Stoner Cats, CryptoPunks and Bored Apes. Blockchains and metaverses. Crypto-currencies and non-fungible tokens.
Over the past 12 months, as the world has eased out of pandemic crisis mode, the pop culture-verse and the Wall Street-verse have been rife with discourse and deal-making around a belief in the revolutionary potential of mind-bendingly complicated, internet-enabled new systems of communication, content creation, supply-chain management, legal documentation and banking. This emerging world has a nomenclature all its own — the digital version of a velvet rope — but in general it refers to technologies and wildly complex computer processing applications (also referred to as data mining) that fall under the broad heading of “Web3.”
Yet — simply put — what is Web3? And perhaps just as important, why did seemingly everyone in entertainment, finance, media and law start talking about it at cocktail parties and mixers as those trappings of pre-pandemic life came back into play? The answer is the only thing that is clear about the world of Web3: Money.
“I started to pay attention to the NFT business in the midst of the pandemic,” says Chris Jacquemin, WME partner and the agency’s head of digital strategy. “By the end of 2020, the total market revenue for NFTs was $300 million. One year later, it was a $41 billion business.”
But back to the what-is-it question. The term “Web3” broadly refers to the next major evolution of the internet communication that is designed to combat the monopoly power wielded by Big Tech giants like Facebook, Amazon, Google and Twitter.
Web1 was learning how to send and receive email via CompuServe and AOL accounts during the Clinton administration. Web2 was building out the World Wide Web, audio and video streaming capabilities and social media platforms.
As for Web3: Paul Sweeting, founder of Washington, D.C.-based consulting firm Concurrent Media Strategies, describes it in his recent VIP+ report, “Web3 Demystified,” as “a shorthand for evoking an intersecting and overlapping set of ideas and technologies that its proponents hope will make up the next iteration of the internet. At the center of that Venn diagram is the notion of a World Wide Web built on decentralized protocols such as blockchain rather than on the massive, centralized platforms and walled gardens running on the proprietary servers that dominate today’s Web2 version.”
For the creative community, the capabilities enabled by Web3 tech will pave the way for artists to be paid for their work directly from individuals, which in theory will remove the need for middle layers of production and distribution. The digital ledgers created by the impossible-to-replicate computations that form the blockchain will be the ultimate arbiter of who owns what — and they create a digital string that will theoretically allow artists to receive royalty fees tied to any sale of their assets for all time.
“This is the last mile of direct-to-consumer,” Jacquemin says. “The data and relationships that artists and sellers have with the consumer is very different in a blockchain environment.”
Cryptocurrencies and digital asset sales are at the root of the Web3 concept of business transactions. Propelled by the hoopla over the promise of Web3 and the big bucks racked up by sales of NFT creations like Stoner Cats and Bored Ape Yacht Club, the value of Bitcoin, Ethereum and other cryptocurrencies soared in 2021. The market was so white-hot that crypto-ATMs began popping up in gas stations in some urban and suburban areas.
As with all things that go up like a rocket, crypto wasn’t impervious to an IRL crash. As prices tumbled in spring, owners selling crypto coin accelerated. That has taken a lot of the hot air out of the market. Innumerable headlines about hackers stealing cryptocurrencies from the myriad online services that facilitate transactions have also raised big questions about their viability as an alternative to old-fashioned greenbacks and the Federal Reserve.
At the same time, there’s no doubt Web3 has applications that Hollywood needs to comprehend, if only to understand how the next generation of consumers hopes to be entertained and engaged. NFTs, or non-fungible tokens, are digital identifications that are recorded in a blockchain. They certify an owner’s authenticity and rights to a specific piece of digital content such as an image or a video, or a specific animated character in a franchise such as Stoner Cats or CryptoPunks. NFT holders get fanclub-like perks that might include wider access, early screenings and in many cases the right to create their own iterations of the character or asset they own. That ethos, not surprisingly, is a direct clash with the tight control that Hollywood studios have long enjoyed over content.
Those who have the mental computing power to study crypto and blockchain say that the market is deeply confusing because it is still in its most nascent form. Cryptocurrencies in general were an outgrowth of the 2008-09 global financial crisis, when trust in big-name banks was torpedoed by abundant evidence of greed and unethical activity around home mortgage lending.
Mike Winkelmann is a graphic designer from Charleston, S.C., who hit the jackpot in the NFT market with his digital creations, marketed under his professional name, Beeple.
“People are starting to demand more transparency and ownership of their virtual self. And this is the very, very beginnings of that with NFTs,” Winklemann says. “Where people look at this and say, ‘Well, this isn’t a fully formed ecosystem that brings immediate extra utility and value to my life.’ Well, of course it’s not. Neither was the internet in the beginning; it was very hard to use.”
The flip side of being wary of large institutions is relying on the collective power of community. Relationships stoked through online discourse on specialized social media platforms such as Twitch and Discord are significant and can be meaningful even to name-brand talent.
“I see IP being generated in a completely new way,” says Tricia Biggio, CEO of Invisible Universe. The animation studio, which just closed a $12 million round of funding, is working with partners such as Serena Williams, Jennifer Aniston and TikTok dynamo Dixie D’Amelio. At present, Invisible Universe straddles the Web2 and Web3 worlds, since the company relies on big platforms to distribute its short-form animated content. But the horizon is wide, Biggio emphasizes.
“Much the way we have been using TikTok to build community very quickly to curate IP and get ideas for the creative, I think we can do that in a Web3 way to build an affinity for our content,” Biggio says. “Web3 is speaking far more to what it means to collaborate creatively, what it means to own an asset and [to what extent an owner] gets to be involved in the creative.”
WME’s Jacquemin cites similar themes in pointing to the potential he sees in WME client Pixel Vault, creator of CryptoPunks. The Web3-centric content operation is growing by leaps and bounds, thanks not to ticket sales or Nielsen ratings but to hot NFT auctions and microchip-processing power gains.
Jacquemin and his team firmly believe Hollywood needs only to strip away the jargon to embrace Web3 as another form of doing business, however radical it may seem today.
“Just like streamers became an alternative to traditional networks, [Web3] is another iteration of a platform,” Jacquemin says. “The economics are quite substantial for some of these projects. This is not spending $5,000 to make a YouTube video. These are companies that want to work with traditional filmmakers and writers.”
Shirley Halperin contributed to this report.