Jay Bodnar watches as the first televised pictures of the moon’s surface are beamed back to earth in … [+] detail. The Ranger 9 unmanned probe shows Americans an unprecedented view of the surface, and Jay wears his space helmet in celebration of the live event.
Web3 promises to be a game-changer in the evolution of the internet. At its core, Web3 is a vision for a more open, decentralized, and secure internet, enabled by advances in technologies such as blockchain and machine learning. The applications seem limitless—especially in the context of the entertainment industry. Although the extent of Web3’s impact on the future of entertainment is yet to be seen, Web3 is poised to critically alter several key aspects of the industry:
Changing incentive structures.
There’s compelling evidence that Web3 will give rise to new incentive structures for entertainers and their fans. Increasingly, fans and other audience members want to be active participants in the entire entertainment creation process—from idea to distribution. Thanks to non-fungible tokens (NFTs), which are at the heart of Web3, fans can realize this objective and become long-term investors in an entertainer’s success. A fan that purchases an NFT from an under-the-radar entertainer can see their ROI increase over time—perhaps exponentially—if the entertainer gains popularity. And, on the creator side, NFTs enable entertainers to reward early adopters and rewards fans who bet on their future potential. In the end, if all goes according to plan, a positive feedback loop is created that nurtures a sustainable community united around shared confidence in the future potential of an entertainer.
Of course, NFTs also create new lucrative incentive structures for already popular entertainers. In purchasing NFTs, audience members can be rewarded for betting on the future potential of content that they believe is underappreciated or will appreciate in value over time. Long-term fans and nonfans looking for a quick win can both stand to benefit. In March 2021, an art NFT from entertainer Lindsay Lohan was purchased for $17k and the seller immediately put it back up for sale for $78k. In a rhetorical quip, content creator @danipass0s asked:
“Only creator’s superfans are buying their NFTs? No. Some buyers could care less about the creator and just want to make a quick profit. For example, someone bought @lindsaylohan art NFT for $17K and put it back on the market for $78K.”
New platforms like a16z-backed Royal are also helping to change incentive structures that have long been misaligned in the entertainment industry. Royal enables users to purchase shares of songs through its marketplace and earn royalties as the music that they have invested in gains popularity.
Decentralized autonomous organizations (DAOs) are also quickly emerging. DAOs are collective decision-making bodies that enable entertainers to interact directly with fans and influencers to become front-seat participants in the process of creating and promoting an entertainment project. Dreams Never Die Records—led by the folks behind Before The Data, which has helped discover entertainers like Billie Eilish—is one of several newly launched DOA aimed at entertainers. Emphasizing the new incentive structures it enables, Dreams Never Die Records markets itself as a Web3-focused music community and record label focused on discovering new entertainers that is built around an “incentivized and aligned community.”
Changing ownership structures.
In our pre-Web3 era, entertainment content has been overwhelmingly controlled by platform giants. In Web3, the hope is that ownership will shift from behemoth platforms to creators—although time will be the true arbiter of whether this aspiration comes to fruition.
Taylor Swift’s loss of ownership over her original songs—which prompted her to re-record six of her albums—offers a stark insight into the broken ownership structures inherent to the entertainment industry. In theory, Web3 can enable a world where artists do not have to fight to secure power and ownership rights over their work. Had Web3 been around when Swift first recorded her music, she may have been able to safeguard her ownership over it. She might have opted to mint her own NFTs and allow fans to become investors in her, profiting when songs performed well. Importantly, in leveraging NFTs, she could have created a verifiable record of ownership over content that would be perpetually traced back to her.
In many ways, changing incentive structures enable new ownership structures. When audiences stand to gain financially when content performs well, they are more likely to promote the content and creators can, in turn, capitalize on audience members’ willingness to pay more—ultimately, enabling them to retain control of their work from the get-go. This ownership persists throughout first, second, and higher-order distribution. When a fan buys an entertainer’s NFT and later resells it, entertainers can profit through royalties and other means from each successive sale.
New monetization channels.
Web3 also enables new monetization channels—especially ones that are not guarded by stalwart intermediaries. Traditionally, radio stations have had enormous say over which songs get airtime. Similarly, record labels are infamous for limiting artists’ choice. And streaming platforms have developed a reputation for changing their discovery algorithms so that entertainers are left in the dark as to how to increase the visibility of the content. The result has been that entertainers have needed to, indirectly or directly, relinquish a lot of their potential earnings to intermediaries. According to Kadeem Clarke, Head of Labs at Momentum 6, less than 0.2% of musicians earn more than $50,000 per year. A similar state of affairs exists for other types of entertainers, too.
New Web3 monetization channels can help entertainers be more fairly compensated for their work. By leveraging NFTs, entertainers are able to keep a greater percentage of sales. As well, new Web3 platforms like Socios and Roll give creators tools to directly monetize their content and reputation without intermediaries. Mobile app, Vezt, is also getting a lot of traction of late. The platform enables music fans to share royalty rights for songs and recordings by various entertainers. As the company explains, “We exist to improve the music industry by providing artists, songwriters, and producers with funding sourced directly from their fans on a global basis. In exchange, fans get the right to receive royalties earned by their favorite songs and recordings.”
Web3 paving the path to the future of entertainment.
The entertainers and entertainment platforms that embrace Web3 will be the ones that thrive in the years ahead. By enabling transformative change in incentives, ownership structures, and monetization channels, many have high hopes that Web3 will create a more equitable and empowering ecosystem for entertainers to thrive. The key will be rewarding fans early when they are willing to bet on a creator’s future success and enabling them to share in this success as it’s realized over time.