Despite what you may have been hearing, non-fungible tokens (NFTs) aren’t just another fad. On the contrary, as a form of digital asset native to the internet that lives on the blockchain, they offer opportunities to monetize both new and existing intellectual property, creating new forms of community engagement with stronger incentives for community members and customers. For media organizations in particular, branching off into this new space can be overwhelming and risky—but there is also risk in not engaging at all.
The market for NFTs is growing rapidly, with soaring valuations and sales. In 2021, OpenSea, one of the largest marketplaces for digital collectibles, recorded more than $14 billion in transaction volume, versus $21.7 million in 2020. This is noteworthy, representing an increased trade volume by a factor of 646 in 2021, according to data from Token Terminal.
In the dominant paradigm that most of us recognize as today’s internet (a.k.a. “Web 2.0”), content creators can earn money and everyday users share their data on social platforms, with a significant portion of their profits going back to the platforms. NFTs, however, are fundamental to the internet’s emerging next iteration, what’s referred to as “Web3.” In this paradigm, not only do creators receive royalties from their content, they also gain a new way of interacting directly with their fan base. In Web3, creators have ownership of the communities in which they participate, rather than being the passive participants effectively required in Web 2.0 applications. This applies to governance, as well: users and community members are empowered to influence how the ecosystem evolves.
Put another way, Web3 is all about enhancing community participation, and all types of organizations can benefit from “activating” their audiences—particularly those in media, gaming, and sports. Through ownership and community, NFTs are also playing a large role in digital identity, which many believe will be a large part of our future lives in virtual worlds, such as the metaverse. In the specific context of the media industry, direct fan engagement via NFTs can take the form of token-gated fan experiences and opportunities for musicians’ loyal followers, such as rewarding them with one-of-a-kind digital or even real-life experiences that can only be accessed if you’re a part of their NFT ecosystem.
Media companies in Canada are still in the experimental stage with NFTs, but a huge amount of untapped potential is waiting to be explored. Releasing a collectable NFT is a natural starting point, but if you stop there you could miss out on what could become the main digital touchpoint with your consumers and the chance to build a community they control—and to which they are therefore more apt to be loyal. Virtually any consumer brand in Canada can play in the NFT space, with an opportunity to blend in-person experiences with digital assets. But due to their integration in current pop culture and their established acceptance by a tech-savvy demographic, media, gaming, and sports companies are especially well-situated to capitalize on NFTs’ growing popularity.
Publishing and entertainment: Ever on the pulse
It’s not only start-up tech companies that are ready to take advantage of wider consumer NFT adoption; traditional media companies are carving out their own spaces. For example, one well-known American news magazine has survived a transforming media landscape for almost 100 years and has now leaped into the NFT world to remain relevant with an evolving demographic. With its NFT collection, token holders can connect their digital wallets to the magazine’s website, which gives them unlimited access to content, as well as exclusive invitations to both virtual and in-person events. The company has started to create a more involved community with the added benefits of holding an NFT—conference passes with lifetime access, for example, known in the NFT world as “Permies.”
Gaming: Cross-over appeal
The gaming industry already has a digitally native customer base and “worlds” of digital content—and gamers are accustomed to buying, selling, and trading assets within those worlds. However, despite players logging hours of screen time to earn in-game benefits and assets, they don’t actually own these in-game assets. With the advent of NFTs, this is quickly changing, representing a new business model in gaming: Play-to-Earn (P2E).
In a nutshell, P2E empowers players with incentives in exchange for their time, as well as to experience interoperability of their assets. This could open possibilities for players to truly buy, sell and trade their in-game assets—as well as find utility for these assets outside of the game. If they own an in-game asset in one ecosystem, eventually they may be able to bring that asset into another ecosystem or sell it on the open marketplace to another gamer. The ultimate goal is to deepen a gamer’s relationship with a game by narrowing the distance between the game and the real world. Developers are also able to oversee in-game assets and monetize those assets by charging fees for secondary transactions.
Sports: The fish in the water
Sports teams, leagues, individual athletes, and fantasy sports already have dedicated fan bases, and NFTs are a natural extension of that. Not only can NFTs be issued for sporting events and games, they’re also creating a new marketplace for collectibles, such as videos and animations, sports memorabilia, and digital trading cards. With blockchain technology, their value can be adjusted in real time based on the performance of a player or team. The possibilities of tokenizing sports are endless with the right strategy.
Take the example of a football club in England’s fourth league that has taken the collectible space and blown it out of the water. The club’s NFT has the goal of decentralizing and democratizing the sports club structure. It grants their owners voting rights within the football club, which means having the power to contribute to decisions around what concessions will be available to fans and even influencing the signing of new players. The potential for this idea is huge and the model can be implemented in any club and applied to any team sport.
To affinity and beyond
It’s still early days for NFTs. And because not everyone fully understands them, there’s a need for experimentation, internal upskilling—and, of course, a healthy dose of risk. Execution risk, brand risk, market risk, and technical and compliance risk will all play a role in developing organizations’ NFT strategies. Regardless, whatever you do with NFTs, don’t dismiss them. They represent a brand-new opportunity to buy, sell and trade intellectual property, generate buzz, attract investors, and not only find new customers but also create the most coveted media customer of all—the superfan.
Whether you’re just getting started on your NFT journey or growing your presence in the NFT marketplace, find out how KPMG can support your organization with our flexible and scalable NFT Framework.
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