Pattern Unlocked: NFT Holders Determine IP Ceiling

Author: Mandy, Odaily Planet Daily

I consider myself a player with a basic understanding of NFTs. I've participated in most of the well-known NFT projects and currently hold collections like BAYC, Azuki, Doodles, CoolCats, Mfers, and others. I used to be a writer in the entertainment industry and have interviewed many companies related to IP incubation and operation. I also enjoy collecting modern art pieces and trendy toys.

When NFTs emerged, I quickly became fascinated by their rich and diverse attributes in consumption, investment, collection, and trendiness. Regarding what NFTs are, why they have become a trend, and why they must be paid attention to, I have some personal views as a player that I believe differ from the existing interpretations in the market.

Discussing NFTs from an IP Perspective

Recently, the focus of industry traffic has been on BAYC and its parent company, Yuga Labs. On March 12, when I saw Yuga Labs acquire the Crypto Punks and Meebits series from Larva Labs, I marveled at Yuga Labs' vision on Twitter. In this acquisition story, Larva Labs resembles a top-tier IP incubation factory, while Yuga Labs is not only a self-owned but also an acquisition-enabled IP operation platform; the former is like Pixar, while the latter is akin to Disney.

Subsequently, Yuga Labs further showcased its vision as the leading NFT IP platform, describing it in a new deck as "bridging the gap between culture and web3," and outlining its commitment to breaking the boundaries of the "metaverse," further creating new IPs, acquiring old IPs, and even releasing a video short for their NFT family metaverse "the Otherside."

Other media have referred to Yuga Labs as the "Disney of the web3 era." Is it too exaggerated to compare a company selling small images to a century-old entertainment giant like Disney? I don't think so at all.

My starting point is not the complete market capitalization of the APE token exceeding $10 billion, nor the recently completed $4 billion valuation with a16z leading the way, along with participation from Adidas Ventures, Animoca Brands, Samsung, Google Ventures, and a $450 million financing round, but rather the changes and patterns in IP incubation, operation, and copyright commercialization over the past century.

A few years ago, the founder of an IP company told me something I deeply resonated with. The core issue that IP companies are always thinking about is "low cost, high traffic." How to achieve higher traffic at a lower cost shapes and changes content, channels, and marketing strategies.

A century ago, widescreen sound films were the new media. In 1928, Disney launched the first-ever sound cartoon, "Steamboat Willie." Film and television became the new content carriers of that era, and the Mickey family emerged as the first batch of IPs rising in this channel, becoming the ancestral IP in the hearts of global viewers.

Over the past century, Disney has faced multiple growth bottlenecks, continuously innovating its IPs and expanding new distribution channels to maintain its leading position. This includes developing entertainment program production, theme parks, toys, books, games, media networks, acquiring Pixar, Marvel, 21st Century Fox, and vigorously developing the streaming service Disney+ during the pandemic, even recently announcing plans to enter the metaverse.

However, I want to talk more about Sanrio, founded in 1974, which is a favorite example among all IP people. Everyone knows its most famous IP, Hello Kitty. Interestingly, Hello Kitty has no film or television works and has never conducted any advertising, yet Sanrio established one of the earliest complete IP licensing and management chains. Apart from special categories like tobacco and alcohol, Sanrio has licensed its copyrights to almost all fields, including clothing, accessories, daily necessities, automobiles, offline stores, and more.

In the context of the rapid development of the commodity market and international trade in the second half of the 20th century, I believe it's hard to escape buying one or two items featuring the Hello Kitty family. When you drink water from a Hello Kitty water bottle or write with a Hello Kitty pencil, you are not only consuming but also becoming a node of dissemination for this IP.

Another interesting example is Line Friends. LINE is a social application developed by NHN Japan, a subsidiary of the South Korean internet group NHN. As the built-in emoji of LINE, the popularity of Brown Bear, Cony Rabbit, and Sally skyrocketed alongside the proliferation of this instant messaging software. LINE FRIENDS has also become an independent brand, operating character IPs with businesses including games, animations, theme parks, and cafes, generating over 1.2 billion yuan in revenue in 2019.

Similar examples include Kakao Friends, and China's long-grass facial expression group (Shidong Culture) that became popular in WeChat's ecosystem, as well as the recently released NFT series from the well-known internet humor creator Cold Rabbit, which produced deadpan jokes for mainstream Web2 community products like Douban and Weibo.

What I want to say is that from these three examples of film and television works, daily necessities, and emojis, we can see that with the changes in communication media, the cycle for cultivating IP has shortened, and the chain for commercial monetization has also shortened. The dissemination model is lighter, and the efficiency of reaching audiences has grown exponentially. At the same time, the design style and presentation of IP are constantly iterating.

This is akin to the evolutionary process of print media, internet media, and social media. The ways and media for acquiring information and attention are changing. In every era, what people and things become popular is subject to randomness and irreproducibility, yet they are indeed the only choice of the times.

The Infinite Potential of BAYC and Yuga Labs

Therefore, when I see NFTs, I know this will be a true and brand-new transformation.

As an IP, the speed of recognition and dissemination of NFTs is truly "riding a rocket." In August 2021, NBA superstar Stephen Curry purchased a BAYC and changed his Twitter avatar to it. This was not only headline news in the Crypto industry but also topped Twitter's trending topics and Douyin's hot searches that day. Recently, when I returned to my hometown, a relative (an ordinary person from a small city, completely unaware of blockchain) glanced at my WeChat avatar and asked, "Is that the same monkey as Curry's?"

Subsequently, Dallas Mavericks owner Mark Cuban, top DJs like Steve Aoki, The Chainsmokers, Marshmello, Mike Shinoda from Linkin Park, singer Post Malone, rap superstar Snoop Dogg, football star Neymar, socialite Paris Hilton, and celebrities like Justin Bieber and Eminem (I probably only mentioned about one-tenth of the current celebrity holders) all purchased BAYC series and changed their avatars.

With Twitter's daily active users at 200 million, Instagram at 500 million, and WeChat at 1 billion, these celebrity influencers have millions of followers. And these communication channels are not only not bought, but also involve KOLs voluntarily spending lavishly and participating in community building. If NFTs are not the strongest IP carriers of this era, then what is?

Some may argue that this influence cannot be monetized into the pockets of BAYC creators Yuga Labs through licensing, or that the decentralized open copyright of NFTs poses risks. I can only say: my friend, your vision is too narrow, and you know nothing about the world of Web3.

As of January 2021, Hello Kitty has generated $84.5 billion in revenue over its 47 years of existence, making it the second highest-grossing IP in history (the first being Pokémon, which was born in 1996 and has generated $100 billion).

BAYC has been around for less than a year, with total transaction volume exceeding $1.5 billion. MAYC's transaction volume in 7 months surpassed $1 billion, and the total transaction volume of the Crypto Punk series reached $2.7 billion. The current price of APE coin is around $12, with a market cap of $12 billion. And these numbers still do not fully encompass its commercial value.

However, what is more important than these numbers is what BAYC brings to its holders.

The Copyright System in the Web3 Era

In August 2021, Curry purchased a BAYC for 55 ETH and a BAKC for 5.7 ETH, which at the time was approximately $198,000 based on ETH prices.

Subsequently, Curry topped global social media trending lists and was hailed as a leader in the Web3 world. On September 8, he became a global ambassador and shareholder for the mainstream crypto trading platform FTX; on December 22, he released the "2974" series NFT in collaboration with FTX.US, generating $1.46 million in sales, all of which was donated to charity; on December 24, he launched five "Genesis Curry Flow" sneaker series NFTs on the Polygon network, with total sales exceeding $3 million on the same day.

Last week, the token ApeCoin (APE), associated with the Bored Ape Yacht Club (BAYC) NFT ecosystem, was officially launched. Holding both Bored Ape and Kennel Club NFTs allows one to claim 10,950 tokens, and if Curry sells the airdrop he received today, it would be worth $130,000. Currently, the floor price of the BAYC series is 101 ETH, and the floor price of BAKC is 8 ETH, already double the price at which Curry bought them.

In other words, in the six months since Curry acquired the monkey, he not only achieved nearly three times the investment return but also transitioned from a sports star to a KOL in a new field. The metaverse era is still far from arriving, yet we have already felt how to achieve both fame and fortune in the real world through virtual digital IP. Is there anything more "futuristic" than this?

What is even more remarkable is the "decentralized copyright" that disrupts traditional licensing models. Let's see what decentralizing copyright can bring.

First, regarding the definition of copyright for NFTs, I recommend reading this article: The CC0 Fog of NFTs (https://www.odaily.news/post/5177104), and I won't elaborate further here. Simply put, Yuga Labs initially established very clear statement terms, affirming that you "own the NFT" and that "the underlying work of the NFT is owned," allowing for commercial use of the owned NFT.

This is also one of the most discussed points after Yuga Labs acquired Crypto Punks and Meebits, as they plan to grant all commercial rights of the CryptoPunks and Meebits series to their respective owners. It's worth noting that Larva Labs had previously faced criticism for not being Web3 enough and not opening up copyright.

So what results will allowing NFT owners to commercialize such powerful IP bring? Let me give a few examples:

1. In December last year, Adidas collaborated with Bored Ape Yacht Club to launch the adidas Originals Into The Metaverse NFT, generating sales of 5,924 ETH (approximately $23 million), with total transaction volume nearing $100 million to date.

2. Universal Music Group purchased Bored Ape Yacht Club #5537 this month, forming a virtual band called Kingship with its previously acquired NFTs. Three members of Kingship are from Bored Ape Yacht Club, and one is from Mutant Ape Yacht Club.

3. The world-renowned electronic music festival Tomorrowland announced that the NFT artist Ape Rave Club will debut on the main stage on July 24, becoming the highlight of this year's music festival. Ape Rave Club is a digital artist from the Bored Ape Yacht Club NFT series, planning to release original crypto-native music through the NFT platform.

A few years ago, when I interviewed the founding team of POPMART, I asked them if they would create content based on Molly. They immediately replied no, explaining that Molly could be anyone, any profession, any personality, and they wouldn't create content that limits her as a platform IP. As time has progressed, I felt that their reasoning was very sound.

In the universe of NFTs, I see a new ceiling. The world's top clothing brands, entertainment giants, and big-name celebrities are tirelessly using their decades of accumulated resources to promote BAYC, providing it with top-notch content and matching it with the best channels from their perspectives.

This is the power of openness, the copyright system of the Web3 world in my eyes—where the community of holders determines the height of the IP. This community can be individuals, companies, or DAO organizations.

Consumer Goods, Art, Luxury Goods

Finally, I want to share some subjective experiences.

NFTs were born in a very interesting era. Beyond the grand narrative of disrupting the commercial world of IP and copyright, when someone asks me what it is, I would say: it is an artwork but not just an artwork; it is a consumer good but not just a consumer good; it is a luxury good but not just a luxury good (here I refer to the narrow sense of Avatar-type NFTs).

In fact, the definitions of the above concepts themselves blur boundaries.

Many practitioners use Andy Warhol and Pop Art as metaphors to explain to "newcomers from outside the circle" why a seemingly crude little image NFT, which doesn't appear to have much artistic technique, is worth a fortune, and this is indeed very appropriate.

Pop Art draws styles and themes from popular culture: television, Coca-Cola, comics, cans, dollars, and printed wallpaper. Initially, many traditional elites felt uneasy about such art because they rejected commercial culture and the commercialization of art, believing it would threaten the survival of modernism and "high culture." However, the trend of rebellion, dissolving authority, and confronting commercial society is irreversible and has indeed occurred.

NFTs represent a more extreme broadening, marketization, and commercialization of modern art. You may disdain it or look down on it, but you cannot stop this from happening.

An even more interesting example is the ongoing trend of luxury goods becoming streetwise and trendy over the years. The design of luxury goods has come down from its pedestal, slogans are printed on clothing, oversized designs without logic, the loss of origin in subcultures, collaborations with streetwear brands, and the use of social media influencers as brand ambassadors…

Behind this phenomenon is the increasing number of global middle-class individuals—luxury goods are no longer symbols of wealth and blue-blood status but choices that reflect lifestyle and individuality, with more people possessing sufficient purchasing power. For luxury brands to maintain their guiding position in the fashion market, they must adapt to the development of the times and expand into more popular and youthful markets.

When some "newly wealthy individuals" ask me why they should buy NFTs, rather than telling them that BAYC is the Mickey Mouse of Web3, I often say it is the Richard Mille of Web3.

When someone claims that luxury goods must be timeless classic brands, Richard Mille serves as the best counterexample. It can be regarded as the super wave of the modern era, having launched its first piece in 2001, challenging the application of new technologies and materials in watches. Richard Mille initially gained recognition through elite friends from various fields (especially in sports, including Federer) wearing its styles, and currently, basic models are priced over a million or even several million, yet they still attract wealthy individuals, especially among celebrities and influencers.

Isn't this example highly similar to BAYC? It can be said that today's luxury goods have gradually replaced "bloodline attributes" (who is promoting it) with "community attributes." While wearing a Richard Mille, you still need to "casually" roll up your sleeve to show it off; unlike Federer, who can always wave his arms in the spotlight on the court, changing a BAYC avatar is clearly much easier and has better liquidity.

Therefore, to return to why brands are issuing NFTs and why everyone is buying NFTs: giants fear falling behind and being defeated by new things; newly wealthy individuals in Web3 need to showcase their social identity; old wealthy individuals from Web1 and Web2 need an entry point to engage with the new generation.

A few days ago, a Web3 investor mentioned a Crypto-related project that a Web2 team was starting again, and upon seeing their deck featuring monkeys, he said:

I couldn't help but exclaim, this is the so-called Web3 identity recognition.

Some media have published eye-catching content with titles like "NFTs are the 'gambling stones' of young people." Indeed, we often use old references to compare with the new world, but the development of the internet and the business world is the least amenable to "carving a boat to seek a sword." If you want to understand it, you should first learn about it.

Of course, today, with BAYC's floor price exceeding 100 ETH, it is already unattainable for most people, and there are only 10,000 BAYCs. However, there are still many fresh and interesting series continuously emerging, and the holders themselves determine the ceiling of this IP. The new story is just beginning, and more narrators are needed to participate. Once involved, you will reap unexpected rewards.