Exploring Web3 use cases in the entertainment industry
Exploring Web3 use cases in the entertainment industry
Token-based Web3 idol projects in Korea, Japan, and Thailand
TL;DR
The entertainment industry is considered a prime candidate for the popularization of Web3 technologies. It has also emerged as a new way to accelerate digital transformation and address the profitability challenges triggered by the coronavirus pandemic.
In particular, Korea, Japan, and Thailand have recently demonstrated the potential of innovative business models that utilize Web3 technology to increase fan engagement and develop new monetization models.
However, there is still room for improvement in the industry's current use of Web3 technologies. Going forward, we expect to see more widespread experimentation and innovation within the industry.
Introduction
As we discussed in our previous research, "Web3 Entertainment, the fundamentals of mass adoption," the entertainment industry, is considered to be a leading industry that will bring about the mass adoption of Web3 technology with its large fandom culture. As expected, many companies have been actively entering the Web3 market. This seems to be an attempt to resolve the industry's long-standing dilemma of 1) accelerating digital transformation triggered by the coronavirus pandemic, and 2) low profitability relative to the value of artist IP.
Case in point, global artist BTS has a market value of KRW 6.5 trillion (approx. 4.8 billion), while the average revenue per paying user (ARPPU) of the big four Korean entertainment companies (HYBE, JYP, SM, and YG) is limited to KRW 2.5 thousand (approx. USD 19) for the entire year of 2021.
In response, entertainment companies are trying various experiments to maximize profitability by actively utilizing their artist IP resources. In this process, Web3 technologies are emerging as a key element of new business models.
Falling short of the mark
The entertainment industry has high hopes that blockchain technology will help in actively engaging with fans and revitalizing the market. Unfortunately, the process of utilizing the technology has not been smooth. It is difficult to generate immediate utility from blockchain technology, and there is a high probability of fan backlash due to concerns about excessive monetization. In addition, the entertainment industry consists of many different stakeholders, making it very difficult to try something new.
Another challenge is the entertainment industry's approach to the Web3 market. Most Web3 projects are agency-driven, with a sole focus on monetizing artist IP. A typical example is selling NFTs using artist IP and expecting fans to happily accept the benefits designed by the agency without question.
Web3 technologies have been used simply for marketing purposes and have failed to build support from the audience. For example, BTS's entry into the NFT market was met with strong reactions from its fans, who threatened boycotts. On the other hand, Modhaus, a Korean entertainment company, announced that it would build a transparent settlement system based on NFTs for artists, which resonated with fans and is considered a successful case.
In summary, Web3 technologies need to help create innovative business models that resonate with fans, not just focus on monetization. It also needs to be done so in a way that would be difficult to realize without Web3 technology and foster explosive fan engagement.
Web3 Native Entertainment Projects
Many Web3 projects in the entertainment industry are not successful and often fade into obscurity. Nevertheless, there are some innovative examples of Web3 technologies that have revitalized the industry. In this article, we will explore how Web3 entertainment projects in Korea, Japan, and Thailand are actively innovating with Web3 technologies in the industry.
① Korea, fan-participation artist agency 'Modhaus'
Modhaus is the first agency in Korea to organize an artist group based on fan participation. Currently, it has introduced girl groups 'TripleS' and 'ARTMS', and encourages active fan participation through a token-based governance model.
ModHouse operates a fan engagement platform, the Cosmo app. The platform allows fans to purchase and collect NFT photocards, as well as participate in decision-making related to the group's operations. Participants can name the fan club or choose the title song of the album, giving them the opportunity to be directly involved in important operational processes.
Fans can participate in governance through the utility token 'COMO'. Fans can earn them in two ways: 1) by purchasing NFT photocards of artists, or 2) by receiving airdrops based on their level of engagement. NFT photocards come in both physical and digital forms and offer a similar experience to collecting traditional photocards. They can be easily purchased through in-app purchases. Even if you purchase a physical photo card, you can still redeem NFTs and utility tokens via an embedded QR code.
The NFT photocards are only available for a limited period of time, after which they are no longer available. In addition, the utility token is burned along with governance participation. With this model, Modhaus is considered to have built a sustainable revenue model through the sale of NFT photocards, which shows promise as a new business model in the entertainment industry.
② Japan, IDOL 3.0 Project (Nippon Idol Token)
Japan's IDOL 3.0 Project is a Web3-based idol project run by Overse. Like Modhaus, this project also actively utilizes Web3 technology. The project is characterized by 1) securing funds for operations through the issuance of NIDT (Nippon Idol Token), and 2) building a token-based governance model for active fan engagement.
It is also worth pointing out that the NIDT token has been listed on Japanese cryptocurrency exchanges. In April 2023, the NIDT token successfully completed its Initial Exchange Offering (IEO) on DMM Bitcoin and Coinbook. Approximately 67% of the exchange's circulating supply was sold in the process, totaling nearly 1 billion yen (approx USD 6.7 million) in funding. NIDT tokens are now available for trading on both exchanges, giving fans the opportunity to easily participate in the project and cash out their tokens. This means that fans can easily monetize the potential profits from the increase in token value, which is an important factor in encouraging active participation.
NIDT tokens are also used to participate in the idol group selection process. At the beginning of the project, 114 people were preliminarily selected from roughly 10,000 applicants, and the final 11 members were selected through fan voting. Fans participated in the selection process by registering their NIDT token holdings via DMM Bitcoin and Coinbook exchanges on the IDOL 3.0 Project official website and receiving voting rights proportional to their holdings.
The IDOL 3.0 Project, like Modhaus, is recognized for taking fan engagement to the next level by providing fans the opportunity to directly participate in the management of their idol groups. Furthermore, the project is also attracting attention for securing diversity in its fan base through methods such as listing on exchanges so that anyone can become a fan by purchasing tokens.
③ Thailand, entertainment company iAM
iAM (Independent Artist Management) is a Thai entertainment company founded in 2017. It is known for managing BNK48 (Bang Kok) and CGM48 (Chiang Mai), the official overseas sister groups of Japanese girl group AKB48.
The group's operations are centered around fan participation, just like Modhaus in South Korea and IDOL 3.0 Project in Japan. However, iAM did not start using blockchain technology from the beginning. Initially, the group granted voting rights through the sale of physical products such as albums and merchandise. 2022 was a turning point, as the group issued tokens through an Initial Coin Offering (ICO) and began to build a token-based model in earnest. This transition has been credited with fostering more active participation from fans, and the introduction of a fairer voting system has greatly improved both transparency and operational efficiency.
Fans will be able to participate in group decisions through iAM48, a dedicated fandom platform operated by iAM. Voting is centered around the BNK Governance Token (BNK Token) and GE4 tokens, which provide exclusive voting rights. The BNK token is also used as a payment method to purchase artist merchandise or acquire GE4 tokens. As such, iAM is significant in that it has added blockchain technology to its existing operating model. It enhances transparency and fairness, while introducing an additional token-based revenue model.
Recap, Web3 Native Entertainment Projects
All of these projects are experimental initiatives that are revolutionizing the entertainment industry. At the center of these innovations are three common factors.
First, there is an emphasis on a soft landing into the Web3 ecosystem. It minimizes the use of blockchain-related terminology and makes it easy to create and manage wallets. In particular, ModHaus utilizes Ramper, an email-based wallet creation service, to provide an experience similar to a traditional login experience. This makes it easy for web2 users to use web3 technology without a technical background. This approach is a key factor in fostering innovation in the entertainment industry by lowering the barriers to entry for blockchain technology and helping to attract a diverse user base.
Second, it has redefined the relationship between artists and fans and elevated the role of fandom. The traditional entertainment market is a provider-driven ecosystem with limited fan participation in the market. However, token-based governance models have expanded opportunities for fans to participate in the market and strengthened the sense of connection between artists and fans. This has allowed fans to participate as important decision-makers, rather than just consumers, which has revitalized the entertainment industry.
Lastly, blockchain technology records fans' participation activities, ensuring a fair and transparent process. This approach is an important solution to the trust issues that have plagued the entertainment industry in the past, especially vote manipulation in idol group auditions such as Produce 101. This is because blockchain technology records all voting results and participation activities transparently, ensuring a fair outcome without fraud. During BNK48's general voting process, fans were able to count the number of votes for each member directly, which shows that anyone can easily verify and validate the data.
Conclusion
In this report, we have seen innovations in the entertainment industry utilizing Web3 technology. They are significant in that they build token-based ecosystems that strengthen the role of fandoms. They are also meaningful for entertainment companies in that they are able to quickly secure upfront funding for their operations and establish new revenue models.
However, even though the existing system has been converted to blockchain, it is not a full Web3 utilization. For example, it is still very much an agency-driven operation. It is up to the agencies to come up with voting proposals, and fans can only comment within the scope of the activities provided, which somewhat limits their participation.
A solid next step is to consider building a C2E ecosystem utilizing artist copyrights, as in the case of MapleStory Universe, and develop it into a more explosive and scalable ecosystem. However, there is still a lack of understanding and empathy for the Web3 market to fully engage fans, and the copyright issues related to artists need to be addressed. This is because artists' music, name, and likeness rights are all intertwined in a complex web of interests involving various stakeholders.
Also, too many competitive aspects can become a vice. If there is excess competition between participants and a vote for every moment, it is expected that both artists and fans will quickly become exhausted due to high fatigue. Therefore, it is necessary to design a sustainable business model that utilizes blockchain technology. Something more than just a consumable ecosystem, and innovations that can lead to a virtuous cycle.
Take a quick, 1-minute survey to enhance the weekly insights we provide. In return, get immediate access to the updated "2024 Country Crypto Matrix" by Tiger Research, featuring the latest global virtual asset market trends. Your participation helps us provide valuable content while you gain cutting-edge analysis.
Disclaimer
This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.
This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.