VEGA: When Web3 Meets the Entertainment Industry, Will New Sparks Fly in a Bear Market?

Author: VEGA

1. From the explosion of NFTs in 2021 to the recent sluggish market, issues such as low liquidity and cold industry sentiment necessitate new narratives and ecological development to break the deadlock.

Looking back at the overall market performance of blue-chip NFTs in 2022 through the NFTGO Blue Chip Index, there was a trend of explosive growth followed by a decline, a brief recovery, and then a return to sustained sluggishness.

In comparison with the Google search index, Q1 2022 benefited from the hype around web3 and the metaverse, with blue-chip NFT projects, represented by market capitalization, showing small fluctuations but overall high value realization. However, after the LUNA incident in Q2, industry sentiment quickly plummeted, and NFTs were no exception; around July, as ETH prices slightly rebounded, NFT projects also saw a brief rise, followed by a continued stable downturn.

Figure 1: NFTGO Blue Chip Index 2022

Figure 2: Google Trend "Metaverse" search heat

Figure 3: Google Trend "Luna" incident discussion heat period

Figure 4: ETH price trend 2022

++Data Source: NFTGO, Google Trend++

The existing NFT market is concentrated in categories such as PFP avatars, artworks, and collectibles, primarily around IP as the main value, accounting for over 70% of the current market capitalization according to NFTGO (Figure 5). Aside from a few leading artists or top new web3 IPs like BAYC and Azuki, most PFP avatar NFTs lack narrative depth, and project teams have limited payout capabilities. Holders typically adopt a strategy of low-price buying through whitelists, followed by quick selling after short-term price increases, leading to a market filled with financial speculation, which is detrimental to the medium- to long-term development of the industry.

In addition to the limited utility of NFTs, the overall decline in the crypto market has also had a significant impact on NFT liquidity. Taking the top 3 most discussed NFTs, BAYC (Bored Ape Yacht Club) as an example, as of December 25, 2022, 10,000 NFTs were held by 6,193 owners, with a floor price of 69.89 ETH and a market cap of 824,580 ETH, but the daily trading volume was less than 20.

Figure 5: Number of different NFT types (2022) Source: NFTGO

Figure 6: NFT trading volume on different chains (2022)

Data Source

From the initial concept proposed in 2017 to the prosperous explosion in 2021, the core essence remains the financial attributes of crypto culture driving the momentum. The difference is that new NFT projects are increasingly focusing on returning to intrinsic value, hoping to achieve a "de-anchoring" of pure financial attributes. However, this point itself faces enormous internal and external resistance:

Internal to the industry:

• The trend of multi-chain is basically deterministic; how single-chain NFTs can cross and reach all users remains a technical issue. DID may be one of the solutions, but it requires richer protocol layer innovations, consensus, and technical implementation.
• Addressing security issues. At the asset level, whether FT or NFT, countless asset theft incidents have occurred due to contract vulnerabilities, phishing, wallet private keys, authorizations, intrusions, etc.
• Regulatory compliance issues. Starting from Luna and FTT, the ensuing Genesis, Grayscale, Three Arrows, etc., involved a large amount of user assets, leading to a fundamental trust crisis and regulatory issues. Internally, this will trigger new technological creations, including wallet technology, contracts, and EIPs.

NFTs breaking out of the predicament will be accompanied by the prosperity of the web3 industry, with more on-chain projects moving offline and traditional web2 applications gradually joining the web3 capabilities. Innovations at the application level will precede regulation and financial compliance, which aligns well with the development trajectory of innovation in the traditional world.

2. The Web3 entertainment industry in the Asia-Pacific region is highly likely to become the starting point for the next bull market.

First, from the macro historical development cycle, the entertainment and idol industry typically flourishes in reverse after financial crises.

Taking South Korea as an example, after three financial crises, the era welcomed the upgraded development of Korean Wave culture. Over the past decade, K-Pop has integrated its characteristics with various music forms such as Hip-Hop, R&B, Trap, and Jazz from the West, not only forming a globally popular K-Pop style but also becoming a cultural symbol sought after by young people.

Second, from the perspective of global communication channels and media carriers, the Southeast Asian market, with its active social media and high-density young population, holds enormous potential.

The limitations of traditional television channels have compressed the space for idols to showcase and develop, but with the development of internet social media, the explosion of short videos, graphics, and original IP content carriers has provided fans with more opportunities for interaction and secondary creation with idols. Around Twitter and YouTube, contemporary idols represented by BTS and BLACKPINK actively communicate with global fans, making fandom gradually a lifestyle for young people and sparking an idol economy worth over billions of dollars worldwide.

Taking BTS (Bangtan Sonyeondan) as an example, from the distribution of YouTube playback data over the past 12 months, fans are spread globally, with high-density population cities such as New Delhi, Bangkok, Jakarta, and Kuala Lumpur contributing to some of the highest playback volumes worldwide. The first-generation girl group idol pioneer, the 48 series, has been actively laying out in Pan-Asia-Pacific countries and regions since 2011, with BNK (Thailand) debuting in 2017 and MNL48 (Philippines) established in 2018.

YouTube's Music Charts & Insights for BTS playback data for the past 12 months (screenshot date: December 20, 2022)

Pan-AKB48 (JKT48, MNL48, BNK48)

Third, topics related to pan-entertainment inherently carry high public discussion heat, which is key to breaking through the circle.

From the characteristics of NFTs, unlike the pure financial trading attributes of tokens, they focus more on granting ownership of digital assets to holders, with stronger playability and incentives for co-creation, thus rapidly entering the mainstream context in fields where creators are active, such as art, music, and culture, driving a surge of projects in the "creator economy" and "fan economy," such as Audius, Royal, Soundxyz in the music field, and AsynArt in the generative art field.

The fan base in the entertainment industry inherently possesses strong creative abilities. In Web3, they may also act as partial owners of an IP, directly interacting with their favorite idols in a more equal manner, enhancing the incentive effect. The "entertainment idol economy" combined with the "consumption as investment" model of web3 tokens is likely to attract a large influx of web2 users.

The left image is Google Trend Data: Over the past year, internet users' interest in NFTs has surpassed their interest in cryptocurrencies;

The right image shows an overview of music NFT projects that surged from 2021 to 2022.

Compared to the DAU of web2 internet products, web3 remains a relatively niche market. According to a report by Crypto.com, the global population of crypto assets increased by 178% in 2021, rising from 106 million to 295 million, and it is expected that by the end of 2022, the number of crypto asset users will exceed 1 billion. From the perspective of user education costs, star artists, as major traffic holders in the web2 sphere, can quickly bring discussion to the industry and fan circles. Looking back at 2021 to 2022, whether in the European and American markets or the Asia-Pacific region, a significant portion of public user education about web3 has been completed by celebrities, among which the most well-known in the Chinese-speaking area are Jay Chou, NBA superstar Stephen Curry, and recently, Stephen Chow.

Fourth, the internet-based gameplay and community-driven power of Korean entertainment are highly similar to NFT operational thinking, while NFTs also add new commercial possibilities. The web3 + pan-entertainment market has immense growth potential.

1) Building brand narratives and community consensus

From BAYC, BAKC, MAYC to Otherside Metaverse, NFT transforms the "narrative of crypto cultural dreams" into digital assets with IP value.

EXO and BTS revolve around youth dreams, becoming global K-Pop cultural IP icons.

2) Fan support culture and decentralized organizations (DAOs)

Both exhibit distributed, specialized, and self-organizing characteristics.

Fan clubs are more connected due to emotional value, while communities have deeper value binding around on-chain identities based on consensus.

• Support culture: A spontaneous organization centered around "fans/fan clubs" localized and segmented for promoting artists. Fan operations have developed based on the evolution of fan culture, transitioning from rough to refined and specialized, with fans gradually evolving from followers to builders of idol growth.

Source: Yi En "New Insights into Fan Circles and Advanced Fan Operations"

• Web3 community: Created and owned by users, usually using NFTs or Tokens as proof of users' on-chain identities, with community members having different identity certifications based on their roles. Social-oriented DAO organizations often focus more on interest and value socialization, spontaneously forming different community groups to share views and hold social events; becoming a member of a DAO provides opportunities to participate in activities organized by the community and discuss topics of interest, such as multiple sub-channels in Discord where MODs (similar to forum moderators) manage and self-organize operations.

Image Source: “The Development and Future of Decentralized Autonomous Organizations (DAOs)”

3) Web3's technological product innovations bring more commercial space imagination and possibilities to the pan-entertainment industry.

Web3 enables business models centered around identity, ownership, and utility, adopting a De-Collab (decentralized collaboration model) business model, where the community participates together for mutual benefit.

Taking blue-chip projects like BAYC, CryptoPunk, and Azuki as examples, various innovative business plays have emerged from community participation or targeted community marketing.

3. VEGA: Making All Entertainment Valuable

VEGA revolves around the narrative of IdolSchool, allowing NFT holders to become the founders of the academy, thereby establishing long-lasting connections and bindings around the "alumni" consensus.

With "Talent Discovery" as one of the main gameplay elements, it upgrades the community and social gameplay of traditional entertainment fan clubs, keeping users continuously active and providing actual utility, thus promoting the long-term sustainable development of the token economy.

1. Project Concept: VegaIdol School------A decentralized idol training academy in Web3, where you meet new generation idols with high looks, high quality, and high talent.

2. Business Model: Redefining Entertainment 3.0 around discovery, investment, and consumption, allowing fans and new generation idols to grow together and share profits.

3. Project Development Roadmap

References:

1. How the Bored Ape Yacht Club Became The Most Successful NFT Brand

https://bettermarketing.pub/how-the-bored-ape-yacht-club-became-the-most-successful-nft-brand-5158a80f1bd9

2. Stories, Scarcity and Mimetic Desire

https://thecontrol.co/stories-scarcity-and-mimetic-desire-c4a344fa74e1

3. Tianfeng Securities "2021 NFT Industry Observation Report"

https://pdf.dfcfw.com/pdf/H3AP2021102215242587131.pdf?1634913595000.pdf

4. How the BTS Universe Successfully Engages Thousands of Fans https://medium.com/bangtan-journal/how-the-bts-universe-successfully-engages-thousands-of-fans-78152ad8338f
5. IP Analysis I BTS: How Enterprises and Users Achieve Symbiosis? (Product Edition)
6. Debuting with a "Dirt Spoon," How Did BTS Become Popular in Europe and America?
7. The Development History of BTS Wikipedia
8. Three Major Blue-Chip NFT Bear Market Financing, Who Can Survive the Winter? - Foresight News