier in the game and taking that leap forward. They are going to come out of the woodwork. I went into the space guns blazing and it worked. There was so much more visibility on that single, I said, "Just trust me on this, on one song."

It didn't help us in the short term, but it did help us in the long term. Whenever you make speculative moves, you have to think like that. If you're doing it for the wrong reason, you can't think about short-term gain. Period.

One of the life lessons I have learned is that I'm here and I'm not going anywhere. When it comes to my label, I don't say, "We have got to make all this money on this artist or band, then boom, we're out." We are here to establish a larger community of people that support us, starting in small rooms then onto bigger rooms or arenas. Keep growing it, keep servicing it, and keep moving forward. I still work from the same concept. I'm not leaving. I'm here. This is the future. This is how it will be.

Commerce will be here regardless of where I go. People who are pulling the rug out from others are what I see when people get into the NFT space. Don't you see? Everyone is going to be doing it next year, and you just rugged yourself. This is how it will be. This is how we will communicate. You have to think about the long game.

I think of the classic Decoder question when I ask everybody. You are an investor in a lot of different things, you run a lot of businesses, and you are an artist. How do you make decisions? What is your thought process?

There is a balance of passion. I only have so much time in the day, so I have to ask, is my passion going to lead me into making sure I carve out this amount of time in my day for this project? My schedule is stacked, but it is with things that I love. The way has to be led by passion. You have teams involved that can provide a different angle on what you are doing because I learned the hard way about economics. They give you more information about your choices.

I keep my mind open. I think it's important to know when you're wrong and not be stubborn. It's important that you have the right team because people are saying things that can change your decision. You trust that the decision is true to your core. You have to find the right team.

I have asked this question of everyone from the biggest CEOs to individual creators, and it's funny how the answers can all be different, but at the end of the day, all line up. It is one of the most important questions we ask on the show. It's the most important thing you do with your time, and few people take the time to think about it.

I think it is important for everyone to ask themselves why they are doing what they are doing. I always think about that. You have to think about how long you have on the planet. I'm in good health and my average life expectancy is maybe 90.

At some point, you might want to slow down.

Let's say 80. I have 36 years left. Is it 36 years? Only three decades? Three decades! It's not like you can say, "Yeah, we'll do this and we'll get out of it soon."

Dim Mak, my record label, had no end in sight. In five years, we're going to sell and we're out. There is no exit for a lot of the stuff I do. In some cases, I will continue to build, and maybe partners will come in to give an exit, and I will get some money out of the equation for myself. If this is going to be part of my game plan for 36 more years, I have to think about it. There is a legacy after that.

I ask that question almost every episode. It leads to places you wouldn't expect. You are a worker now. It's crazy that you toured 361 days in a year. How do you decide between Steve the performer or Steve the investor? How do you manage that?

Steve-the-performer time is only two hours, which people forget, but traveling and the side effects of traveling are a crazy time sink. The brain cycles are taken away by it. It is hard to be optimal when you are zombie-ing through jet lag. I am still trying to figure that out because I travel a lot. I am a global artist and I travel across the country every other week. I did 14 tours in China in two or three years, then I went to Europe, then back to America, Central America, South America, Asia. It doesn't end as far as jet lag. It is constant.

I have a good team that makes sure everything is on schedule and on time. I really stick to my schedule. Being 100% with my schedule is very important. I have never broken under 200 shows a year for 15 years, but I have missed a few. I have a good track record of reliability. I will make it regardless of rain, sleet, or snow, I will do whatever is in my power. Sometimes the act of God comes, or I just feel sick, and I just can't go, but shows are just one aspect of the things I do in my life that are important. I try to keep them in line with everything else. You have to be a mental athlete in order to make it to those things. If I decide to take on all this stuff, there is no other choice. The NFT world, Aokiverse, is a major time sink in a good and exciting way. We are building a world.

It's important that you sacrifice things that will not allow you to be optimal with all that going on. I go into things with my team as well. The team you pick has to be with you. We are moving forward at this pace, at this pace, and the train does not stop. You have to want that, you have to like that, and you have to train like an athlete. The mentality of the physical, mental, and spiritual is what I love the most.

I wear a lot of hats in my life, including a management hat, a creative hat, and a podcastser hat. I need to schedule time to switch between talking to people and being creative. Are you a mental athlete that can just go from one to the other, or do you have to do that? Can you walk out of a business meeting?

Yes. 100%.

That is crazy to me. I wouldn't be able to do that.

I think it's more difficult to nap than it is. I did five shows in five different countries in 40 hours and only an ounce of sleep was left on the transportation. I was driven to the back of the stage at one show. I could hear them chanting my name and I was still asleep. My manager was shaking my arm and telling me to hit the stage. They are chanting your name after we arrived. Thirty seconds is all I need. You feel it when I get to the stage. I'm excited.

Follow the passion and excitement at the end of the day. You have to accept that your brain is not going to be able to adjust so quickly when you go from the polar opposite mental hats that you are talking about. You will have to fail in the first part. I catch up after I go and I'm good. It's like I'm riding on my horse and I'm flying. I always accept that it is part of who I am. I have some people that are listening to me who are willing to give me some benefit of the doubt.

Let's talk about the Aokiverse. When COVID-19 hit, you got deep in NFTs. You jumped in hard. What made you go in that direction?

I was already a believer and I think it's important. I knew a lot about the space before I became a NFT. Everyone who has money to invest, believes in alternative investments, believes in art, and believes in collectibles, was able to do so during COVID-19. There are a lot of different reasons why I jumped in and there are so many different angles as to why it makes sense to me. There is so much more I can participate in, on the collecting, investing, curatorial, and creative sides.

I was getting into cards, like sports cards and Pokémon cards. I formed my own company with the founder of the brand that was already being developed, and we are doing very well with this. I'm already there on the collecting side for NFTs because I'm heavy into the card world.

You understand the communities with certain things that you love and believe in. The community side of NFTs is just as important as the technology and utilities behind it. The communities that are part of each of these projects are more important than any other industry I have ever been a part of. You have a voice, whether you are an investor or a stockholder. This is more of a two-way street, more transparent, and more real-time than it is.

It was important when I created the Aokiverse community. We have to deliver fast and be real-time. I wasn't seeing the delivery as fast as I wanted. I was amazed when I created the Aokiverse that there are more layers to what we can deliver. It's real-time, real-world stuff.

I am excited to do these shows. The first Aokiverse-only event for passport holders is about to happen. We haven't announced it yet.

There is a scoop.

Yes. There is a bit of an alpha there. I want to do this for the citizens of the Aokiverse. You can grow your passport and level it up if you get a passport in the Aokiverse.

Let's talk about that. The Aokiverse is a community. I've seen it described as a token-gated social club, but on the website it says it's Web3 and Web2 and I'm not sure if that's true. Tell me what that means. How does it work?

It is everything we said. There are real-world utilities and offerings like the live shows that make it a social club.

One person made it to the highest level, level six. They can come to the studio, where we are going to make a record and release it together; it's going to be Steve Aoki and XYZ dropping a record. I also work with other people. I've made songs with people who are scientists. It is one of the most exciting collaborations I have ever done, and I am hoping to do a record with Musk. I need the spirit of someone in the studio with me when I am making something beautiful. A lot of stuff is happening at my shows, between the access and the shows I am already doing and that we are going to be creating drops, both physical and digital. The first collaboration that we are doing with My Little Pony is really exciting.

That's great.

Everyone is so excited when I announce this or talk about it in social media. My brand, Dim Mak fashion, does a lot of collabs and licensing deals with a lot of cult intellectual properties, like The Matrix, Gremlins, My Little Pony, and Dragon Ball, among others. The first drop will be an exclusive collection from My Little Pony for Aokiverse members. I did Character X for my first NFT drop. Early access to just passport holders is what PFP is about.

I think it's fascinating that these communities are all built on the blockchain and that you should be able to resell them. On the website, it says Aoki credits are on the platform. You can buy a bunch of those and trade them in for an Aokiverse passport. You get them back when people trade them in. Do you have the right to resell them?

Yes. You burn them when you trade them in.

Do you burn them?

Yes. The more credits people burn, the less people are in the population. You can use the credits to get a passport. Level one is one credit, level two is four credits, level three is 16 credits, level four is 64 credits, and level five is 256 credits. It is in multiples of four. There are different levels of rewards, utilities, and offerings.

The goal is to get a lot of people in the community. If someone buys a lot of credits, what happens? You are still learning about this part of buying and selling your way into a community. It seems like a problem that there could be an Aokiverse whale that chokes out the community.

It's difficult to do that. There are whales here. There are five members at level five, and one that got to black prism level six. The floor of credits is the same as it was when we launched the passports. I have to check the floor again. The floor will go up as credits burn. It is up to the market to decide.

Is the passport an NFT? Is it possible for people to resell the passport?

Absolutely. You can level up with the mechanism we are building. Manifold is the best developer on Web3. Period. From Pages to Lost Poets, to Aokiverse, to Mad Dog Jones, everything they have worked on has always been unique. We launched this with the culmination of a lot of ideas. The Hundreds and Adam Bomb Squad are a merchant and a fashion company.

I also offer the same thing. We are doing these drops with My Little Pony because of that. We are going to be working with other NFT projects in dropping exclusive collabs inside of Aokiverse with great projects that are blue chip. You have that aspect that Gary V and others have done, and I am going to be speaking there as well.

Again, this stuff is new, so I'm thinking of the corner cases. When you hold the show there are only 30 people, what if someone buys all 30,000 credits to turn them into level six passports?

That is fine with me.

That is fine with you? That is a weird outcome that could happen.

I believe there are between 2,000 and 3000 members of the Aokiverse. You are correct that someone could have done that. I played for Gala Games at the first Vegas show. Kings of Leon, H.E.R., and myself and some other DJ friends all showed up at The, which was booked out by Doja Cat, who couldn't make it for some reason. The heavyweights were brought in by Gala Games to do an exclusive community show. The legendary venue in LA was turned into something special for 200 to 300 people.

That is amazing.

That is something that is aspirational. They have an incredible business and community that they are taking care of. I like that. It feels like you can do anything. When I play this Aokiverse show, I really don't care if there are only five people there. I know where every single person came from, so I look at each person as someone who believed in the Aokiverse membership, that got themselves a passport, and it's going to be more meaningful to me.

How do you generate revenue over time? Once all 30,000 credits are burned and there are many passports, where do you get more money?

The tertiary.

How do you get paid when people resell the passports?

Yes. We are participating in the secondary. We wanted to have a cross-section of NFT culture and community that was participating, not just Aoki fans. We reached out to all the different communities that supported us in the last year after we started designing this. The launch of Aokiverse had a diverse, broad base reaching out to many different communities. Building the community brings in a lot of different ideas and reasons as to why they are part of it.

The Discord is more vibrant because of it. Conversation isn't going to be about just one thing; there are different things that they want, things that they are excited about, and things that they value. As a social club, we are going to communicate and connect with a lot of different partners, like the DeadFellaz, and do really cool offerings and something exclusive for our communities.

Do you have to keep the racists out of the community that has a Discord, or do you? How does that work?

That is a good question. We have people who can help. We have weekly calls and meetings about how things are going in the Discord, and I rely on the moderators to do all that stuff. I think it's important. You hear it all the time, "Oh my God, so-and-so community got hacked." I think that's one of the big conversations that people will have when they get into this space. When hitting a link, be careful who is saying what. Make sure to double-check.

Are you double-checking for yourself?

That is their job. Making sure you have a quality team is more important than missing through the cracks.

Let's say you have a level six passport and the owner goes on the Discord and says silly shit or tries to do a scam. Do you take the passport away?

I haven't thought about that. At level six, we have a different conversation. I have a one-on-one chat with them. Would a level six do that? It is possible for something in the world to happen, but I don't think it will happen. It's hard for me to see someone investing all that money, time, and energy to be a part of a group that's trying to pull the rug out from under everyone. Is it possible? Yes. Is it likely? No. It is highly unlikely.

Again, it is early, so I was just curious.

Absolutely. Asking every question you can is the only way to safeguard or protect. It is early, and it is not centralized. These kinds of questions are the only way we are going to move forward with innovation.

Let me finish with some of the most important questions. Are you on the platform?

Yes.

The feedback I get from our audience is that all this stuff is terrible for the climate, and that it's all about the money. The climate aspect is the worst because you are burning a lot of energy. You couldn't do it on the ledger. Do you think about the climate?

I do. It's a very important topic, and something that needs to be addressed in a way that uproots it. We need to figure out a way to build a more eco-friendly foundation underneath the current one. It is a hope that people who are more versed in this space can find a way to make it more ecological.

Do you think the climate aspect is more important than the opportunity aspect? There might be a lot of opportunities there, it might be better for musicians, and there is a direct relationship, but the climate is so bad. Maybe we should use a different blockchain because the thing is so inefficient. I am wondering how you made that decision.

We were able to source it all up through Nifty Gateway, which is on the ethereum platform. I can't really answer that question in detail, but I talk to my team about it. Do we switch to Solana? I love Solana and what she is doing. I think it needs some work and888-607-888-607-888-607-3166888-607-888-607-888-607-888-607-888-607-888-607-3166, but I do love it. I plan on working with Solana. There are a lot of different people on the team that make these decisions, so we are just going with what we are all going for.

You're describing a bunch of people in a club who can buy and sell token, which is mostly happening inside, and you're not connecting with the world a whole bunch. Why does this have to be on a platform? Why don't you just set up a server and a social network?

The whole idea is that we are moving towards Web3. You don't own anything with Web2. I fly American Airlines because I want to get my points up. I can never sell it at the highest level. I decided to be an American flyer because I could fly United all the time. I am proud to be Concierge Key. I want to have the chance to sell it. I think that is the main difference. The social club that you subscribe to is Web3. I enjoy going to Soho House and having my meetings there. I can't sell it because I'll pay whatever I pay to be part of that. Web3 allows you to grow and sell.

We are going to make it where you can gamify it, where you can go to all these different shows, and start to micro-level in your level. You could spend this time grinding it all the way up to a different level, and have different badges and stamps in your passport. You can say, "You know what?" when you get to that different level. I want to sell it and have the ability to do that.

This is the last big-think question. I've been waiting for this question to be asked the whole time. You are involved in art, commerce, and finance. I think the point of art is to be democratic, to improve people's cultural lives, and to knock people out of their comfort zones. We spent an hour talking about financialization, buying and selling things, creating token, creating markets, and grinding so you can resell a product that is based on your experiences. Where do you see the tension? Do you ever worry that art and music is getting too financialized, and that NFTs are creating monetary incentives around culture?

I don't think we have made much of a difference in culture. We have made a dent in our small world, but as far as cultural ramifications are concerned, we are so small. We are a small part of the space. When your favorite artist is doing an NFT, the dialogue will change. The whole world can listen to the album, but it is limited to a certain number for people who love it. It gives an income stream and a conversation that never happened before. It adds something else. It allows it to be viewed in a similar way to buying a piece of art. It is exciting. It is up to the artist at the end of the day.

Again, I am pulling the string. I don't know. Music is not worth much money in the current system, so a lot of what we have talked about is based on that. We are moving the value to everything else, and the music is kind of becoming like marketing for the stuff that is worth money.

That is correct. Music is meant to be free and heard, but you are adding a different layer of scarcity to it that has an art impact. It is up to the artist to decide if they want to go down that path.

Is it possible for an artist to make that choice? Will you be able to make money as an artist if you just do music?

It is up to the market. The market decides if they will spend money on a band that just came out and said, "Hey, I want to make money off this album that no one has heard of." This kind of conversation and way of viewing music as art should be allowed.

I think I would allow it.

The artist doesn't have to pull the string the other way. They are able to release music. That is how it is.

You won't make any money.

You are correct that you would only make money in the confines of how it works.

I am interested in that tension. At some point, the music should be worth something.

That conversation has nothing to do with NFTs. Are you suggesting that the NFTs take away the potential for music to have its own value?

If the money goes to the NFTs, then everyone's incentive is to focus on that instead of the music. The music is the most important thing.

I think this is like two people talking over each other's heads because the music is going to exist regardless. It is going to be out there for people to listen to, and it is free. It is not going to be a game-changing effect that they will increase the amount of money that people make. It is always going to be free.

It is going to exist, but there may be someone that says, "Hey, I absolutely love this album, and its attachment to this particular rarity or scarcity of this NFT of art." It is connected to the emotion that I feel when I listen to this song, and I want to be the person that owns one of those few hundred pieces. It is up to the person buying it, the market and the artist to allow it to happen.

I think that is a great place to end it. I think you should come back in a year and we should talk about how it is going. I feel like we are talking about hazy ideas that will get a lot clearer in a year.

If you have been here for at least six months, you are a veteran in the NFT space. I got into NFTs around the summer of 2020. It was only a year ago that I dropped my first collection, but I am very knowledgeable about what I know now. It is exciting that every day there is a new level, a new way to advance it forward and do something that is interesting, and keep building on the idea of community, because that is what it is all about. It is about delivering incredible experiences and this two-way conversation with the community.

Our life is based on a lot of experiences, at the end of the day. You want those experiences to be meaningful, whether it is spending time with your family, going to a live event where you feel something, listening to a song that makes you cry, or looking at art that makes you melt. We need to build on that. I play a lot of shows because I am obsessed with connecting with different crowds through music. I am barely saying anything on the microphone, yet I am connecting with strangers. Those are the moments that matter the most. How do you bring that into the future?

When I was in my 20s, my friends and I would always say that life is a collection of experiences.

It really is. That is all it is.

We did have some of those experiences.

We have all had that.

This was great, Steve. I want you to talk about what you have learned and where this has gone in a year. I feel like a lot of these threads are going to get pulled. This was a great conversation. Thanks so much for coming on.

In the past year, we have created a whole world with Aokiverse, the passports, the community membership, the social club, and NFTs. It is a multiverse of communities that I am a part of. When you enter the space and say, "I want to be a part of all of that happening in the Aokiverse," we start understanding and respond with "Oh, you really like that?" Okay. If it is possible, we will try to deliver that. I believe that in a year's time, there will be other people in the center of things that they love. I really love the person that is in the middle of all, because they deserve to be able to say, "This is our membership community to all things in the car culture." They should have a community.

I think this is going to happen in a year. You think when you see brilliant projects that it's great. I'm going to use this idea and put our own genes into it, and build it out for the community that we are trying to speak to. Is it possible to time-capsule that?

We are going to have a soundboard of all your predictions, and we will play it a year from now. This was great. I would like to thank you for going deep with me. I really like it.

Of course, man.