Because the chatter around Web3 and media is picking up steam, I figured this is as good a time as any to write about why haven't written about the topic yet (though I have written about the Metaverse in MGM Resorts M life "Convergence" vs. "Metaverse" Convergence).
Last Thanksgiving I listened to a podcast interview with Eric Golden - a former Portfolio Manager at Fidelity and a member of the Bored Ape Yacht Club (BAYC) - where he explained Web3 to Invest Like The Best's Patrick O'Shaughnessy. Golden now hosts a podcast series on Web3
I listened to it twice (which is unusual for me).
It's a wild, surreal experience to listen to the language and logic Golden uses with ease: "eth" (pronounced "eeeth"), "gas", "airdrop", "serum", "mutant ape". It all sounds alien when compared to legacy media and streaming.
But, Golden offers a compelling, enthusiastic description of a successful use case of supply meeting demand in Web3. BAYC is "a limited NFT [Non-Fungible Token] collection where the token itself doubles as your membership to a swamp club for apes".
[NOTE: A non-fungible token is a non-interchangeable unit of data stored on a blockchain, which is a form of digital ledger. The images of BAYC are accompanied by NFTs, which are uniquely identifiable data units.]
The story Golden tells is one of membership, initially on a Discord server and then in BAYC where the NFT offers special access to the BAYC community, cash flows, and/or additional NFTs.
Reverse Engineering to Web3 in Media from BAYC
There are many, many use cases for NFTs right now, and growing: NFTs are estimated to be a $41B market right now.
There is certainly lots of speculation about how media will enter the market given Disney's large library of IP and trademarks (something former Chairman Robert Iger mentioned in a recent interview with Kara Swisher), and moves by ViacomCBS and others.
I had an opportunity last August to commission an NFT of a favorite author of mine - Thomas Pynchon - but because he is a notoriously recluse and few know what he looks like. So, in an idea that amused myself and maybe two other people on Twitter, I planned on having a black box commissioned.
It would have cost somewhere between $3K and $4K to commission, depending on how I bought my Ethereum (which it was priced in).
It could have been a fun experiment, but I decided against it when basic questions popped up:
Is this worth my time and money?
What do I do with it after it's commissioned?
Would anyone on demand side appreciate the joke? And if they did, was it worth $4K to them?
I never came up with any good answers.
Eric Golden has become an archetype for helping me to understand the demand side in Web3: effectively his unique NFT of a bored ape was less about perceived value of the image, and more about perceived value of membership. The story he tells is less about media, and more about the ways BAYC's anonymous founders engaged the community by:
inventing new ways to engage the community in new and exciting ways,
making membership feel more exclusive, and
generating more value through new tokens.
So How Does Media Evolve in Web3?
We *could* consider this Eric Golden interview as a helpful starting point for reverse engineering where Web3 and legacy media may meet. Obviously, there are experiments as I write.
But, how do we reverse engineer towards the meeting point between the pronged value proposition of BAYC and the non-exclusive value proposition of mass media?
One path may be via the PARQOR Hypothesis . To remind you, the PARQOR Hypothesis argues that the media businesses most likely to succeed in streaming and beyond must meet five attributes, and highlights any missing pieces they (arguably) may need to solve to optimally succeed.
Those attributes are summed up in the BEADS acronym:
an Aspirational Brand
Existing user base at scale
Multiple Avenues to monetizing the same IP, and
Daily value proposition (something new for fans to consume daily)
Sales Channels: Online (digital) and offline (physical) commerce
Notably, BAYC hits four of five parameters:
✅ an Aspirational Brand
❌ Existing user base at scale
✅ Multiple Avenues to monetizing the same IP, and
✅ Daily value proposition (something new for fans to consume daily)
✅ Sales Channels: Online (digital) and offline (physical) commerce (e.g., merchandise)
There is a longer essay to be written evaluating how the BAYC hits four of five. Instead, today, I simply want to highlight the interesting lens of the attribute Existing user base at scale, which is not met by BAYC: there are only 10,000 BAYC avatars available, but they have generated $1B in total sales to date.
BAYC reflects how that area of overlap between web3 and legacy media may be found if:
we rethink the Existing user base at scale attribute to deemphasize scale and emphasize exclusive, BAYC-type membership, instead; and
hold all other attributes to be true
If one agrees with the PARQOR Hypothesis and the argument laid out in the IAC Letter to Shareholders that inspired it - as I still do, and strongly - then BAYC suggests that the optimal media business model no longer needs scale as a necessary condition. In other words, making Exclusive membership the second attribute, while holding all other four attributes of the PARQOR Hypothesis static, may be the optimal Web3 model for media.
That is a significant takeaway at a time when the creator economy is beginning to eat into Hollywood's model, as I argued in an opinion piece for The Information last week, Why YouTube Sees Hollywood’s Future in the Creator Economy.
The challenges are Aspirational brand - are there any creators who offer that? -offline sales, and the ability to produce IP that attracts a user base. Ironically, all three remains strengths of legacy media over the creator economy.
That said, through this exercise, we now have a basic sense of what an optimal Web3-meets-legacy-media model could look like. It is something I can test media models in the Web3 against, and I plan on doing so.
The Web3 BEADS Acronym (V1)
an Aspirational Brand
Exclusive membership
Multiple Avenues to monetizing the same IP, and
Daily value proposition (something new for fans to consume daily)
Sales Channels: Online (digital) and offline (physical) commerce
NOTE: I last wrote about the PARQOR Hypothesis two weeks ago in What Will IAC Chairman Barry Diller Say About Streaming in 2022?