Why are huge brands entering the NFT space?
Non-Fungible Tokens (NFTs) seem like a big mess right now with many new “digital artists” launching their own NFT collections and projects. Most of the time, they appear as monkeys or other types of animals or characters wearing different accessories. This highly lucrative trend for the most famous and rarest projects, looks like it is reaching a peak as most of the projects look quite similar, do not have a real structure behind them, and both the owners and buyers of the art aren’t really attached by a strong mutual link.
Powerful brands and companies such as Disney, Coca-Cola or the luxury brand Givenchy want to be part of the fun and enter the game with their own NFT projects.
In this article, we will try to understand why these massive companies are making big moves into the NFT sector, known to be highly speculative, when they mostly stayed away from other crypto-related projects.
A massive financial opportunity
This emerging sector represents a new source of revenue that can be massive for companies.
As an example, for its first official release of NFTs, Disney offered 6 days of sale of 11 different collectibles in honor of its most famous characters (R2D2 and C3PO from Star Wars, The Simpsons, Iron Man…). As explained in the article by Ledger Insight below, they all sold out in less than a second, reaching a total of $7.2 million of sales to be shared between the brand and the sales platform.
But that’s not all! The huge advantage of these digital collectibles over more “traditional” goods is the existence of secondary marketplaces. There, NFTs can be bought and sold, after the official first “minting” (the act of buying an NFT to add the data of a digital file to a blockchain). In these markets, people in possession of them can sell the ones they own.
What’s magical for brands is that on some structures such as the specialized sales platform Veve, companies will receive a fee for each sale in the secondary marketplace. Disney or Marvel, for example, will pocket 6% of each sale that happens after the first official release.
This is a huge evolution for these companies as it allows them to passively receive money several times for the same NFT they themselves only sold once. A revenue source that will continue to happen as long as people continue to sell and buy their licensed NFTs.
Developing the brand image: the importance of communities
Financial revenue from the sale of these new types of products isn’t the only goal of these moves.
Indeed, it will also allow companies to build brand awareness and reach new potential customers. Young people — the future customers of these brands — are more and more involved in these digital environments that are cryptocurrencies and NFTs. Companies know that they have to become part of it to stay relevant in the future.
In these new environments, the community is one of the key aspects of a successful project. Each one needs a community that talks about it as much as possible in order to let other people discover and learn about it. A united and friendly community is part of the recipe to make people want to join in.
Communities can develop real “complementary universes” behind these projects. For instance, by building websites to track collectibles, publishing articles and actualities, making videos in relation to the topic… All of this contributes to raising awareness about the sector and the firms involved.
In addition, brands allow different types of collectors to gather, from old-school fans to newbies, in order to find their common interests and talk about things that bring them together.
These family-like communities use social networks to share their experiences and their knowledge, allowing the information to be shared quickly and spread widely.
Twitter is the most used one in the NFT sector, but you can also find an important community on platforms such as Discord, Telegram, YouTube. More recently Tiktok as well, with the appearance of Augmented Reality collectibles and young people using this network to show their collectibles, namely giving tips to get them.
Below you will find a video of an influencer giving his opinion to his community on which NFTs he thinks will perform better.
The different types of added value offered by owning these licensed NFTs
All are made to make people want to get or keep a certain type of collectibles in order to have some incentives. These rely on 3 different types of added value:
- First, there is an internal value to these NFTs, as, if you hold the right ones, you can benefit from advantages in some ecosystems. For example, being included in groups with other holders that you wouldn’t be able to access without that, makes people want to mint or hold their NFTs.
- Then, there are real-world utilities that are slowly appearing. For the release of their last movie 007 No Time To Die, the firm decided to offer 7 movie tickets to each person that succeeded in buying one of their NFTs. Something similar happened with Disney when they offered 6 months of subscription to their streaming platform Disney+ if you bought some of their NFTs.
- The last type of utility offered, which can seem a little bit far away, is the one offered in the metaverse. The metaverse is a shared virtual environment in which people use avatars to interact with each other. Licensed NFTs will definitely have a utility, as some platforms claim you will be able to use your digital collectible as if you were in the movie Ready Player One. This leaves room for a lot of speculation, some communities even talk about having access to Disney Parks in the metaverse by owning a certain NFT by Disney…
To conclude, many big companies want to be part of the blockchain / NFT revolution and want to capitalize on the current trend.
This industry will offer them new types of revenues consistently, make them develop their brand awareness, and improve their company image as well as putting them in a good position for the future in a world that becomes more and more digitalised every day.
It won’t take long before we hear more and more about these new types of products, as brands begin to promote them. NFTs seem on their way to starting a big shift and licensed brands seem to be in a good position for the start.
NFA WAGMI
About this article
This article has been written by a student on the Grenoble Ecole de Management’s Advanced Masters in Digital Strategy Management. As part of a content creation assignment, students are given the task of writing articles based on their digital interests and disseminate the articles online. Articles are marked but we make minimal changes to the content. Thanks for reading! James Barisic, Programme Director, MS DSM.
