Streaming Media
Some say NFTs (non-fungible tokens) are a novelty, a
status symbol for the crypto rich, and a bubble that's bound to
burst. Others argue that NFTs will fundamentally change business models in
the creative industries.
Whom should you believe? It's early days, and healthy doses
of scepticism and caution are warranted. At the same time, studios
such as Marvel and FOX are launching NFT divisions to market digital
collectibles, new series are being crowdfunded using NFTs, and indie features
are being distributed with blockchain-backed tokens that have royalties to IP
stakeholders baked in.
Could the technology really tip the balance of power and
monetisation once and for all in favour of the content creation community?
"It may sound hyperbolic, but there's the potential for
NFTs to democratise digital ownership and put powers back into the hands
of both content creators and content owners on a scale we haven't
seen since the original creation of the world wide web," says Morten
Rongaard, CEO and co-founder of Reality Gaming Group.
Taking Back Control
An NFT is a unique (indivisible/non-fungible) digital
certificate designed to represent ownership of a virtual item or
intellectual work such as music, a video clip, a graphic, or even a tokenised
tweet. The tech is seen as a means to help creatives monetise a product that
has no physical manifestation.
Nigel Green, CEO and founder of the deVere Group, put
it this way on the company's website: "With NFTs we are experiencing
the meeting of an internet of information with an internet of value." He
says this groundbreaking development is attracting large investments from
multinationals, venture capital firms, and major media and entertainment
(M&E) brands that are not blind to its risks but are
convinced of its potential.
Of M&E brands, Green says, "They know
this is the inevitable future and are moving apace to be early
adopters. The hype is real, and they see the value in it. However, the
market remains young and highly speculative, and caution should be exercised.
It can be expected that some of the NFTs on the market now
will have little value in a few years. But some will be worth a
fortune. It's a similar situation to websites in the early days of the
internet."
To some, the development may sow the
seeds of wholescale disintermediation of the video biz.
"Entertainment media is dominated by subscription streaming services that
configured the whole economics around their platform," Michelle Munson,
founder and CEO of blockchain network Eluvio, tells IBC365. "[NFT] blows that up."
Munson and business partner Serban Simu built file
transfer technology Aspera into a multimillion-dollar business acquired by
IBM, winning technical Emmys for their achievement. With that track record
and an investment in Eluvio by FOX Entertainment, what Munson says should
be taken seriously. "There are creators today who have deeper control
over their content who are choosing to distribute this
way natively—meaning no [subscription video-on-demand] streaming,"
she notes. "That idea is frankly new but as this grows it really
butts up against the traditional windows. As soon as an audience
has the ability to directly consume the content by actually owning it,
essentially, it's a new form of rights. There are lots of discussions
we are having with clients about [selling] these rights."
The marketplace for NFTs exploded in the art world
earlier this year with the $69 million sale of a single digital artwork from
US artist Beeple. Nothing has quite matched that high-water mark, and
the NFT market is widely considered to be a wild west filled with speculators
looking to grab a bargain and quickly sell it (or flip it) at a margin.
While there is a lot of head-scratching about why
anyone would pay millions of dollars for the right to own, for example, a
JPEG that anyone can freely download to store on their own PC, the
fundamentals of digital tokens encrypted and secured on blockchain are
believed to be the core of the emerging content creation metaverse.
"What we're seeing right now is the surface level
of the technology and what's possible," Rongaard says.
"Conversations around digital art ownership dominate the space,
because digital artwork is relatively easy to bring to market, making
it ideal as the first big use case for NFTs. As time goes on, we're going
to see the technology stand less on its own and become more
integrated into other, more mainstream, services, products and platforms."
Hollywood Looks to More Revenue
In Hollywood, there has been a flurry of activity by M&E
companies in the NFT space. Most are piloting NFTs as a digital extension
of the decades-old collectors market for film memorabilia. No major
release, certainly of a franchise movie, is now complete without
NFT collectibles as part of the marketing campaign. MGM and EON
Productions' No Time to Die is just one of the latest to offer
collectibles on digital platform VeVe.
Sports leagues are also dabbling in NFTs. Soccer-focussed
online content business Copa90 has hired a head of cryptomedia. The NBA
has launched NBA Top Shot, a digital highlight collection.
This is the entry level. Studios are building on
digital collectibles to "aggressively" develop and curate
communities of fans around their IP on NFT platforms, according to
Munson.
Eluvio Content Fabric is the technology behind FOX's NFT
subsidiary Blockchain Creative Labs, which has a number of projects in
development. Among them is The MaskVerse, an NFT marketplace alongside
FOX's The Masked Singer. It's a form of gamification in which fans of
the show will be incentivised to collect tokens to view new episodes, unlock
unique content, and even participate in the storytelling. All of this, if
successful, binds consumers more directly with content creators and
develops stickiness to subscription services. The show's first NFT,
released in early October 2021, sold out 10,000 units in 10 hours, according
to FOX.
"The Maskverse," the NFT marketplace built around FOX's runaway hit The Masked Singer, sold out its first 10,000 units in 10 hours. FOX's Blockchain Creative Labs is built on Eluvio's Content Fabric Technology.
"Content owners are not giving away revenue to the
streaming platform, and they're not giving away creative control," Munson
says. "Data sharing is under the fans' control. When you own something
based on tokened access, any data consumer-owners share with an
advertiser comes directly from their unique wallet, meaning that is an
explicit transaction. Your data is no longer being sold by a social media
platform.
"Advertisers themselves receive perfect information
from that direct-with-consumer
relationship. They could sponsor the tokenized content; they could give
benefits back to the user in return for using their influence to talk
about the show on social. Those features have to be native and be able to
scale across parties, plus the crypto mechanics have to be hidden away to
make it possible for everyone to work easily and securely. That's profound for
users and advertisers, and I'm not sure how many people appreciate that
yet."
NFTs as Utility
One of the crucial ways to look at NFTs is as
"utility." Right now, if you own an NFT—a picture, a video, a coin,
whatever—it has a speculative value in and of itself, but that's it. You hold
it, or you sell it. This describes the vast majority of NFTs out there right
now.
When Reality Gaming Group refers to utility though, it means
giving benefits, perks, and bonuses to people who own that NFT. They don't have
to be related to other NFTs at all. "For example, in our NFT card game,
Doctor Who: Worlds Apart, there's a special NFT called a ‘Founders
Token,'" Rongaard explains. "If you play our game and interact in our
community while you hold that token, you get a ton of benefits ranging from
discounts to private community channels and events to early access to builds of
the game. That's where utility comes in. It doesn't even have to be digital.
Some of the more forward-thinking football clubs are allowing fans to hold NFTs
and coins that give them VIP access to physical games and participation in club
decision-making, like a sort of quasi-shareholder."
Another experimental use case for NFTs is crowdsourcing.
Here, NFTs are sold and used to fund a production. NFT buyers can also
influence what goes into the production.
In the most high-profile feature film release strategy yet,
a unique NFT of drama Zero Contact, starring Academy Award winner
Anthony Hopkins, sold for 20 Ethereum (worth $56,860 at the time of
sale). This was part of a total of nearly 94K worth of NFTs auctioned in
relation to the film. While Zero Contact will be distributed
conventionally in theatres and on streaming platforms, the NFT sales represent
found revenue for producer Enderby Entertainment.
"[W]e've seen a community form around our film,
enhanced fan engagement, and also proved a new revenue stream in the industry.
We think this is ground-breaking," says Rick Dugdale, the film's
director and producer. "Our goal was to earn the respect of the NFT space
in order for us to create staying power and help blaze a new path for
filmmakers. Not only is this now a proven distribution model, but we will be able
to create new film financing structures moving forward."
This model has potentially huge implications for the likes
of Amazon, Netflix, Roku, and Samsung. "It disintermediates the platforms
that have been traditionally needed by content owners to get to their
audience," Munson tells IBC360. "What NFT allows is anybody with
equity interest in the content—think of it as IP with equity interest—to share
in the full life cycle value of the content. This is really profound for the
content industry.
"It is the ultimate control point for those who have a
stake in content. That stake could be a creator, a producer, [or] the network
that aggregates and curates it. The key here is who doesn't take a piece is the
middle platform. In the media world these are the streaming platforms."
To emphasise this point, Munson says that the content
distribution industry has been built to a point at which the platform itself is necessary
to reach the audience. "What this tech does is makes it possible for the
creator to reach the audience without ... the platform," she notes.
"Is NFT distribution an alternative to streaming? Absolutely. It will grow
rapidly over the next months and years."
Moreover, for live-event production, Munson suggests that
sports producers could tokenise the myriad additional live feeds currently
captured, but largely uncommercialised, direct to consumers.
That's not to say it's going to be an easy ride, though. NFT
technology is still in very, very early stages. "There are many NFT
marketplaces that act as intermediaries and provide creators access to
audiences they would otherwise struggle to find," Rongaard says.
"Right now, it's a very healthy space with constant competition producing
a market that is positive for both consumers and creators. However, technology
alone is only half of the equation. Hopefully competition remains healthy,
and we don't see a gradual consolidation into just a few platforms as Google,
Amazon, and others become more active in the space."
Blockchain and Copyright
There may be some confusion as to what rights an NFT
entails. For one thing, an NFT doesn't excuse the owner from copyright law.
"Just giving attribution to an actual owner of the underlying IP of an NFT
doesn't automatically give the creator of an NFT the right to use it,"
says entertainment attorney Anita Sharma in an interview in Forbes.
Using IP without the owner's permission is called IP
infringement, and an NFT creator can be sued for that. Selling art using
copyrighted characters is also an infringement unless you have the permission
of the copyright owner. "Most NFT sales merely convey a license to
use the digital copy of the creative work, and the copyright holder retains
their copyright ownership," Sharma explains. "This means that
ownership of the virtual art piece is not guaranteed when one buys an NFT.
The digital governing contract covering the sale of NFTs must expressly
provide for an assignment of copyright in a signed writing for the buyer to
actually own the copyright in the art. The buyer definitely owns the tokens
that are placed in their digital wallet when they buy the NFT, but this does
not automatically confer ownership of the underlying artwork."
The Environmental Cost
There are concerns that NFTs are only fuelling the rise of
cryptocurrencies that rely on energy-hungry computational crunching to
prevent data corruption. Digital-currency operator Ethereum, for example,
currently has about the same energy usage as all of Zimbabwe, according
to Nature. That makes NFTs "really a criminal amount of waste for
something that doesn't do anything valuable other than act as a database for
receipts for ugly cats," Nicholas Weaver, who studies cryptocurrency at
the International Computer Science Institute, tells the publication.
Munson is quick to jump to the defence. "There are a
lot of misunderstood points—a meme starts and people become drunk on it. It's a
stupid idea. The truth of the matter is that blockchains themselves wildly
vary in their technology, they are not simple or uniform, and they are
multigenerational.
"It became popular to criticize the earlier blockchain
technologies which used what is known as proof of work—a brute force technique
to provide validation. It is inherently designed to be compute intensive.
"The second point is that blockchains themselves, in
terms of their drive to have high transactional efficiency, are evolving very
rapidly. The newest blockchains, such as Polkadot [an open source project
founded by the Web3 Foundation] and Solana [a decentralised blockchain claimed
to be the world's fastest], are incredibly efficient and fast and do not
inherit any of these [previous brute force] problems in terms of validating the
blocks that go onto the chain."
In other words, Munson argues that the natural economics
that make it easier to trade on blockchain will drive the most efficient
technology.
Eluvio itself does not use a proof of work blockchain.
Moreover, it is designed not just for blockchain efficiency, but for content
distribution efficiency. "We invented a new content protocol that avoids
all file copies," Munson says. "That allows us to suck enormous
amounts of resource usage out of what we do. It makes it not only much cheaper
to distribute the same content at high quality, but also makes it vastly more
energy efficient. It uses a small footprint in comparison to the number of
nodes you would need in a classic CDN or cloud to achieve the same scale. This
is, frankly, a radical departure from brute force content distribution that is
the norm in video today."
Rongaard also targets the mainstream media's
misrepresentation of the issue. "To put it into perspective, the entire
Ethereum network's yearly energy usage is a third of that of YouTube, yet
you'll rarely see the mainstream media writing articles about how uploading
YouTube videos is bad for the environment," he says. "That's not to
say we shouldn't do something about the energy cost of NFTs, or that it doesn't
matter. It's vitally important for our company and the wider NFT community to
address and tackle this, and we're making great strides."
He explains that his company has developed its own
environmentally friendly "eNFTs" by creating its own sidechain,
which only communicates with the Ethereum network when it absolutely has
to for verification. This, he says, has reduced energy usage by around 90%
versus the mainnet. "It also means that minting an NFT on [the Ethereum]
network uses about as much energy as a single VISA transaction. That's why
for our games and marketplaces, there's no costly 'gas' charges or long wait
times."
What Comes Next?
Crypto is developing in three stages: first, as a new
digital money; second, as a new financial system; and third, as a new internet
app platform. Coinbase co-founder Fred Ehrsam (also co-founder and managing
partner of cryptocurrency investment firm Paradigm) explains his thinking
to Vanity Fair: "As a new digital money, crypto has gone from
zero to over $1 trillion over the last 10 years. As a new financial
system, decentralized finance (or DeFi) came on the scene about three years ago
and already has almost $100 billion of user assets. As a new internet app platform,
NFTs are a glimpse into the third stage: a next generation of mainstream
consumer apps built on crypto rails—the social networks, games, and more of the
future."
While NFT art auctions and digital collectibles have lit a
fire under the whole market, NFTs are being seized by creators as the ultimate
tool to control ownership and the sale of their work without needing a
middleman to facilitate transactions. NFTs are believed to allow for more
transparency and direct relationships with fans by being stored and
cryptographically secured on the blockchain rather than social media.
"Netflix and others have established an economic model
where their platform is necessary for content creators to reach the audience at
scale," Munson says, "And what this tech does is make it possible for
the creator to reach the audience without that."
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