Last month, the artist Nas performed his song “Rare” as part of a medley at the 2022 Grammy Awards. It was noteworthy because some viewers likely owned a portion of that song’s streaming rights courtesy of an earlier non-fungible token (NFT) drop for tokenized royalties.
In January, the rapper released two tracks as limited edition NFTs with embedded streaming royalty rights. A $50 ownership interest earned 0.0143% of the songs’ streaming royalties while a $4,999 purchase netted 2.14%.
This highly utilitarian approach to NFTs will likely become more common in the media and entertainment world, regulations permitting. While largely used for static ownership of art and collectibles today, NFTs have the potential to provide utility beyond straightforward ownership of an image or video by virtue of blockchain’s superior record-keeping system and cutting-edge functionality. This includes rights to more complex activities such as resale, royalties, voting rights, access to events, smart contract triggers, and more.
What Are the Challenges that NFTs Can Solve?
NFTs create a bridge between the crypto world and the physical world for everything from sports and music, to tv and film. NFTs can solve very specific challenges or pain points like distribution, ownership, and compensation, with robust protocols and capabilities like royalties and access rights built in by design.
While JPEGs and generative art are legitimate use cases, the true power of NFTs lies in their ability to represent ownership and identity. Imagine owning NBA season tickets as an NFT. Clear ownership on the blockchain for that asset could confer the right to attend games, stream them for viewing at home, sell them, pass them down to heirs, or even access exclusive team events in the metaverse or in real life. With crypto enthusiasts like Mark Cuban already piloting NFTs for sports ticketing programs, the future is promising for real-world NFT use.
NBA Top Shot—which allows users to buy, sell and collect NBA NFTs that showcase influential moments—is another example where the shared sense of ownership lies within the idea that your NFT is intrinsically unique. This concept of digital ownership based entirely on a blockchain provides a glimpse into the huge opportunity ahead for NFTs.
Consumer Engagement and Loyalty
For sports organizations and ticketing companies, this new medium could encourage consumer engagement, facilitate loyalty and repeat purchasing programs and streamline sports licensing and other deals. For example, some professional football (soccer) clubs are leveraging crypto and NFTs to increase fan power via voting rights on things like team uniforms and where the next match should be held. From a commerce perspective, other executives and major sports and entertainment conglomerates like MSE are also exploring the tokenization of tickets, which could help get more people into the arena on gameday while simultaneously engaging a global market. Airdrops could reward ticket holders for attending in-person, and as we’ve already seen with sports images as NFTs, the market for digital collectibles (and the opportunity to offer them as part of larger ticket bundles) is enormous.
More Consumer Insights and Intel
Furthermore, most professional sports organizations have historically lacked robust data about their fans and users, which has resulted in a major missed opportunity to further connect with these customers and gain valuable business intel. Due to the verifiable nature of blockchain—as well as the identity mechanisms and Know Your Customer (KYC) processes that can be built into the ledger—a whole new world of possibilities opens up for companies in the Media & Entertainment space to gain actionable insight into their fan base and keep those customers engaged and coming back for more.
New Experiences and Business Models
These benefits also translate to music and film. The indie film industry in particular is exploring ways to leverage NFT technology to not only help fund film production, but also as a way to sell shares of these films as public offerings. On the flip side, some bigger, more mainstream NFT collections are going Hollywood: either being turned into feature films or exploring potential film deals and tv series.
Like in the case of Nas and his record label, tokenization creates an opportunity for collectibles and shared ownership. It can also lead to improved community engagement between companies, artists and their fans through immersive experiences and new business models.
Improved Royalty and Provenance Processes
Importantly, NFTs will help clear up royalty disputes or payments, reduce piracy and clear a path for more ethical engagement. Ultimately, NFTs can elevate artists, labels and fans by providing a new source of innovation, monetization and ownership.
For both artists and enterprises, issues such as proof of provenance can be solved for all parties involved due to the verifiable certainty of the blockchain that NFTs are minted on. The fact that each NFT is a unique digital asset that is completely traceable throughout the entire process of sale, trade and ownership means that both artists selling their music as NFTs, and companies selling tickets to artists’ shows and concerts, can have complete trust and visibility of those sales.
Engaging in the Future of Functional NFTs
Tokenization is here to stay, but utility-based NFT creators and owners need a blockchain designed for their specific needs—one that removes the frictions preventing many people from participating.
As a public, decentralized Ledger known for its high speed, low cost, green (i.e. sustainable) nature and ease of use, the XRP Ledger has the potential to be ideally suited for organizations and individuals to quickly and easily create NFTs without paying high gas fees. Innovations like XLS-20—a proposed NFT standard for the XRPL—also aim to pre-program NFT functionalities such as minting, burning, trading, and automated royalties into the XRP Ledger for a seamless NFT experience.
The XRPL could be especially useful for the Media & Entertainment industry where there are high levels of consumer engagement and transaction volume. A fast and efficient high throughput ledger with a native, highly liquid cryptocurrency would make it quick and easy to scale an enterprise NFT solution for multiple use cases.
Functional, utility-based NFTs have the potential to afford usefulness and solve specific pain points for both companies and individuals in the Media & Entertainment industry at levels currently unmatched today. The opportunities are endless, which is why we’re committed to supporting the growth and maturation of additional NFT applications and use cases. And we’re placing our bets on the XRPL as the chain of choice for utility-based NFTs.
As we continue to work closely with partners, financial institutions and businesses to explore new crypto and tokenization use cases across industries, we also continue to propose important contributions to the XRPL to provide additional support for the community bringing these NFT use cases to life.
It’s safe to say the world has only just begun to scratch the surface of NFTs, and the technology promises even further practical applications and use cases across industries, for both companies and consumers alike.
Learn more about NFTs on the XRPL and how to get started today.