I Want My NFT !
Fanatical human connections through fantastical technology
Openview
The power of the creator classes and the fervour of fans continues unabated and although the web has democratised the creative process and streaming services have restored the music industry’s revenue base, the artists themselves continue to struggle and with all this technology we have only been treading water.
Unique software tokens (Non Fungible Tokens or NFTs) are a new building block for media networks and marketplaces to grant true ownership to their fan bases and thereby smoothly transition through the following critical phases :
- Acquiring the right customers or fans
- Removing fee extraction and abuse of personal data
- Incentivising community participation, both early and in scaling
- Transparently generating data to improve the proposition
- Adapting propositions, packaging, and pricing to match demand
So with these capabilities we can build new media marketplaces and platforms that scale faster and serve the fans & artists for longer.
The superpower of the OpenWeb is the free composition of living building blocks of value: identity, credentials, utility, store-of-value, the ability to borrow and so on. Now we see that when this raw capability is extended to culture and entertainment it provides rich opportunities for entrepreneurs, creators and the fans or collectors themselves to rethink the entire mesh of relationships between them. This is an almost ‘blank slate’ for creators and an opportunity for themselves; for developers; and for entrepreneurs measured in trillions of dollars over the coming decades.
For many thousands of years, the patronage of kings or the Medici used to be a prerequisite for culture to flourish, now we can all be in the king’s court and many more performers in the king’s favour.
From Money For Nothing to Money For Something
I grew up in the 70’s with a father working in the music industry, and obsessed with vinyl (think garages full to this very day) and digital gadgets (think Sinclair watches and TV’s). In this period, music fandom expressed itself through this curation of vinyl records with their artwork; the worship of turntables and amplifiers; and pilgrimages to music festivals. Then the year 1984 brought a new force into the home. Not Big Brother (yet) but the 24/7/365 music TV channel. The bright stars, propelled by the medium of the moment MTV, were teleported in person to your living room. Sting; David Bowie; George Michael; Sade and hundreds more. As Richard Branson pointed out in his autobiography ‘Losing My Virginity’, once an artist had found ‘record:fan’ fit, it generally stuck and the labels set out to ‘make hay’.
The satellite broadcast Live Aid concert in 1985 brought the fans out in the hundreds of thousands raised 10’s of millions over the phone. Bob Geldof’s exhortations to (hashtag)‘Givemeyourfuckingmoney’ worked with the live crowd and TV audience because they were ‘involved and all shared in the occasion. The performances, the rehearsals and behind the scenes can all be found on Youtube and as powerful today as they were back then to a 12 year old in the VIP.
Disruption Delivered
However the focus on ‘serving’ the stars meant the barriers to success in the music industry increased and the commercial pressures ever higher as the large record companies capitalised on their scale and scope.
Negroponte’s 1995 book ‘Being Digital’ made it clear that this was all going to change. Television, vinyl, cinema, it was all just a file format. Digitisation of content kicked in but in the first wave of the web it first revolutionised delivery and record sales fell off a cliff. Digital streaming platforms, Napster, Last.fm, Spotify have restored the fortunes of the industry and democratised this segment of the creator economy. Now in 2021, in the UK, each and every day there are as many new albums released as there were in the entire year of 1984 when MTV was launched.
Yet as an industry veteran commented on the conclusions from ‘Dissecting the Digital Dollar’, streaming is arguably ‘saving the labels and failing the creators’ and as Will Page, former chief economist for Spotify, wrote last month in the Financial Times ‘the music industry is indeed making more money thanks to streaming, but there are far more mouths to feed’. Furthermore, streaming remains a step backwards versus live performances or physical artefacts. It still lacks the intimacy and potency of the physical record and the live performance. It simply doesn’t capture, memorialise, showcase, or reward the thrill of discovering and supporting an artist at their inception.
The intricacies and power of fan relationships are illustrated powerfully, perhaps ironically, in Daft Punk, the faceless robots who waved farewell this week. Their subtle shift to anonymity in itself perhaps elevated their legacy from the great to the exceptional just as much as the Spotify chart fueled success of ‘Get Lucky’ with the legendary and indefatigable Nile Rodgers.
So, what if there was also a digital approach to creating and scaling a sense of ownership in the relationship between fan and creator, moving from unidirectional flow of value to a direct and programmable flow of value and a data dialogue. Something that might come closer to reflecting the power true fandom holds.
Embracing the Emergent Power of Decentralisation
In fact as we have written elsewhere one can think of the progression of the Internet as: content-first; mobile-first, data first, and finally individual or user first. User-generated content drove the second wave of the Web, ‘User-owned Content’ will drive the third.
“User-generated content drove the second wave of the Web, ‘User-owned Content’ will drive the third.”
Giving your users and broader stakeholders ‘ownership’ in your endeavour turns out to be the most efficient and effective way to address the cold-start challenge found in many technology companies. Over the years this ‘community first’ approach to company building has emerged even within the enterprise or B2B space. It was inspired by the open source movement and found a great commercial exponent from its inception in Splunk. The alternative, when companies are unable to generate enough Elon Musk-style belief, is to dedicate massive resources to marketing and business development.
By turning stakeholders into shareholders, early participants become proprietors rather than the product or proletariat. This does not just obviate marketing spend, but generates a core following of evangelists who will do the marketing themselves, amply demonstrated by the fervour seen online among proponents of various crypto projects.
Protocols can incentivise liquidity by offering distribution of governance tokens in addition to the share of fees garnered by the core business. Compound was the first to successfully introduce this model, known as liquidity mining, issuing $COMP to users of their protocol and starting a frenzy of activity thenceforth known as the “DeFi SummerSummer of DeFi”. Benefits come to all stakeholders: users receive financial rewards in the form of a token that can accrue value; the protocol receives liquidity to make its business case viable and furthermore is able to widely distribute their governance to the individuals who are most likely to care about shaping the future of the protocol thereby safeguarding ongoing innovation.
This integration of the mechanism of financing with participation in a network together amounts to no less than a software-powered reinvention of the firm and a refinement of capitalism itself. When successful, a decentralised firm (in the broadest sense, a Decentralised Autonomous Organisation or DAO), delivers both faster and higher returns to financial backers than equity and and improved outcomes for participants. So how might this be applied to the creator or passion economy?
Harnessing the Upgrade from Closed Data Networks to Open Value Networks
One of the core tenets behind our thesis for the Open Web is that it will disrupt sector after sector with decentralised, data-driven, developer-fist, and ‘delicious’ products. When software developer tools, libraries, and APIs are adopted organically from within organisations to invisibly support positive feedback loops driving further network effects that result in parabolic innovation of which incumbent industries cannot help take notice.
Compound is an example of one area of OpenWeb innovation, that of Decentralised Finance (DeFi). This is a toolkit of financial primitives that can be freely incorporated with each other to build new services. DeFi ‘weaponises’ software with the ability to handle value such that in the demand curve: correcting the price, optimising the packaging, and relentlessly improving the proposition of historically underwhelming financial products that have only catered to the few and even then not sufficiently.
Initially DeFi dealt with fungible tokens i.e. those that are mutually interchangeable. The introduction of non-fungible tokens (NFTs), i.e. those that are provably unique or at least one of a limited edition, and which are still programmable and composable, has opened up a world of new opportunities.
A week ago, this infrastructure enabled American DJ 3LAU to auction the first ever tokenised music album for $11.6 million via a novel mechanism: the pseudonymous highest bidder won a custom song, all of the 11 NFTs from the album, unreleased music, and a physical vinyl, while lower bidders won progressively smaller prizes. Similarly, the Kings of Leon are becoming the first band to release an album as an NFT, which comes with perks like exclusive audiovisual art and front-row show seats for life. Not only does this give the artist a direct link to their biggest fans, but it also provides upside for early supporters, royalties on future sales for the artist, and in many cases, many times the margin going straight to the artist instead of a record label.
This last week, Verisart announced 10x10, a collaboration with the leading blue-chip rare art marketplace, SuperRare, to release 10 verified 1-of-1 NFTs from some of the most established contemporary artists: Shepard Fairey, Neïl Beloufa, Petra Cortright, AES+F and Jonathan Yeo. These NFTs benefit from provable scarcity coupled with global digital distribution packed into a simple elegant product transacted from artist to fan. Fabric Ventures thinks it ‘got lucky’ to have been advising Verisart from the beginning on their goal to treasure creativity, empower artists, and enable trusted transactions across both physical and digital markets for arts and collectibles.
Designed to empower artists to tell their own story of their work, the Verisart certificate includes additional images, videos, and documents. For collectors, Verisart’s Certificates of Authenticity (CoA) form an integral part of collecting NFTs. They provide confidence in the identity of the artist and the verified history of the artwork.
Football fantasy league and collectibles platform, Sorare, lets users not only own their digital goods such that they can not only be transferred off the native platform, but earn yield, all the while enjoying The Beautiful Game. What’s not to love?…grab a beer and read more about Fabric’s thoughts on our journey with Sorare here.
It’s the Dynamic Data, Dummy
Much more than merely enabling ownership of digital objects, in of itself is a ground breaking capability, smart contracts provide the means to programmatically enforce royalties from secondary sales; equitably direct streams of revenue between beneficiaries; split ownership between collectors; allow fans to interact directly with creators; and form the basis for open marketplaces where data can flow bidirectionally to augment price discovery, liquidity and authenticity.
We have just seen Jack Dorsey surprise not just The Wall Street Journal but also The Information with his purchase of Tidal. Fabric Ventures would speculate that this goes beyond providing a platform for a specific sector of creators to seek payment from their fans but rather that the real potential lies in the tokenization of these relationships, with the Square CashApp wallet as the gateway.
OpenSea, Superare and Nifty Gateway all intrinsically publish their data ‘on chain’. We can see the potential that they become another composable component that will be augmented by trusted or trustless intermediary networks that provide authentication, provenance, and cross exchange pricing in real-time as slivers of ownership change hands simultaneously on multiple platforms. Taken together, these innovations signal a fundamental shift in media.
EPilogue
Elevated to the status of proprietors, the fairly incentivised participants of decentralised networks will benefit the users from the consented use of their data; the platform from the evangelism of its users; and creators with the fair fruits of their labour.
Music, art, and sports but scratch the surface of the potential for NFTs to upgrade the digital realm with critical characteristics of the human experience. Poetry, lyrics, movies, gaming are all in scope and 99% of the use cases are yet to be envisaged or implemented. Incumbent internet businesses rely on user lock-in and rent extraction, be it in the form of selling their data to advertisers or making them pay for the privilege of having their data abused, all while hardly paying creators who deserve the lion’s share of the proceeds.
All of this can now be achieved behind the scenes, elegantly integrated into the users’ or fans’ experience. Elevated to the status of proprietors, the fairly incentivised participants of decentralised networks will benefit the users from the consented use of their data; the platform from the evangelism of its users; and creators with the fair fruits of their labour.
Those who know me would say I am a super fan of Elvis. I market him to my unsuspecting children free-of-charge and would certainly have sent the King of Rock’n’Roll fan mail. But…this does not scale. These new NFT-powered forms of OpenMedia can create an army of willing believers (like m), whose data is used to refine the very experience for which they came, whilst richly rewarding the creators themselves. So we can support creators as once did the king, whilst enjoying their art like a king, whilst honouring the memory of The King or perhaps purchasing the new Kings of Leon NFT.
If you are a developer, artist or fan and are inspired by the limitless possibilities of this new media stack then bring it on, we would love to hear from you here at Fabric Ventures www.fabric.vc.
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With many thanks to Ian Emerson, Max Mersch, Dennis Muirhead and the whole team at Fabric Ventures.
