The Eve of the Fan Economy Revolution: How to Play Entertainment IP Operations with NFT and Token Economy?

Today, crypto technologies like decentralized autonomous organizations (DAOs) and non-homogeneous tokens (NFTs) enable a new model of IP development and ownership.

We consume popular entertainment products centered around “characters” every day, and a successful set of characters (note from Chain Link: the Chinese prefer to call them “IPs”) can be the cornerstone of franchise licensing, such as Star Wars, Marvel, and Harry Potter. These characters can generate decades-long, steady revenue and be incorporated into successful products across platforms and media genres.

But today, a single company holds the intellectual property behind most successful characters. This means that fans have no management rights, let alone direct ownership, over these characters, resulting in fans being nothing more than passive consumers of the products and narratives produced by the company. Even when fans buy publicly traded equity in a company to show support or loyalty, it is difficult to make targeted bets on the success of individual characters or franchise entities, as many companies are large, diversified, vertically integrated businesses that own and operate multiple product lines. It is impossible, either in the past or in the future, for fans and investors to choose which actor should play their favorite character in the next film in the franchise, or to make other such influential decisions, through a shareholder vote.

Some might say that making this request would be absurd. But the reality is that the most passionate fans have created online communities, organized events, and even posted homoerotic novels of their own creation online. Rather than ignoring these communities, character (or IP) holders can choose to bring them into the creative process, providing an avenue to test and expand on ideas that would be difficult to manage at scale using traditional tools and techniques.

Reference Reading.

The Promise and Potential of Fan Fiction

Today, crypto technologies like decentralized autonomous organizations (DAO) and non-homogeneous tokens (NFT) enable a new model of IP development and ownership that can not only segment creative media, but also lower the threshold for online communities to get involved with “characters” or IP, bringing new characters to the real world. It may also give rise to IP that more fully represents the fan community.

Breaking the closed loop of ‘IP governance’
There has been a broader cultural shift within and outside of the enterprise, such as the rise of environmental, social and corporate governance (ESG) investments, radical investments or various creator fan communities. What these different approaches to engagement 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 engage them. And we are on the cusp of the same thing around the intellectual property side of cultural products.

Early in my personal career working for the e-commerce payments and advertising platform TrialPay (which was acquired by Visa), I worked with some of the most successful free-to-play game developers, helping them expand their virtual economies and cash in on them. One of these games serves as a very typical early case study of how fans can feel the ‘exclusive’ feeling of being able to control a highly popular IP with their own cell phone.

The game is Kim Kardashian: Hollywood (https://studybreaks.com/), a star-raising game launched by Glu Mobile in 2014 that has long topped the US App Store). tvfilm/kim-kardashian-hollywood-is-still-shockingly-popular-why/), a simple game that allows you to choose your own adventure style, allowing players to pretend they are Kim Kardashian and finalize costumes, fictional movie shoots and looks for the game’s avatar.

The Eve of the Fan Economy Revolution: How to Play Entertainment IP Operations with NFT and Token Economy?

Although the game became a highly popular hit, the game’s ‘currency’ (https://kimkardashianhollywood.fandom.com/wiki/Stars), and all the outputs determined by the myriad choices made by fans, were confined to a closed-loop world – -These early game experiences amply demonstrate the magnificent promise that simulated governance of popular ‘characters’ that exist in reality holds: fans can enjoy these ‘personalities’ individually, but they are never given the opportunity to join forces with the community in more meaningful and creative ways.

And what if fans could bring a new character into the real world, giving anyone the opportunity to participate in the fun and financial benefits of its success?

DAO and Token Economic Incentives
DAOs shine. These decentralized, autonomous organizations provide a mechanism for creative people around the world to invest real money, create communities and new characters – much like the Fantasy sports game series caters to sports fans’ latent desire for ownership (and potential financial gain) of their beloved teams.

There is also a market for a decentralized version of ‘Fantasy Hollywood’ – it just hasn’t been met yet.

How will DAO achieve this goal? In short, a DAO is a network run by smart contracts or automatically executed code on a blockchain that, if you are a member of that DAO, can commit to certain rights and responsibilities while performing little or no active oversight by a central figure. Anyone in the world with a cell phone and an Internet connection can participate in such a network, which can issue tokens to participants based on their contributions (or any other factor based on the decision of the protocol creator). These tokens can lead to certain voting or governance rights, and if more and more people wish to participate in the network, these tokens may appreciate in value (meaning not just at the monetary level). Due to the economic incentives of the tokens themselves, it is in the interest of all participants to maximize network utility, including using their ‘equity’ to make good collective decisions about ongoing operations.

The initial iteration of a successful DAO is largely shaped around financial protocols, for example by proposing and voting on specific changes to the protocol that enable the token-holder community to manage decentralized lending. While this structure meant that the growth and operation of new protocols in the decentralized finance (DeFi) ecosystem was possible, most mainstream consumers did not have the financial knowledge or interest necessary to weigh in on specific governance decisions such as collateral ratios.

But the concept of DAO has broader uses and can be applied to other use cases of shared incentives and common stakeholder networks as well. As a result, the next iteration of DAO will emerge around creative communities, 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 actors to mainstream audiences.

Building communities around IP
There are currently at least two paths to building communities around characters, innovating on their IP, creating digital identities around characters, and reaping the financial benefits of the IP’s market success. More paths are sure to emerge in the coming years, but I’ll use current examples to demonstrate each model.

CryptoPunks

CryptoPunks demonstrates a way for developer Larva Labs to create digital artifacts for 10,000 personas, each of which exists as an NFT with unique properties.

The products developed around CryptoPunk NFTs form a decentralized community of collectors with their own cultural behaviors and norms, such as using CryptoPunk as profile avatar images on various social media platforms. Although CryptoPunks (https://www.larvalabs.com/cryptopunks#getapunk) were initially released for free in 2017, the community has guided lifetime sales of the project’s products to over $680 million (with the rarest individual CryptoPunk selling for over 7 million).

However, collectors are not just passively holding CryptoPunk, but are beginning to collaborate with each other to create new stories inspired by CryptoPunk character art that ‘gives life’ to their CryptoPunk.

NFT art is like a digital Lego block, or a creative stem cell – either way, it provides the basis for a rich imagination to grow in every direction and in every way. For example, a group of collectors has created a PUNKS comic (https://punkscomic.com/) containing 16 punk characters with backstories and narrative lines that will create a full IP identity for these punks.

The Eve of the Fan Economy Revolution: How to Play Entertainment IP Operations with NFT and Token Economy?

However, this type of community initiative does not involve the original developers behind CryptoPunks at all. The community only uses the original punks as inspiration to create entirely new art, expanding into new forms beyond Larva Labs’ creative control and oversight.

These new punk-inspired stories can become new NFTs in their own right, and community members can monetize and sell them as fan art without having to obtain a licensing agreement from the IP holder. When it comes to fan fiction featuring characters owned by traditional companies, fan creativity may increase the value and exposure of those characters, but the companies do not allow those fans to share in that increased value. For PUNKS Comic, however, fans already have ownership of the core CryptoPunk NFT. So the success of the characters and stories they create based on PUNKS drives the exposure and demand for the original PUNKS – benefiting PUNKS Comic creators, original developers and the broader PUNKS community together.

The Eve of the Fan Economy Revolution: How to Play Entertainment IP Operations with NFT and Token Economy?

Aku

Another route to character control through the fan community begins with a specific character that has a backstory and identity that inspired the creation of NFT, but then opens up to the collector community 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 Economy Revolution: How to Play Entertainment IP Operations with NFT and Token Economy?

Johnson overheard his nephew ask his mother if astronauts could be black. This inspired him to start drawing his nephew wearing an astronaut helmet – given the lack of real-life examples and narrative characters – to encourage him and hopefully give him the confidence that he could achieve this dream. Johnson then created a new NFT-based character, this one a black boy wearing an astronaut’s helmet.

When I saw Johnson’s work and interacted with the community around him, I was struck by the tremendous potential of the idea that hundreds of millions of Internet users (rather than private institutions) could determine the value of an artwork and easily own the tokens that represent it. In addition, they can use this token, which represents membership in their community, to build a digital cultural identity.

For artists like Johnson, and all artists who build communities or have fans, this is significant. Black culture and forms of creative expression across music, literature and the visual arts have flourished and driven generations of mainstream global culture, but historically, it has been difficult for Black artists and creative staff to capture the value of culture, let alone own it, even partially. The power of seeing a talented Black artist sell NFT, which represents an inspiring Black character, to a predominantly Black collector community, feels, as I have written before, like the embryonic stages of a new cultural movement (a Black digital renaissance).

Reference reading.

The a16z Podcast: Making Culture, Making Influence

Why I’m Collecting Black Crypto Art

The Eve of the Fan Economy Revolution: How to Play Entertainment IP Operations with NFT and Token Economy?

Link to “I am __. by Micah Johnson

Just a few months ago, Johnson announced that he would interact with different people and places by creating ten animated films in short video format, each featuring a chapter of Aku’s story in a limited edition Aku NFT. Aku NFT not only drove over $2 million in sales through the first two chapters, but NFT had a passionate community of fans who wanted to see Aku succeed as a positive representation of black kids and a symbol of black economic empowerment. In turn, by owning these NFTs, early Aku collectors benefit financially from Aku’s success, which in turn will increase the demand and value of Aku digital memorabilia.

The Eve of the Fan Economy Revolution: How to Play Entertainment IP Operations with NFT and Token Economy?

The potential for the fan community to own and operate the character’s IP is also reaping resonance in traditional media channels: not only has Johnson worked with a 3D sculptor to create a physical statue of Aku, but it will apparently be the first NFT to be optioned for a movie and TV series.

Reference reading.

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

(https://variety.com/2021/digital/news/aku-first-nft-optioned-film-tv-1234953189/)

IP can create economic benefits
In both of these ways, whether by creating or expanding character stories, NFT can be a powerful tool for artists to test the market demand for their characters.

In a sense, it is an audition, or what is seen as a Minimum Viable Product (MVP), a “character-market fit” test of their creative vision – where early collectors of NFT are a vane of artistic style, traits and artistic messaging that helps later on can appeal to a broader audience.

However, the NFT model provides a stronger signal to artists and other collectors than traditional fan groups that have no financial ties to the game itself. If there is enough market demand for NFT characters that individuals are willing to spend hundreds to thousands of dollars to collect these NFTs, then creators will know that “IP creates economic interest,” just as games create economic interest.

Once an NFT is able to sustain a community of passionate early collectors who are closely tied to the economic benefits of the IP, the challenge then becomes how to grow that community, further develop the IP, and distribute it to a wide audience through mainstream media platforms.

In fact, I believe this model could also benefit large companies, as under the current IP system, it is difficult to coordinate and achieve fantastic linkages between multiple character IPs owned by different companies, as these character IPs see each other as direct competitors. Even if there is a clear overlap in the fan base of two characters owned by two separate companies, it can be extremely challenging to achieve this collaboration. Occasionally there may be crossovers (as DC and Marvel occasionally do), but it is difficult to do so in a way that provides enough financial gain for both companies while minimizing potential competition issues between the two products. nft and dao point to a bright path.

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

In talking to artists like Micah Johnson, his decentralized storytelling model creates a ‘choose your own adventure’ practice where community members can suggest many different stories or experiences for their IP.

But how would this be implemented concretely? The community can distribute governance tokens to IP NFT holders, who in turn can use these tokens to vote on key creative decisions. This collaborative relationship between creators and the community has come to life and will only grow as participants explore the possibilities of creativity (both governance and financial).

Is this another version of crowdsourcing, which is the worst way to create quality character IP, and will it result in creators’ visions simply being discounted for cash?

No, because this new, crypto-native economic incentive makes all the difference: it actually creates a vast new realm of models in which creators become more of a leader in a decentralized fan community. We’ll soon start to see community members come together to open public requests for proposals (RFPs) from artists and institutions for specific types of digital content built around IP, in the same model as people developing software in open source projects (which has been done for decades) .

The Rise of IP DAO
But there is more that this technology can do. Given the current technology, here’s a model that is entirely possible to deliver on:, community members drafting drafts for short films or animated series. Token holders – community members who have been given NFTs or alternative “social tokens” that give equal management weight to multiple holders – could vote on them, decide whether to approve them, and allocate an initial budget to them.

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

The community’s founding artists work for the token holders as creative directors, helping to manage the RFP process, and then work closely with the successful bidding companies to concretely execute.

Collectors purchase initial NFTs and ongoing airdrops that can be reinvested into the community vault for crowdfunding the creation of other digital content around that NFT IP to increase brand awareness and grow the surrounding community.

This may sound a bit out of reach, but it’s not. Consider how eager artists of all kinds are to explore NFT and other new ways to interact with their fan communities. The interoperability of encryption simply gives room for innovation, allowing ideas to quickly build on top of each other. What are the benefits of such a die? Several can be described below.

Increase the speed of innovation iteration. By the community owning the character IP – but outsourcing the creative execution of that IP’s episodes, movies, or video games – the community could potentially create entirely new global franchise entities, and execute faster than a single company.

Instead of executing one content activation for one market at a time, “IP DAO” can fund multiple shows, movies, video games and merchandise (physical and digital) executed by independent teams targeting different markets, and the above actions can be done simultaneously at the same time. Smaller, modular communities spawn more experimentation, and cryptocurrency will take on the role of coordinating all incentives.

Simplify collaboration. Multiple independent, creative DAOs emerge around different IPs, and there will be overlapping ownership between them. But this is not a systemic vulnerability, it is a feature: this overlap creates opportunities for collaboration across DAO personas, for example by creating digital content that includes both personas, enabling them to drive distribution across different communities and create a common audience (and branding ambassadors) without fear of competition.

Consistent financial incentives across DAOs. Community members will be incentivized to support collaboration as customers and promote as brand ambassadors. each successful media activation by IP converts a new audience into community members who also want to get involved and help own and manage the characters they just saw in their favorite movies.

Better cultural presentation. In addition to creating positive characters with different cultures (e.g., ethnic and religious minorities), this type of model allows for the popularization of the type of story being told. Instead of trying to find existing characters, 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 boost revenue. This isn’t just a feel-good business – there is real market-making potential in it. As the global community and audience continues to grow, and demand for governance tokens and NFTs increases, it can generate additional revenue that can be used to fund additional stories and media pieces related to the characters.

Governance-related issues
Of course, it’s not all fun and games here – after all, a DAO is not just an abstract crypto concept, but a system made up of people. While creating a new model of human coordination around common principles or goals, it also presents new challenges in terms of effective governance, day-to-day implementation, and scaling. These include some of the following questions, which will require a lot of experimentation, but I would like to share some thoughts here.

What types of decisions should the DAO optimize around?

If the community needs to vote on every little detail of a role, the specific experience becomes less interesting and much less efficient, and engagement may decrease as well. However, if voting decisions are made at too high a level, community members may not feel they have enough control and ownership.

Who will manage the day-to-day administrative and community management functions?

I think the DAO would be more effective as a ‘creative board’, voting on key senior strategic decisions and roles, while outsourcing product management and creative development to a third party through the RFP.

How does the DAO implement quality control around IP?

Major persona licensing entities have strict rules about what persona IP can and cannot do and say to establish consistency, identity, and quality. The community needs to establish its own guidelines or principles for persona IP identity, which members can use to evaluate new proposals. Ultimately, if the community seeks to implement different activations of IP in different forms of media simultaneously, some of them will be more successful and have better experiences than others. The key here is that all of this experimentation can be done in ways that would not be possible in-house.

How does DAO convert revenue generated off the character IP chain back into the on-chain vault?

NFT sales have spawned an easy way for on-chain vaults managed by token holders to get their money back. But DAOs may require third-party administrators who can provide payment and contract services under the direction of the DAO, using a bridge to connect off-chain (e.g., real-world) and on-chain revenue, fees, and funds management.

The costs and barriers to doing these things – bringing a new character into the real world, testing whether it resonates with a specific audience, and building various forms of media and storytelling around that character – are dropping dramatically thanks to crypto, specifically thanks to the advent of NFT and DAO.

Not only will individual artists have a huge opportunity to build fan communities around their work, but consumers will also be able to shift from passive participants to active participants – telling stories with the artists they support, and previously left out stakeholders such as parents, underrepresented creators/consumers , and others have also found new arenas and outlets for their voices.

Thanks to Chris Lyons and Micah Johnson for inspiring these ideas in conversation with me. The content of this article is strictly personal and not employer related.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/the-eve-of-the-fan-economy-revolution-how-to-play-entertainment-ip-operations-with-nft-and-token-economy/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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