5 ways non-fungible tokens can impact the video industry
Digital art has been the primary driver behind the current NFT craze. However, NFTs have been issued for a variety of assets (such as collectibles, access rights tokens, and even financial contracts) for a number of years now. Is video going to be the next big push for NFTs? And, will NFTs make enough impact to change the way that video content is created, distributed, and monetized in the future?
What is an NFT?
First, let’s take a look at what an NFT (non-fungible token) actually is. An NFT is an unique asset that is tokenized on a blockchain (a blockchain is a digital ledger of transactions). Tokenization is the process of issuing a security token on a blockchain to digitally represent an asset.
Today, most NFTs reside on the Ethereum blockchain. Ethereum, similar to Bitcoin, is a cryptocurrency but it’s blockchain provides additional support for NFTs, by storing extra metadata that makes them work differently from an ETH (Ethereum coin). It is because of the uniqueness of an NFT, that their value is created.
For most of us, digital scarcity is a bit hard to wrap our heads around, in the age of copy & paste. The supplies of each NFT are known and you can not fake their authenticity, as the blockchain verifies its origin and all transactions. Yes, someone might be able to screenshot a digital image and share it, but a tokenized NFT cannot be counterfeited and sold/passed off as authentic, because it would be easily verifiable if the original asset had truly been transferred. As NFTs are created on the blockchain; the creation, ownership, and each transaction is verifiable and of public record.
Think about the difference between owning an original physical artwork or a print. Anyone can buy a Picasso print, but there is only one original. This is where the inherent value from an NFTs uniqueness is generated (especially for those serious collectors out there).
How is this really different compared to a fungible (interchangeable) asset, you might ask? A fungible asset, although it may have value, is not inherently unique.
For example, if I am buying or receiving bitcoin, it wouldn’t matter which specific bitcoin I receive, as bitcoins are interchangeable and all have the same value. The bitcoin would go into my crypto wallet, and be intermixed and interchangeable. The same as, if I had multiple US dollars in my wallet they could become intermingled with each other, and every dollar in my wallet would hold the same value. Although they may have different serial numbers, they are completely interchangeable.
Thus, whereas a Bitcoin is fungible, like a dollar bill, and can be intermixed, the additional data on an NFT makes that token, that asset, non-fungible (unique and non-interchangeable).
How could NFTs impact the video industry?
We believe there are five main ways that NFTs have the potential to impact the video industry:
- The creation of new and additional revenue streams
- New ways of marketing and reaching an audience
- Monetary incentives for fans
- Tokenized rights management
- A move towards decentralized storage and distribution
Let’s explore each of these in turn.
The creation of new/additional revenue streams
- Reintroducing special editions. Creators can leverage the current excitement over collectibles and reintroduce the ‘special editions’ that were popular in the past (most recently with DVD releases). Studio’s often maximized the revenue of their catalog by releasing exclusive, limited-edition ‘special editions’ with content such as director’s cuts, cast interviews, and behind-the-scenes footage.
True fans were more than happy to pay more and/or buy multiple versions of DVDs for this extra content. Video NFTs provide an opportunity to popularize this again. Especially, when adding elements of hard-capped limits, and the inherent ‘certificates of authenticity’ that NFTs provide.
- Using NFTs as a funding or crowdfunding source. Creators could earn funds from their fans by selling ‘making of’ and promotional content as NFTs. For a creator that is well established and/or has a loyal fanbase, this could be lucrative and powerful, potentially allowing more to follow an ‘indie’ route.
Let’s say that you wanted to make a 2-minute short and sell an ‘exclusive’ limited run of 100 authentic copies via NFT. If each NFT of the film is sold for $1,000 upon release, you will have made $100,000 in revenue. While reaching mass audiences will likely still be achieved through more traditional distribution and platforms for the time being, creators can use NFTs to potentially generate higher revenue (and more rapidly) than traditional methods.
- Monetize video NTF content. Platforms such as Youtube have provided a way for anyone to create and distribute video content. But, only the few at the top have been able to monetize those platforms in a meaningful way. Oftentimes, even with the most successful creators, more money is made via sponsorships than the shared ad revenue. Now, imagine the potential of the next generation of a Youtube style platform, where creators could offer and monetize unique video NFT content for their subscribers. This could potentially be an even larger opportunity for both the platform (taking a share) and the creator, than ad revenue.
New ways of marketing and reaching an audience
- New distribution channels. NFT marketplaces could offer creators a new distribution channel to offer their content, independent of big studios or platforms such as Youtube. Creators could also use the ability to deliver exclusive content, interviews, etc… directly to fans without needing to negotiate with studios, networks, or distributors.
Monetary incentives for fans
- NFTs have the potential to make the viewing experience more interactive and rewarding for fans. Creators can reward fans by not only offering exclusive content and flexible pricing, but potentially even rewarding fans offering their own ‘creator tokens’ through platforms such as BitClout.
Tokenized rights management
- Creators can use smart contracts to manage rights and maximize the value of the content, merchandise, and all other creator’s rights. This would include terms and conditions of third-party agreements including distribution services such as streaming services and providers.
- Creators can remove middlemen from the process of video sales and streaming. NFTs on the blockchain provide complete transparency and data protection. Transparent ledgers are distributed – therefore everyone can see how much revenue a piece of content is generating. The timing and magnitude of the revenue streams, and who and what would all be public record. Gone are the days of Hollywood accounting! There would be automation of royalty payments that divide revenues fairly according to each person’s contribution and agreed share.
- A digital rights database. Smart contracts containing rights owners and metadata for NFTs could be added into the blockchain, creating the potential for a rich distributed dataset that anyone can reference to and interact with through the blockchain ledger, associating the underlying copyrighted material and all of it’s metadata. This could perhaps be the basis of a self-building next-generation IMDB.
A move towards decentralized storage and distribution
- Emerging infrastructure is allowing video storage and distribution to happen in a decentralized fashion. This is a fundamental shift from the way that we consume video today. By introducing the ability to create video-based NFTs of the length of an entire TV show or movie, the shift becomes even more significant. By combining a video NFT platform & marketplace with decentralized file storage capabilities, it reduces the reliance of storage in the blockchain (like Etherium), the cloud data providers for storage, and on content delivery networks (CDNs).
- Decentralized storage ecosystems offer incentives that align to bigger user numbers. The more people that use the storage, the more opportunities there are for rewards for network participants. This results in a network able to scale to greater storage capacities.
Conclusion: We’re in the early stages of a new frontier
There are a number of exciting opportunities for NFTs to change the world of video. But, in order to have a true impact, there are still a few hurdles and limitations to overcome.
As video files are large, it would be quite a burden to store them on the blockchain itself. One of the more promising solutions is the concept of decentralized storage for storing NFTs. Progress is being made in this area in projects such as IPFS, VideoCoin and FileCoin.
We are still in the early stages as the number of people that have the know-how of buying NFTs is limited to those that are familiar with transacting with cryptocurrency. However the number is growing rapidly as new ways of using it emerge. Stay tuned, we are in the early days of an exciting new frontier.