The eve of the fan economic revolution: How to use NFT and token economy to play entertainment industry IP operations?

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The rules of Hollywood and the gaming industry are about to change, and the encryption economy can turn IP into the control of the fan community.

Written by: Cuy Sheffield, Visa Global Encryption Product Team Leader Compiler: Perry Wang

We are consuming popular entertainment products centered on ” characters ” every day. A set of successful characters (chain news note: Chinese prefer to call them “IP”) can become the cornerstone of franchise licensing , such as “Star Wars” , Marvel, Harry Potter. These roles can bring decades of stable income and are included in successful products across platforms and media types.

But today, behind most successful roles is a company that holds the intellectual property rights . This means that fans do not have any management rights over these characters, let alone direct ownership, resulting in fans being just passive consumers of the products and narratives produced by the company. Even if fans buy publicly listed shares of a company to show support or loyalty, it is difficult to make a targeted bet on the success of a single role or franchise entity, because many companies are large, diversified, and vertically integrated companies that own And operate multiple product lines. Whether in the past or in the future, through shareholder voting , it is impossible for fans and investors to choose which actor should play their favorite role in the next film in the series, or make other such influential decisions .

Some people may say that this request is absurd. But the reality is that the most enthusiastic fans have established online communities, organized events, and even published their own fan fiction online. Rather than ignore these communities, role (or IP) holders can choose to bring them into the creative process and provide a way to test and expand ideas. Using traditional tools and techniques, it is difficult to manage these ways on a large scale.

Reference reading:

The Promise and Potential of Fan Fiction

Today, encryption technologies like Decentralized Autonomous Organizations (DAO) and Non-Homogeneous Tokens (NFT) implement a new IP development and ownership model, which can not only subdivide creative media, but also reduce the involvement of online communities. The threshold of “role” or IP brings new roles to the real world. It may also give birth to IP that can more fully represent the fan community.

Break the closed loop of “IP governance”

More extensive cultural changes have taken place inside and outside the company, such as environmental, social and corporate governance (ESG) investments, radical investments, or the rise of various creator fan communities. What these different ways of participation have in common is that stakeholders or communities seek new ways to organize and invest time and money to support the people and causes that attract them. As for the intellectual property rights of cultural products , we are on the cusp of the same trend.

I personally worked early in my career in the e-commerce payment and advertising platform TrialPay (acquired by Visa) and worked with some of the most successful free-to-play game developers to help them expand and monetize the virtual economy. One of the games can be used as a very typical early case study, allowing fans to feel the “exclusive” feeling that they can use their mobile phones to control a highly popular IP.

This game is ” Kim Kardashian : Hollywood ” ( Kim Kardashian: Hollywood , Link Wen’s Note: It is a celebrity development game, launched by Glu Mobile in 2014 and has long occupied the top spot in the US App Store). A simple game where you can choose your own adventure style. Players can pretend to be Kim Kardashian, and finalize the costume, fictional filming and appearance of the avatar in the game.

Although this game has become a popular and popular item, the ” currency ” in the game, as well as the countless choices made by fans and all the outputs decided by fans, are confined to a closed-loop world -these early game experiences are fully demonstrated The magnificent prospect of simulated governance of popular “characters” that exist in reality: fans can personally enjoy these ” personality “, but they have never been given the opportunity to collaborate with the community in a more meaningful and creative way.

And what if fans can introduce a new character into the real world, so that anyone has the opportunity to participate in the fun and economic benefits of its success?

DAO and token economic incentives

DAO is here. These decentralized autonomous organizations provide creatives around the world with a mechanism to invest real money, create communities and new roles-just like the Fantasy series of sports games that cater to sports fans’ ownership of their beloved teams (And the potential economic gain) the same as the potential desire.

The decentralized version of “Fantasy Hollywood” is also very marketable-but it hasn’t been satisfied yet.

How will DAO achieve this goal? In short, a DAO is a network run by smart contracts or automatic code execution on the blockchain. If you are a member of the DAO, it can make promises to certain rights and responsibilities, while performing little or no active supervision. The central figure. Anyone in the world with a mobile phone and Internet connection can participate in such a network, which can issue tokens to participants based on their contributions (or any other factors determined by the creator of the protocol). These tokens can bring certain voting rights or governance rights. If more and more people want to participate in the network, these tokens may appreciate (not just the currency appreciation). Due to the economic incentives of the token itself, maximizing network utility is in the interests of all participants, including using their ” equity ” to make good collective decisions about ongoing operations.

The first iteration of a successful DAO is mainly formed around financial agreements , such as making specific changes to the agreement through proposals and voting, so that the community of token holders can manage decentralized lending . Although this structure means that the growth and operation of new protocols in the decentralized finance (DeFi) ecosystem is possible, most mainstream consumers do not have the necessary financial knowledge or interest to measure and judge specific governance such as mortgage ratios. decision making.

But the concept of DAO has broader uses and can also be applied to other use cases for shared incentives and networks of common interests . Therefore, the next DAO iteration will revolve around the creative community, spawning crowdsourced ideas and coordination (also known as “creator DAO”, etc.).

But communities can be formed around IP, not just creators, and these communities can collaborate and promote these roles to mainstream audiences.

Build a community around IP

At present, there are at least two paths to build communities around roles, innovate on their IP, create digital identities around roles, and obtain economic benefits from the success of the IP market. More paths will certainly emerge in the next few years, but I will use current examples to demonstrate each model.

CryptoPunks

CryptoPunks shows a way for the developer Larva Labs to create digital artwork for 10,000 characters, each of which exists as an NFT with unique attributes.

A decentralized collector community is formed around the products developed by CryptoPunk NFT. The community has its own cultural behavior and norms, such as using CryptoPunk as the profile picture of each social media platform. Although CryptoPunks was initially released for free in 2017, under the guidance of the community, the lifetime sales of the project’s products have exceeded 680 million U.S. dollars (the rarest individual CryptoPunk sold for more than 7 million U.S. dollars).

However, collectors not only passively hold CryptoPunk, they also start to cooperate with each other to create new stories inspired by CryptoPunk character art, so that their CryptoPunk “has life”.

NFT art is like a digital Lego building block, or a creative stem cell-either way, it provides a foundation for a rich imagination to develop in all directions and in various ways. For example, a group of collectors created a PUNKS comic containing 16 punk characters, with a background story and narrative line, which will create a complete IP identity for these punks .

The eve of the fan economic revolution: How to use NFT and token economy to play entertainment industry IP operations?

However, this type of community project does not involve the participation of the original developers behind CryptoPunks at all. The community only uses primitive punk as inspiration to create new art, expanding to new forms beyond the creative control and supervision of Larva Labs.

These new punk-inspired stories can themselves become new NFTs, and community members can monetize them and sell them as fan art without obtaining a license agreement from the IP holder. When it comes to fan fiction with characters owned by traditional companies, the creativity of fans may increase the value and exposure of these characters, but the company does not allow these fans to share this value increase. But for PUNKS Comic, fans already own the core CryptoPunk NFT. Therefore, the success of their characters and stories created on the basis of punk has promoted the exposure and demand of the original punk-the PUNKS comic creators, original developers and the wider punk community benefit together.

The eve of the fan economic revolution: How to use NFT and token economy to play entertainment industry IP operations?

Aku

Another way to control a character through the fan community starts with a specific character, which has a background story and identity that inspired NFT to create, but is then opened to the collector community to allow it to participate in the evolution of the character. An example of this is Aku, a young black astronaut character created by former Major League Baseball (MLB) player (and a self-taught artist) Micah Johnson.

The eve of the fan economic revolution: How to use NFT and token economy to play entertainment industry IP operations?

Johnson overheard his nephew asking his mother whether the astronaut can be black. This inspired him, and he began to paint his nephew wearing an astronaut helmet-in view of the lack of real cases and narrative roles in reality, to encourage him, and hope he has the confidence to realize this dream. Then Johnson created a new NFT-based character, which is a black boy wearing an astronaut helmet.

When I saw Johnson’s work and interacted with the surrounding communities, the idea that hundreds of millions of Internet users (rather than private institutions) could determine the value of an artwork and easily own a token representing the artwork was huge. I was shocked by the potential. In addition, they can use this token that represents their community membership to establish a digital cultural identity.

For artists like Johnson, and all artists who build communities or have fans, this means a lot. Black culture and creative expression across music, literature, and visual arts have flourished and promoted generations of mainstream global culture, but historically, it has been difficult for black artists and creative workers to capture the value of culture, let alone Say owning, even if it is part of the value. Seeing a talented black artist sell the NFT representing inspiring black characters to a group of mainly black collectors . This power, as I have written before, feels like a new cultural movement. The embryonic stage of the (black digital renaissance).

Reference reading:

A16z Podcast: Making Culture, Making Influence

Why I’m Collecting Black Crypto Art

The eve of the fan economic revolution: How to use NFT and token economy to play entertainment industry IP operations? Link to “I am.” by Micah Johnson

Just a few months ago, Johnson announced that he would create ten short video animations, each with an Aku limited edition NFT as the protagonist, telling a chapter of the Aku story, interacting with different people and different places. Aku NFT not only promoted more than $2 million in sales through the first two chapters, but NFT has a passionate fan community. Fans hope to see Aku succeed as a positive energy representative of black children and a symbol of black economic empowerment . By owning these NFTs, early Aku collectors gained financial benefits from Aku’s success, which in turn would increase the demand and value of Aku digital souvenirs.

The eve of the fan economic revolution: How to use NFT and token economy to play entertainment industry IP operations?

The potential of the fan community to own and operate character IP has also resonated in traditional media channels: Johnson not only collaborated with 3D sculptors to create a physical statue of Aku, but it will obviously become the first NFT selected for filming and TV series .

Reference reading:

Black Astronaut Character Aku Is First NFT Optioned for Film and TV

“IP can create economic benefits”

In the above two approaches, whether by creating or expanding character stories, NFT can be a powerful tool for artists to test the market’s needs for their characters.

In a sense, this is an audition, or it is regarded as a minimum viable product (MVP), a test of the ” character and market fit ” of their creative vision-among them, the early collectors of NFT are artistic styles and characteristics. And the vane of artistic information transmission will help attract a wider audience in the future.

However, compared to traditional fan groups that have no economic ties to the game itself, the NFT model provides a stronger signal to artists and other collectors. If the role of NFT has enough market demand to make individuals willing to spend hundreds to thousands of dollars to collect these NFTs, then creators will know that ” IP can create economic benefits “, just as games can create economic benefits.

Once an NFT can maintain a community of enthusiastic early collectors, and these collectors are closely linked to the economic interests of IP, the next challenge becomes how to grow the community, further develop IP, and use mainstream media platforms Distribute it to a wide audience.

In fact, I believe this model can also benefit large companies, because under the current IP system, it is difficult to coordinate and realize the dream linkage between multiple role IPs owned by different companies, because these role IPs will be mutually exclusive. As a direct competitor. Even if there is a clear overlap between the fan bases of the two characters owned by the two independent companies, it is extremely challenging to achieve such cooperation. There may be occasional crossovers (like DC and Marvel occasionally do), but it is difficult to provide sufficient economic benefits for the two companies while minimizing potential competition issues between the two products. NFT and DAO point to a bright path.

But first, what difference will this new way of doing creative work make?

When talking to artists like Micah Johnson, his decentralized storytelling mode created a ” choose your own adventure ” practice method, where community members can recommend many different stories or experiences for their IP.

But how will this be implemented in concrete terms? The community can distribute governance tokens to IP NFT holders, who can use these tokens to vote on key creative decisions. This collaborative relationship between creators and the community has become a reality, and will only increase as participants explore the possibilities of creativity (including governance and finance).

Is this another version of crowdsourcing, and crowdsourcing is the worst way to create high-quality character IP. Will it cause the creator’s vision to be only discounted?

No, because this new, crypto-native economic incentive makes everything different: it actually creates a broad field of new models in which creators become more leaders of the decentralized fan community. We will soon begin to see that community members together open Requests for Proposals (RFPs) from artists and institutions to discuss specific types of digital content built around IP, just like people developing software in open source projects (which have already done For decades) the same pattern.

The rise of IP DAO

But this technology can also achieve more functions. Given the current technology, the following is a completely possible model:

  • Community members draft a draft for a short film or cartoon series. Token holders-community members who have obtained NFTs or alternative ” social tokens ” that have been given equal management weight to multiple holders-can vote on them, decide whether to approve them, and allocate initial budgets for them.

  • The production company can then respond to this and produce a trailer of how it plans to fulfill the draft vision. The community reviews all submitted trailers and uses its tokens to vote on which trailer to fund.

  • The founding artist of the community works as a creative director for token holders, helps manage the RFP process, and then works closely with the successful bidding company to implement it.

  • Collectors purchase the initial NFT and continued airdrop funds, which can be reinvested in the community vault to create other digital content around the NFT IP crowdfunding to increase brand awareness and develop surrounding communities.

This may sound out of reach, but it is not. Consider how eagerly various artists are exploring NFT and other new ways to interact with the fan community. The interoperability of encryption only gives room for innovation, allowing ideas to be quickly built on top of each other. What are the benefits of such a model? Here are a few:

Improve the speed of innovation and iteration. Through the community owning the role IP-but outsourcing the creative execution of the IP’s drama, movie or video game, the community may create a new global franchise entity, and the execution speed is faster than a single company.

IP DAO ” can fund multiple shows, movies, video games, and merchandise (physical and digital merchandise) executed by independent teams targeting different markets, instead of only performing one content activation for one market at a time. The above actions can be performed in the same Time synchronization is complete. Small, modular communities have spawned more experiments, and cryptocurrencies will play the role of coordinating all incentives.

Simplify collaboration. There will be multiple independent and creative DAOs around different IPs, and the ownership between them will overlap. But this is not a systemic vulnerability , but a feature: this overlap creates opportunities for collaboration between roles across DAOs, for example by creating digital content that includes two roles, enabling it to promote distribution across different communities and create A common audience (and brand ambassadors) without worrying about competition.

Consistent economic incentives among DAOs. Community members will be motivated to support collaboration as customers and promote as brand ambassadors. Every time IP is successfully activated by the media, new audiences will be transformed into community members. They also want to participate in it, helping to own and manage the characters they just saw in their favorite movies.

Better cultural display. In addition to creating positive characters with different cultures (such as ethnic minorities and religious minorities), this type of model also popularizes the types of stories told. Instead of trying to find existing roles, parents with similar values ​​can actually collaborate and pool creative and financial resources to create their own IP that truly matches the values ​​they want their children to have.

Capture value and increase revenue. This is not just a company that feels good about itself-there is real market-making potential in it. As the global community and audience continue to grow and grow, and the demand for governance tokens and NFTs increases, it can bring in additional income that can be used to fund more stories and media works related to the role.

Governance related issues

Of course, it’s not all fun and games—after all, DAO is not just an abstract encryption concept , but a system composed of people. While creating a new model of human coordination around common principles or goals, it also poses new challenges in terms of effective governance, daily execution, and capacity expansion. These include the following questions, which will require a lot of experimentation, but I am willing to share some ideas here:

What types of decisions should the DAO optimize around?

If the community needs to vote on every small detail of the role, the specific experience will become less interesting, the efficiency will be greatly reduced, and the participation rate may also be reduced. However, if the voting level is too high, community members may feel that they do not have sufficient control and ownership.

Who will manage the daily administrative and community management functions?

I think DAO will be more efficient as a ” creative committee “, voting on key high-level strategic decisions and roles, and outsourcing product management and creative development to third parties through RFP.

How does DAO implement quality control around IP?

The main role franchise entity has strict rules on what role IP can do, cannot do, and what to say to establish consistency, identity, and quality. The community needs to establish its own guidelines or principles for role IP characteristics, and members can use these guidelines and principles to evaluate new proposals. In the end, if the community seeks to achieve different activations of IP in different forms of media at the same time, some of these works will be more successful and have a better experience than others. The key here is that all these experiments can be performed in ways that are not possible within the company.

How does the DAO convert the income generated under the role IP chain back to the on-chain vault?

The sale of NFTs gave birth to a simple method where the on- chain vaults managed by token holders can withdraw funds. However, DAO may need third-party administrators , who can provide payment and contract services under the guidance of DAO, and use bridges to connect off-chain (for example, the real world) and on-chain revenue, expense, and fund management.

Bringing a new character into the real world, testing whether it resonates with a specific audience, and building various forms of media and stories around the character. The costs and barriers to doing these things are falling sharply-thanks to encryption technology, specifically Thanks to the emergence of NFT and DAO.

Not only artists will have a huge opportunity to build a fan community around their own works, but consumers will also be able to transform from passive participants to active participants—telling stories with artists they support, stakeholders who were previously left out. , Such as parents, underrepresented creators/consumers, and others, have also found new stages and ways to speak up.

Thanks to Chris Lyons and Micah Johnson for the conversation with me that inspired these ideas. The content of this article is purely personal and has nothing to do with the employer.