From basketball Moments to digital clothing, non-fungible tokens (NFTs) are everywhere these days. The latest trend is generative avatars, and Hollywood is eyeing them as an independent way to fund TV shows and movies.
On the surface, these avatars serve as social profile pictures. It might be the reason cats, apes, penguins, or other animals are replacing your friends’ faces across the internet. But it’s a lucrative endeavor. The Bored Ape Yacht Club project, for example, has already done more than $1 billion in transactions.
It’s caught the attention of Ashton Kutcher and Mila Kunis, who launched an NFT project to fund a forthcoming animated show called Stoner Cats, in which big names like Chris Rock, Seth MacFarlane, and Jane Fonda lend their voices to cartoon felines. Similarly, Glue Factory ShowGlue Factory Show sold NFT horses with the promise that some of those horses would appear in an animated show from Colton Dunn, Kate Rich, Jon Barinholtz, and others.
Why are these notable names turning to NFTs? Because selling generative avatars may be an alternative to taking out loans or securing traditional Hollywood deals (though big studios are, not surprisingly, digging into this new sector of the crypto space, too).
The Business of NFTs
There are no specific rules these avatar projects need to follow, but many have coalesced around the general idea of offering 10,000 unique images. Stoner Cats went with 10,420 in keeping with its theme. The mint price, or the cost to buy (usually with cryptocurrency) an NFT on the blockchain, also varies.
Another cat-based project, Cool Cats, went with a low price of .02 Ethereum, which translated to around $45 at the time. Each Stoner Cat minted for .35ETH and it raised about $8 million when all the NFTs sold out in under an hour.
Bored Ape Yacht Club cost .08ETH to mint in late April, or $200 at the time. It has been one of the more successful ones to date. As of late August, the least expensive one available to buy on a secondary market like OpenSea has hovered around 23ETH, or $74,000.
Join the Tribe
One reason for the dramatic spike in price for a Bored Ape is how its owners fostered a sense of community through real and virtual meetups, derivatives, and partnerships. Even Arizona Iced Tea bought an Ape and participated in a comic book story produced by community members.
“Community is everything in the NFT space, and in the case of most projects it is more than enough utility,” says Phil Doucet, contributor to The First Mint. Going forward, however, these utilities, or perks, will likely be a bigger part of the NFT experience.
“The ability to use your NFT or your collectibles as utility at a concert, sporting event, or social gathering is next-level stuff,” he says. “NBA TopShot, Genies, and RCRDSHP are literally giving us a glimpse of the NFT future as we know it aside from access to a community. They are going to provide real-life utility that will be seen worldwide.”
Generative avatars might sound like a complicated way to crowdfund, but something like Kickstarter is more transactional, netting you a physical product and maybe some swag for a one-time payment. NFT projects, however, typically use Discord servers to foster engagement between NFT owners and the development team.
“When it comes to avatar projects, many collectors come for the art and stay for the community,” says Josh Ong, an NFT consultant and co-founder of Causeway Strategies. “There’s no price tag for the value of belonging. When I use an NFT avatar as my profile pic, I’m signaling that I belong to a tribe. I’m choosing to associate myself with every other member of that group. The strength of the community, which includes its values and culture, contributes to the success of the project.
“An active community creates extremely valuable word-of-mouth marketing for avatar projects,” Ong adds. “For independent teams, that can be the difference between making it or not. For established brands, a Web3 NFT-based community offers a chance to connect with fans and customers in a closer way.”
This communal aspect could be hard for entertainment-based projects. It’s yet to be seen whether the ones creating shows can successfully foster that type of community.
“It does take a lot more work to build and sustain an NFT community, but this is crucial to the project’s vision of allowing community voice and insight into the writing process,” says the Collector’s Wife, a moniker used by a Glue Factory Show founder who prefers to keep their identity private. “Our writing team loves this direct connection and the opportunity to test this new format of content creation.
“There’s already so much excitement around blockchain as a disruptive technology, and now we’re adding community to shakeup an industry ripe for innovation,” they say. “Colton Dunn, one of our writers, likened this project to reverse Comic-Con, starting with the collectibles and community first and then building out the final product. We’re really proud of what’s coming together and the role of community in shaping the show.”
Who Really Gets Rich Off This?
Even though buying NFTs is all about digital ownership, unlimited use is not guaranteed. Stoner Cats, for example, grants “a limited license (without the right to sublicense) to access and use the Content solely for your personal, non-commercial use, provided that you keep all copyright or other proprietary notices intact,” according to its terms of service.
Simply put on its FAQ: “Your NFT does not give you the commercial rights to your Stoner Cat.”
A similar sentiment is shared by Glue Factory Show on its website. “Purchasing of these collectibles does not come with a transfer of commercial rights. We are retaining the rights to give the animated series the best chance at hitting the big time!”
The idea is that a show can’t be sold to a major distributor like Netflix if it doesn’t retain these commercial rights. It’s a double-edged sword. In locking down commercial rights, it potentially stifles the most enthusiastic and creative people from using their NFTs in unique, attention-grabbing ways. But retaining control is a top-down approach that Hollywood understands.
On the flipside, the Cool Cats or Bored Ape Yacht Club NFTs are much more open. This has propelled the avatar images to take on a life of their own, spawning a potentially valuable intellectual property.
On its website, Cool Cats states: “You are free to do anything with them under a non-exclusive license.” Earlier this month, for example, it partnered with Time Magazine to create Cool Cat avatars reading the magazine.
“We could spend precious Cool Cats’ development time, watching Twitter and OpenSea for any new copycat and low-effort clone. Or, we can spend that time creating new utility and functions for Cool Cats and the Cool Cat community. We are opting for the second option,” the development team behind Cool Cats wrote a blog post.
Similarly, Bored Ape Yacht Club outlines commercial use in its terms of service. “Subject to your continued compliance with these Terms, Yuga Labs LLC grants you an unlimited, worldwide license to use, copy, and display the purchased Art for the purpose of creating derivative works based upon the Art (‘Commercial Use’).”
As Hollywood wades into crypto and NFTs, it makes sense that it would approach it in the traditional, controlling way it understands. What’s not clear yet is whether that will fly with a digital community. Because this NFT space moves so quickly, however, we should find out sooner rather than later.
