NFTs in the Entertainment Industry
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NFTs in the Entertainment Industry
What are NFTs
Non-fungible tokens (NFTs) are popping up in every economic sector these days. From music to finance, digital assets are behind thousands of daily transactions, accounting for millions of dollars in sales. NFTs are digital assets that contain the same worth as real-world objects, such as music albums or in-game basketball jerseys (Conti & Schmidt, 2022). The asset is sold and bought online, with cryptocurrency being the most common payment method. NFTs are changing the global art market because they provide a means for creators to claim ownership of digital files. Despite NFTs still being in their infancy, they hold substantial implications for the future certification of digital art.
Media Companies and NFTs
Media houses and content creation companies can leverage NFTs to monetize their wares. Artists no longer have to depend on traditional auction rooms and galleries to exhibit and sell their artwork (Merchant, 2022). NFTs allow the artist to sell the art directly to the consumer. The direct outcome is an increase in profit margins. Digitalization also means companies can receive royalties as a percentage of total sales whenever an artwork is sold. Therefore, companies can leverage the technology to ensure artists receive payments from future proceeds.
Since NFTs contain encrypted code with a distinct set of information, companies can use the technology to tokenize information. Foremost, NFT’s user validation features enhance data security, meaning potential applications for medical records, licenses and academic certifications, among many other public services (Sundararajan, 2022). Secondly, NFT technology can help address concerns regarding information censorship and security. Even though data is stored in public registries, third-party access cannot result in the modification or deletion of data. Lastly, enhanced data security implies an improved ability to authenticate products, including ensuring high quality and validating the point of origin. Research outlines that data transparency is associated with reduced logistical expenditure.
How Disney can Use NFTs
With its diversity in entertainment programs and services, Disney can use NFTs to enhance the security of its digital domains. Blockchain technology lets users control domains through private keys (Conti & Schmidt, 2022). The level of security will help prevent the loss of artwork or copyright infringement due to third-party access. Enhanced domain security also enhances the ease of trading. Disney can use the technology to encourage potential buyers or investors to spend on the company’s digital assets. Reserving domains makes access to digital art rarer, which in turn drives up its price.
While NFTs can improve the security of Disney’s digital artwork by preventing copyright infringement, it achieves the same function by eliminating counterfeiting. The entertainment company can leverage the technology to track and monitor the movement of goods along its supply chain. Even though there is insufficient scientific evidence, there is ground to believe NFTs could be the missing link to the global supply crisis (Ahmed, 2022). Reducing the points of contact between man and art reduces the chances of forging. Improved product traceability helps eradicate malpractices carried out along the supply chain journey.
Disney can use NFT technology to grow and expand beyond the digital collectible market. The content creator can invest in entertainment programs that consumers can only access using blockchain (Low, 2022). NFT holders that view the episodes benefit from special privileges, such as voting on the program’s direction. In another scenario, the rise of NFT means an entire segment of new entertainment companies is being launched on crypto. Disney can employ blockchain to invest and acquire stocks in such companies. Examples of crypto-based entertainment companies include Mad Realities and Paris Hilton’s media company.
Conclusion
In the growing global digital economy, NFTs are omnipresent. Blockchain technology is the future of how content creators and artists will monetize and sell their creations. The technology provides a way to generate more consumer awareness and engagement, which positively correlates with the consumer’s intent to make a purchase. However, important to note is the technology is relatively new, and its future remains uncertain. Disney should not consider it a guaranteed investment and should instead invest in research and education to identify its unique use to the company. Since Disney is already a largely digitalized company, it should proceed cautiously as it adopts NFT technology.
Strengths and Opportunities in Disney Using NFTs
Weaknesses and Threats in Disney Using NFTs
Blockchain could pose a significant risk to Disney’s core business operations. The entertainment industry does not have the technical capability to ensure its NFTs transfer the same value and meaning as a baseball or visit to its theme parks. Therefore, as more people purchase its NFTs, they fail to familiarize with the company’s true business function. An increase in customers purchasing Disney’s NFTs might result in a decline in tourist visits to Disney Parks. Unless Disney can ensure the full transfer of meaning and value of its assets in blockchain, it will not be able to prevent the explosion of things created, collected and traded in the digital market. The gap opens room for counterfeiting and copyright infringement.
What Disney Should Start Doing
NFTs allow firms to increase consumer reach, engagement and awareness. Research outlines that people are more interested in firms that reflect their beliefs, cultures and viewpoints (Tikhomirova et al. 2021). Given that Disney is a brand focused on increasing its presence in the digital entertainment industry, the company should create a blockchain community for improved information and idea exchanges. The reserved community can gain special access to collectibles, incentivizing members to become loyal and repeat customers. In addition, the internet community can also assist in determining the worth of Disney’s digital assets through repeat interactions and feedback.
What Disney Should Continue Doing
Disney can leverage NFT technology to continue generating profits from its collectible side of the business. The collectible market is not what it used to be, with sports cards and animation figures becoming niche items (Sundararajan, 2022). The highly limited supply has driven up the prices of available collectibles, with collectors spending thousands of dollars on new premium products. With prices increasing and the customer base shrinking, the looming question is how Disney can attract new customers while maintaining sales in the collectibles market. NFT is the solution. Disney can use NFTs to generate digital ownership models for the collectibles to expand market reach for the rare consumer segment.
What Disney Should Stop Doing
In as much as Disney is gaining experience using NFTs to sell collectibles, its pricing model still does not reflect the worth of the technology. In an article for Verge, Robertson (2021) reports that Disney’s Marvel Entertainment entered into a collaborative agreement with VeVe to release some of its rare NFTs featuring Spider-Man. However, the company is providing the uncommon items at a user-friendly price of $40 in VeVe’s digital marketplace. Disney should stop under pricing its collectibles to gain pace in the crypto economy. The entertainment industry can leverage its unique collection to generate buzz and a gradual price hike of its digital assets.
References
Tikhomirova, A., Huang, J., Chuanmin, S., Ali, H. & Khayyam, M. (2021). How culture and trustworthiness interact in different e-commerce contexts: A comparative analysis of consumers; intention to purchase on platforms of different origins. Frontier Psychology, https://doi.org/10.3389/fpsyg.2021.746467
Merchant, Z. (2022, January 29). Why are social media companies nuts for NFTs? The Economic Times, https://economictimes.indiatimes.com/tech/newsletters/ettech-unwrapped/why-are-social-media-companies-nuts-for-nfts/articleshow/89190920.cms?from=mdr
Robertson, A. (2021, November 17). NFT makers are trying to build the next Disney. The Verge, https://www.theverge.com/22785051/nft-collectibles-intellectual-property-decentralized-disney
Sundararajan, A. (2022, February 28). How your brand should use NFTs. Harvard Business Review, https://hbr.org/2022/02/how-your-brand-should-use-nfts
Conti, R. & Schmidt, J. (2022, April 8). What is an NFT? non-fungible tokens explained. Forbes, https://www.forbes.com/advisor/investing/cryptocurrency/nft-non-fungible-token/
Low, E. (2022, April 26). How NFTs are changing the entertainment industry. Insider. https://www.businessinsider.com/nfts-blockchain-changing-entertainment-industry-hollywood?r=US&IR=T