NFTs, DAOs (decentralised organisations), smart contracts, crypto tokens and social tokens are going to create entirely new media and revenue models. All these applications are facilitated by Web3 applications. What is Web3 and how is it different from previous web versions?
Web 1.0 Internet company
The first digital media transformation coincided with the emergence of the Internet. Companies created new revenue models by selling their goods on the Internet, for example. Certainly, in the beginning, this was just the flat ‘Internet of information’. Let’s say a digital version of the Yellow Pages. It was mainly intended for companies to generate additional visibility on this new platform.
Web 2.0: (social) media company
The business gurus of the early social media era said: ‘Every company will become a (social) media company.’ In short, the advent of the social Internet (Web 2.0) gave every company the opportunity to create its own content via social media channels, in order to generate reach, popularity and turnover. Thanks to YouTube, Facebook, Twitter and Instagram, companies were no longer dependent on editors, journalists and publishers. After all, they were now able to develop their own strategy for online content, media and advertisements. This was a powerful change which has spawned many new players. Red Bull is a great example of a company that has used the power of social media.
Web 3.0: crypto media company
At this point, we are seeing the early signs of a new revolution to the next phase: Web 3.0. Web 3.0 is about the decentralised Internet where data, stuff and identity are completely owned by you and are no longer in the hands of large tech companies. In addition to information, Web 3.0 enables us to exchange digital items and cryptocurrencies with one another.
So, the internet originated as the ‘Internet of information’, which progressed to the ‘Internet of social interaction’, which will lead to the ‘Internet of value exchange’ in the upcoming third phase. As with the rise of the traditional Internet and the social Internet, this facilitates the advent of new media and revenue models. This development justifies my claim that ‘every company will become a crypto media company’.
Technical revenue models
Blockchain and NFTs are an important part of Web 3.0 development. A reminder for those who are not involved with this on a daily basis: an NFT is a Non-Fungible Token: a non-exchangeable, irreplaceable digital certificate of ownership. You can create this certificate digitally and link it to a digital object (such as an image), which you subsequently register in a blockchain (a public database).
This registration is also linked to your own digital wallet. Because you have a digital key (in your digital wallet) that is linked to your NFT, you can prove that the NFT belongs to you. The rest of the world can also see that you own it because the registration of your NFT is in the public blockchain. People can see this, but no one can change this registration.
An analogy in the physical world might be that you have bought a certificate that is stored in a glass vault, as it were, to which only you have the key. Because you have the key, only you will be able to access it. Because the safe is made of glass, everyone can see what is in it and everyone knows that you are the owner.
Buyers therefore receive a digital certificate, a signature, and the attention and blessing of the creator. Just as you used to be able to own and sell a signed copy of an LP or CD, this is now digital. And as you will know, astronomical amounts have been paid for signed copies on occasions. By the way, the purchase of the NFT does not mean that you automatically own the copyright. Translated into the LP or CD metaphor: you are allowed to play the songs at home, but you are not allowed to self-publish or distribute them in any other way.
In short, an NFT is your own, unique proof of authenticity and origin: you know for sure that you own the NFT rather than someone else. In other words, NFT technology enables an individual to ‘appropriate’ an image, an MP3, a video, and so on. And when there is a collective agreement of what this ‘possession’ means, scarcity can arise, which can drive up the price. After all, this is how the economic law of supply and demand works.
The whole NFT concept is special, because it has always been a huge technical challenge to create scarcity in the digital domain. Indeed, the digital world enables you to copy, multiply and share things with the greatest of ease. NFT technology radically changes this, thereby creating a new value system. And this is one in which, with the creator’s approval, new creative options arise, even when the creator sells the exclusive licence to the copyrighted work. But more about this later.
So, you have an NFT certificate, and there is worldwide consensus that this certificate is worth something. This could generate a great deal of money for you. For example, Twitter founder Jack Dorsey’s very first tweet was sold as an NFT for over $2.9 million. And in the spring of 2021, a recording of a concert by DJ Don Diablo sold for €1.2 million.
Because there is worldwide agreement that an NFT represents a certain value, the buyer will receive something else that is automatically added when you purchase something: ‘bragging rights’. The opportunity to brag online about owning a (pricey) digital object. On social media, these types of digital purchases are generally regarded as a status symbol within a particular community. A profile picture of a cryptopunk or Bored Ape NFT is definitely a status symbol on Twitter. Just as a ‘verified account’ gives you a certain status on social media. And just like some people in the physical world fork out hundreds of dollars for a Ralph Lauren sweater or thousands of dollars for a Gucci bag to gain status and feel better as a result of this.
For the techies: an NFT is basically a very simple computer program in which certain properties can be set, such as the distribution of income. In jargon, this is called a ‘smart contract’. Unfortunately, it has nothing to do with contracts technically. However, you could of course include mutual agreements in this computer programme. In this case, you could specify all manner of additional information in the metadata (the description) of the NFT, for example, the accompanying story and whether or not the copyright is included in the purchase. You could basically view the metadata of an NFT token as the sign that hangs next to a painting in a museum. It tells about the who, what, where, why and how.
The emergence of NFT technology is creating new potential revenue models and media models for (media) companies, artists and other creatives. This was also evident during the rise of Web 1.0 (the traditional Internet) and Web 2.0 (the social media Internet).
(Media) companies are already converting the content of their existing media library into separate NFT products. In the simplest form, they are creating digital collectibles, inspired by their own brand. For example, they make unique copies of old videos, images, animations, and so on and sell them as NFTs. And this regularly generates considerable sums of money.
Due to the emergence of NFTs, creations that are no longer in use can suddenly exponentially increase in value. They are frozen assets which, thanks to NFTs, can finally be ‘defrosted’: monetised, capitalised on. What media companies, celebrities, creatives, athletes and similar parties have on the shelf in terms of frozen assets suddenly turns out to be of great value.
Companies have generally retained the intellectual property rights to their creations. Examples include copyright, patent law or trademark law. If you do not come to an explicit agreement on this when selling an NFT, it will always remain the property of the company. Firms know what to do with this. In addition to financial income, the issuing of NFTs can also increase brand engagement among existing fans. And this can involve vast amounts of money: for example, a digital Coca-Cola bubble jacket was sold for over fifty thousand dollars
Individual creators of memes (popular online jokes) can also finally turn their images or videos into financial profit by selling them as NFTs. The creators generally own the intellectual property rights to their images or GIFs. Until now, it was impossible for a creator of a viral internet joke to make money from it. This has changed with the advent of NFT technology.
For example, Side Eyeing Chloe became a popular internet meme in 2013. A girl is surprised with a trip to Disneyland and looks left and right in surprise and suspicion. This moment was captured in a GIF and a meme was born. As an NFT, this generated €65,203. The NFT of the video ‘Charlie Bit My Finger’, in which a baby bites his brother’s finger, yielded €648,808. These memes can also be regarded as frozen assets that have been defrosted. The rise of NFT technology therefore makes it possible to become the owner of a piece of Internet culture and to subsequently trade this.
3. Social revenue models
Better times are likely to be in the offing for artists, musicians, clubs and creators. In any case, the era of COVID-19 has forced them to reflect on how to come into contact with their fans and stay in touch, while earning money online at the same time. With crypto media, a new playing field has been added.
Nowadays, musicians are able to sell their songs directly to fans as NFTs. In this case, the musician is no longer dependent on a record company that scoops up a considerable proportion of the profit. And they are less dependent on the whims of social media platforms such as YouTube, Spotify, Instagram and OnlyFans. Examples include a sudden drop in organic reach, the censoring of risqué content or the closing of accounts.
The possibilities offered by Web3 applications also enable content creators to move away from the Web2 platforms that profit from other people’s content: platforms that earn money because they convert the attention of fans and interested parties into advertising revenue. To put it bluntly: in Web 2.0, YouTube, Reddit and Facebook earn money from a viral post, in Web3 the creator reaps the sweet rewards because they can be paid directly in micropayments via cryptocurrencies, or have control over their NFTs or other tokens.
In the future, writers and journalists, for example, will receive money from their readers via micropayments. The crypto wallet in the reader’s browser makes it possible to pay out small amounts of crypto based on the time the reader spends reading the article. The longer a reader sticks around, the more the writer will earn. Podcast, video and documentary makers are paid in micropayments for the time someone listens or watches.
So, with the help of Web3 technology, artists can be paid directly for their work. In addition, they can release their work in the regular way, for example via a record company or streaming platform, while creating an NFT copy at the same time. When they receive the revenue from this in cryptocurrency, they can convert this into euros or dollars, for example
Fans as joint owners
NFT technology offers other new opportunities. Creatives can programme (or have it programmed) through the ‘smart contract’ that they receive infinite royalties for the continued sale of their products. For each new sale of the NFT, the creator will receive 5% of the then applicable selling price, for example. The advantage is that the creator will have permanent income and can benefit financially from growing popularity.
There are even more possibilities. For example, streaming revenue can be distributed – and even in such a way that a fan who owns a full NFT receives 2.5 per cent of the streaming revenue. This makes the NFT more valuable, as it will also generate new income for the buyer. The fan in question therefore has a financial incentive to make the artist and the song more popular: the streaming revenue and the value of the NFT will increase. For a small part, the fan becomes co-owner of the brand and therefore also an ambassador. Possession and promotion are intertwined in this way.
Furthermore, the NFT can be programmed in such a way that it provides access to all sorts of new merchandise, unique MP3s, VIP cards and digital collectibles. The purchase of an NFT can therefore generate a great deal of additional bonus material. Just like you used to receive all sorts of bonus material, photos, stickers or merchandise with an LP or CD.
An NFT can also give you access to special closed online groups or meetings where you can obtain digital objects and new NFTs. As a company you can, for example, issue a token access NFT card which grants access to a web portal with a live stream where a very well-known photographer shares tips with you about their profession or where you can learn to cook from a well-known chef.
As a company, you can subsequently surprise the wallets that possess your company’s NFT access card with a special NFT ‘airdrop’, made by this well-known photographer. ‘Airdrop marketing’ is becoming an interesting niche for companies.
In addition, physical objects can be released as digital tokenised versions. This enables you to make an NFT from tangible objects. Although a select group of NFT enthusiasts are very excited about this, I am personally still very critical of the watertight connection between the digital and physical world. How do you guarantee that what is on the blockchain is (and remains) linked to the tangible reality? This might be a topic for a later article.
Another new revenue model is linked to social tokens. This concerns a type of fan-related membership, which is why they are also known as ‘fan tokens’. A social token can be issued by a brand, club, community, musician, artist, writer or influencer, for example. But sometimes people can do this themselves. For example, Rally.io makes it easy for creatives to issue their own social token.
Fans can buy and trade digital tokens on swap exchanges, just as with other cryptocurrencies such as Bitcoin. The price is determined by market forces and popularity. The tokens also grant fans access to exclusive content, rights and communities, for example. This is therefore similar to what NFTs do, although you do not really get a ‘product’ with social tokens. Social tokens are interesting for content creators and clubs because fans can buy these tokens directly, which generates additional income. Makers, clubs and celebrities essentially make up their own economic system.
The football clubs Juventus, PSG and FC Barcelona now have their own social token. They themselves determine how many tokens end up in circulation. Fans buy these tokens, which generates a (welcome) additional revenue stream. These social tokens also provide fans with a kind of membership card with all sorts of rights. For example, they can vote on the supply of merchandise, which sports kit the players play in, and which music track will be played when the club scores a goal.
In the future, a company could reward its community members with additional tokens or NFTs when they create content for this company. Examples include a video, a manual, or a written review. This allows community members to participate in the company’s marketing.
Firms will be able to programme in that their NFT provide access to a special portal of their website, or a special Discord channel, but only if more than 100 people have signed up. This way, you ensure that existing fans have an incentive to involve other potential fans with your brand.
You can give the most avid fans of your company guaranteed access to a launch of special NFTs, which is known as ‘whitelisting’. In this case, fans are guaranteed to own the NFT before the masses have it. The fans who end up on the whitelist have introduced the most new members, for example (Twitter followers or Discord members, for example).
As crazy as it may sound, in the future, it will also be a revenue model for ‘talent scouts’ to spot young, promising artists or athletes and to buy their social token, only to sell it later with a profit, by the time these people have launched successful careers.
4. NFT as a source of inspiration for media
Another development is that companies that make an NFT series subsequently enable the buyers – i.e. the fans – to generate new media on the basis of the NFT with new ideas, derivatives and angles. Existing fans will therefore create new content based on existing concepts.
In this case, the NFT is the starting point for new media expressions such as animations, comic strips or poster series. When selling an NFT, companies will award
the buyer an exclusive licence to this specific copyrighted work. This will give fans the right to sell copies of a particular work or to produce other media based on it. This ‘mass intellectual property development’ option offers many possibilities.
Bored Ape Yacht Club
A great example in this context is the Bored Ape Yacht Club (BAYC) NFC series. A coffee brand, a boy band and an animated series have already been built around this popular NFT sequence of images of bored apes. This NFT series basically gives explicit permission to use the image for these new media expressions. This is in contrast to most NFT series, where copyrighted work is still owned by the original creator.
So, there is certainly still a tension field between NFT on the one hand, and copyright and intellectual property on the other. Case law simply does not exist as yet. For example, Quentin Tarantino was recently sued by a film company over the intellectual property of the Pulp Fiction film.
In this new ‘media co-creation’ system, fans have a financial incentive to make high-quality fan art of their NFT character and to popularise it. After all, they might earn money from their new product this way and, at the same time, the original NFT will increase in value due to the increased popularity.
Just to emphasise that the value of a community in Web3 projects is highly appreciated: the original founders of BAYC gave away a $3,000 grant without restrictions to community members who wanted to contribute something to the growth of the intellectual property of the BAYC as a brand.
Jenkins the Valet
A specific example of mass IP development – i.e. collectively working on the development of intellectual property – is Jenkins the Valet, a bored ape from the BAYC series. Jenkins is Ape No. 1,798, and is dressed in some sort of valet attire. A community has gathered around this ape image which has started a project called ‘the writers’ room’. The NFT community will write and publish a book for this project. The community is actively involved in its development.
Holders of Jenkins the Valet NFTs have access to a members-only portal on the Internet where they can vote on the book title, genre, plot, ending, cover and illustrations. The icing on the cake: when you, as a member, own one of the 69 exclusive ‘WAGMI Yacht’ NFT tickets, your ‘bored ape’ will also become a character in the book. These special tickets are currently being traded for a vast amount of money.
The community around Jenkins the Valet is actively seeking collaboration with other apes from the BAYC series. And the great thing is: the legal contracts that facilitate this mass IP development will be made available to everyone at the end of 2021 as open source.
The Loot Bags are another striking example of collective creation without copyright. In August 2021, 8,000 Loot Bags were minted and created on a blockchain. A Loot Bag is a text file consisting of eight sentences on a black background, which is also an NFT.
Each of these eight items has its own degree of rarity within the Loot collection. For example, the word ‘Short Sword’ appears only 325 times in the 8,000-word collection, and ‘Divine Robe of the Fox’ only once. The ‘Loot Bag #748’, which featured this word, sold for 250 ETH.
Interestingly, this NFT collection was initially computer-generated, and it was subsequently left to the creativity of the online NFT community to turn it into a project. Creatives worldwide started working with these words, coming up with stories, characters, objects and illustrations. For example, the lootcharacter.com website uses the words from the Loot Bag to create pixelated cartoon characters. One Loot fan aptly called the concept ‘the improvisational theatre of the creative Internet’.
Twitterer @avichal also offered a striking explanation of the phenomenon: Loot Bags are actually like dice. They are just simple cubes, but they form the basis of hundreds of games that have been devised worldwide. We will see this more often in the future; a brand will be built, with one or more products following in the ensuing period.
At this point, an additional dimension is being added to the landscape of media models and revenue models for companies: headless brands. These are brands that work without centralised control.
Bitcoin is a case in point. This digital cryptocurrency was given its name and logo by its founder, the pseudonym Satoshi Nakamoto. As many know, however, he has been out of the picture for years. Nevertheless, a community of fans and interested parties have continued to develop the Bitcoin brand and product. And successfully so. As at the end of November 2021, Bitcoin has a market capitalisation of $910 billion. In this decentralised branding, community members are therefore in control of the creation of media expressions and have an incentive to spread brand awareness.
The next step is a so-called decentralised collaboration under the heading of ‘DAO communities of headless brands’. This sounds vague, but it can be explained as follows.
A group of people temporarily meet in a DAO, a decentralised autonomous organisation.
In this temporary partnership, mutual agreements are recorded in computer code and facilitated by blockchain technology. Software therefore plays an important role in recording and executing agreements. Sometimes the members of the DAO know each other, and sometimes not. Decision-making in a DAO generally takes place by submitting proposals on which the members are allowed to vote.
After the members of the DAO have made a decision (e.g. on the co-creation of new media), the administrative actions are performed using computer codes. Viewed from a distance, members of a DAO are therefore like shareholders of a company. Indeed, the DAO also works with a system where the more tokens you have, the more voting rights you obtain.
The principle of Decentralised Disney is similar to the aforementioned examples. Suppose the DAO buys an NFT (e.g. a video of a robot), including the intellectual property rights. The DAO then jointly, and in mutual agreement, creates new stories, music, comics, animations and other media products around this robot video. What happens next is that a media empire is built around a brand, as has been done in the past by major Hollywood companies for Transformers and Spiderman. Today, this happens with BAYC, Jenkins the Valet and the Loot Bags.
The collective efforts of DAO members ensure that the robot character gains popularity and interest increases. This, in turn, increases the value of the brand and therefore the value of the NFT. Brick by brick, the DAO is building a media empire around the brand. If Netflix subsequently wants to make a series about the robot, they have to go to the DAO to secure the deal, and the DAO members then split the profits.
The vision of a ‘headless brand’ is sometimes referred to as a ‘decentralised Disney’: a world where fans collaborate decentrally on various characters and intellectual property.
Should we only be singing the praises of this new form of organising? No, definitely not. You are still dealing with people and, where people work together, they will have disagreements. We will therefore see DAOs split off, hostile takeovers, bankruptcies and lawsuits. After all, it is still early days.
The turning point is clear: the new technological possibilities of Web3 create new media and revenue models. Web1 focuses on the transfer of information. Web2 is characterised by the fact that you can create your own content and have social interaction. The third phase, Web3, adds ownership and value transfer to the Internet. Each new phase will automatically bring a tsunami of new possibilities.
Web3 is the rebirth of today’s Internet. Each company, content creator, influencer, athlete or musician will be able to create their own personal economy and retain ownership of their own creations.
This will increasingly enable creators to break free from the hold of the current large tech companies. NFTs, (social) tokens, blockchain and cryptocurrencies offer new possibilities, including the accompanying new media and revenue models. The opportunities described in this article are so self-evident that they justify the claim: ‘Every company will become a crypto media company’.