Non-fungible tokens, also known as NFTs, are a unique form of digital asset gaining momentum in the digital asset space. They represent unique assets on a blockchain and possess their own set of digital rights.
This article explores precisely how these new types of NFTs can open up new revenue streams for both content creators and owners alike.
Below are some of the possibilities they offer, from licensing items with unique identifiers and tracking their distribution to creating scarcity through limited-edition releases.
How will NFTs change our digital worlds?
The ability to create ownership of very specific kinds of digital assets in the form of NFTs is a game-changer.
For example, people online may copy a digital painting around the internet many times. However, what an NFT accomplishes via blockchain technology and cryptocurrencies is to allow people to establish the originality of their ownership.
An NFT can be anything from a tweet to music or this article, and people can still get unique ownership rights in them.
From an intellectual property point of view, this is a compelling concept. It is stamped with a digital fingerprint that bad actors cannot replicate, making it perfect for licensing and tracking.
When it comes to law enforcement regarding intellectual property ownership, there is now a definitive way to identify the original asset and its owner.
People are, in essence, purchasing something that often has no physical counterpart; they are buying possession itself.
It may appear far-fetched. But it isn't any more crazy than the rest of our consumer culture.
For example, with tangible art, the value is more concentrated on ownership than experience. When comparing the value of viewing the Mona Lisa versus owning it, one realises all of the value is in the actual ownership.
So the same thing is essentially true with NFTs, but with the bonus of tracking ownership and digital rights.
Furthermore, combining unique identifiers with smart contracts could create licensing opportunities that never existed before.
NFTs are happening all over the place, and while some people think it's a passing fad or argue they would never buy them, they are already being used by numerous companies.
The licensing and monetisation potential of NFTs
The potential for NFTs to revolutionise the licensing and monetisation of assets is immense. The future of NFTs will be in highly personalised, tokenised, digital objects used as part of video games or online virtual worlds, often dubbed the metaverse.
One example could include 'skins' or 'characters' in video games from a licensing perspective.
As a hypothetical example, imagine if every character in Fortnite, the video game, was an NFT. The owners could then monetise their NFT skins by allowing in-game purchases, for example, and licensing them out to other gaming platforms or in physical form such as figurines.
For example, a brand might want to create a line of products featuring an NFT as its main design motif. This could include anything from clothing and accessories to home decor items.
The more revenue a 'skin' generates, the more likely it is worth on the open market and exchanges. Availability in open exchanges means liquidity, which can build trust and reputation.
This reality could create a virtuous circle where game developers get incentivised to create even better and more valuable skins, which in turn would drive up demand from players, and so on.
Another exciting element is fractional ownership. Instead of owning one whole skin, a player might own 0.01% of it and therefore have the right to enjoy its success yet also be able to take a more negligible risk by trading their ownership in fractions if they want.
The quality, exclusivity, and use-cases of NFTs matters the most
So, here's the problem: NFTs have been perfected to authenticate ownership uniquely, and in fact, artworks have been hindered by forgeries in the past, meaning people can now tackle this issue more efficiently.
But at the same time, there is a saturation in the marketplace, and people may be wary about purchasing an NFT for fear of losing its value. It's a valid concern.
People also no longer have distinct assets because the online community may duplicate digital items endlessly. In jurisdictions without proper intellectual property laws, criminals may also infringe upon the ownership of NFTs.
The key to unlocking the licensing and monetisation potential of NFTs is by ensuring that only high-quality, unique items are released into the market. This exclusivity can give people confidence in purchasing them, knowing that they have something special and one-of-a-kind.
It's also important to note that there are two sides to the NFT coin: on one side, you have ownership and licensing, and on the other, it is easy to track how people interact with each other or the products they own.
The question then becomes, how can brands take advantage of Web3 and the new data-driven world we live in to create unique experiences for customers?
Other licensing ideas for all types of companies
As previously mentioned, NFTs can be used as part of video games and virtual worlds, which could also become a significant new revenue stream for the entertainment industry.
Another way this can happen in the gaming world is if a gamer wants to get hold of an extra mighty sword or unlock access to some exclusive content.
Other industries could also get involved by spreading their brands into the digital world, and in turn, increasing brand awareness and loyalty.
As another hypothetical example, imagine Nike or Adidas turning some of their sneakers into NFTs, which can then be licensed to video games like Fortnite. Gamers could then wear the branded NFTs on their virtual characters, generating the owners revenue every time a sale is generated.
Other ways companies could get involved in the NFT market include by creating new types of NFTs or investing in NFT-related projects. For example, if a company wants to build an online virtual world with unique characters and items within it, they could hire the right developers or fund someone else's project.
Furthermore, a research paper by the University of Edinburgh recently explored whether NFTs "provide an opportunity for fundraising for galleries, libraries, archives and museums (GLAM), by selling ownership of digital copies of their collections". They discovered there is potential.
The bottom line
The rise in popularity of crypto collectables has given brands new ways for monetising content by leveraging blockchain technology.
Although the technology is still in its infancy, it has excellent potential for the future. With the proper planning and execution, brands can create unique experiences for their customers that they won't find anywhere else.
According to a study by Visa, "NFTs represent a deeper and more innovative way for fans to engage and potential new revenue streams for organisations. However, there are many considerations to take into account when integrating NFTs because it is a new space."
It will be interesting to see how the NFT market evolves and whether it becomes a new revenue stream for companies in other industries such as retail, fashion, media, video games or entertainment over the next few years.
If so, then unlocking their licensing potential could prove very lucrative indeed.