How To Surpass The Creation Stage in NFTs And Actually Make Money
(for creators and the entertainment industry)
2021 was a turning point for adopting NFTs, defined by monkeys, pixelated punks, and kitties. Something as seemingly simple as a ‘jpeg’ image written on the blockchain has been able to grow the NFT industry tenfold since 2018. The ‘digital art’ industry surpassed traditional art sales, reaching about $41 billion in sales in 2021. Yet, in 2022, the world is still left wondering what the real value of these NFTs is and how an everyday person can benefit from applying NFTs in real life.
This year, NFT creators started exploring creative ways to engage their audience and build out on-chain loyalty programs by introducing various utilities to individual NFTs poised to grow. One of these most exciting industries is the entertainment industry, where the post-pandemic world is more engaged than ever. Whether you are a musician or publisher, a gaming company, or a ticketing firm, NFTs allow your audience to interact with your brand in never-seen ways.
NFTs & Monetization: New Ways of Engagement
The entertainment sector is currently using NFTs to add new opportunities for user engagement, interaction, and new revenue streams. When a user (defined by a unique wallet address) buys into the creator’s collection, the creator can provide special perks. These perks go along with holding the NFTs within their wallets. They can be in the form of early access to new drops, meet-and-greet opportunities (IRL or within the metaverse), or unique content solely catered to the tokenized audience. Access to these wallets can also allow creators to drop other NFTs as ‘appreciation tokens’ or provide different ways to keep users excited and engaged consistently. These users increase participation in the creator’s ecosystem, leading to more transactions and increased value of each transaction (intrinsic and price driven), a system where truly everyone benefits.
How is this different from the web2 world? NFTs enable us to collect appreciating vs. depreciating assets. Let’s use a subscription to a music streaming platform as an example. The subscription model in the traditional web2 world is created in a way where each month, subscribers pay money to use the services of a particular company, and this membership is non-transferable and non-monetizable (you lose it as soon as you use it). Now, let’s switch to the web3 NFT model. If a streaming platform creates an early NFT collection for subscribers, buying into an NFT gives subscribers lifetime access to the platform’s benefits. In addition, subscribers have ‘skin in the game’ for this platform because they own something tied to it. They become an investor and a member of the platform community.
In the web3 way, a subscriber is more incentivized to promote the platform because the platform’s growth is directly tied to the value of an NFT they hold. Let’s say the user base of this platform grows 10x in the next year, and the value of the NFTs doubles as a result. Now, the early NFT holders own an asset that doubled in value by solely participating in this community of interest, hence the concept of an appreciating asset. The same can be applied through the lens of musicians, gaming companies, gym memberships, etc.
NFT Lifecycle and Value-Driving Signals
Life would be great if the job of a creator stopped at the point of NFT creation. However, that’s rarely the case. What drives the value of their NFTs can be tricky to understand, and creators often miss out on opportunities to maximize the value of their NFTs for all parties involved, including themselves, the fans, and the community.
Here is how we, at Alpha Trend, like to look at the NFT market:
From creating an NFT idea to launching an NFT, creators must stay active and educated. There are various types of data that creators need to explore to understand if the price of their NFTs is likely to grow or decline after the NFTs get minted. It’s a separate art to understand how to optimize marketing strategies to help raise these prices. Ideally, as a creator, you want your NFTs to grow infinitely over time since you gain royalties on each transaction. This also benefits your fans and community, as the holders get to see their NFT value increase over time.
There are three critical signals to follow:
- SOCIAL SIGNALS — Social signals are collected from social channels of NFT collections. The number or count of followers and its growth over time can help creators understand if the demand for their collection is increasing or decreasing. Creators can also see if notable influencers are backing their collection through social channels and how this engagement drives the prices of NFTs, which can help creators find the most suitable influencers to collaborate with. Assessing (and adjusting) the quality of a creator’s community is also critical. The type and volume of engagement can drive their audience to decide whether to hold onto their NFTs or sell them. At Alpha Trend, we combine all these metrics into a “Hype Score” for a collection, so creators can follow how the perceived ‘hype’ is changing over time and take measures to move it in the desired direction.
- ON-CHAIN METRICS: On-chain data is collected after the NFT collection has been ‘minted’ or stored on the blockchain. This data follows the transactional journey of the NFTs within the creator’s collection, from total sales, volumes, prices, and wallets buying into and out of the collections. At Alpha Trend, we combine these metrics into a ‘Momentum Score,’ so creators can follow along with how the transactional momentum drives their NFT prices. A part of this score is also visibility into the wallet holders. Creators can know if blue chip holders (top collection holders) or whales (actively traded wallets with 1M+ in asset holdings) also bought into their collection and if this trend is changing over time.
- UTILITY FACTORS: As the world moves towards utility-based NFTs (otherwise known as NFT 2.0), the utility of an NFT collection can be scored based on the usage type and frequency (Alpha Trend can provide this on an ad-hoc basis upon partnering with the creator companies).
The data above is collected on a collection level, but for creators to know how their collection compares to the market, a summary of the market benchmarks or comparison to other collections’ performances can help guide the overall marketing direction.
An analytical approach to the creator’s community-building strategies is a critical piece that makes or breaks an NFT collection. Track NFT prices in real-time, understand the trend over time — from a social to transactional standpoint — and adjust strategies accordingly. There’s nothing better than data-driven marketing to ensure your NFT collection succeeds.
NFTs & Royalty Capture
A quick point worth mentioning within the entertainment industry is that millions of dollars are often left behind in unclaimed royalties. With the current NFT structures, creators rely on secondary marketplaces to reconcile the amount they are owed, and Marketplaces are notorious for underpaying creators.
As a creator with Alpha Trend, you can have direct visibility for each transaction — from the timing of the transaction, origin, and destination addresses to the value of the transaction. Creators’ accounting team can use our insight to ensure their royalties are accurately paid on each transaction.
Final Thoughts
As the digital market grows, NFTs transform how creators and artists interact with the world. The slow start began with art turning digital, to now using new business and membership models to interact with brands. As a creator, knowing the performance of your NFT collection can help you create community strategies that will grow the value of your NFTs exponentially so that you can maximize each transaction. Using Alpha Trend is critical for any entertainment company to gain an edge against the competition by being prepared and ready to act and grow NFT value.
See more at https://alphatrend.ai/
