Spotify, Universal, Meta, Coinbase, Twitter, Ebay, GameStop etc.: the list of world famous companies working on NFT business models is huge. New marketplaces, some with a special industry or theme focus, such as GameStop, are driving significant infrastructure expansion. On the other hand, JPEG images without context, story or strong branding hardly stand a chance on marketplaces like OpenSea.
Marketplaces as a basis
A well-developed NFT marketplace infrastructure alone is of little use if the virtual goods to be purchased in the marketplaces have no relevant use case. The largest social media platforms, Meta and Twitter, come into play precisely on this point or on the other. Assuming there’s enough supply, nothing stands in the way of a big NFT surge, right?
NFT images are not enough
The most important question is: Is there sufficient demand for the created supply? After all, it has collapsed sharply in recent weeks – trading volume on the largest NFT marketplace OpenSea is down 76 percent since the start of the year. Profile pictures alone should not be enough to justify the high investments and sometimes high ratings of individual platforms like OpenSea.
The hope of the NFT sector therefore lies mainly in the differentiation of individual NFT sectors that offer more than just hip pictures. So success depends on communities like the Bored Ape Yacht Club (BAYC), game developers like Activision, blockchain games like Axie Infinity, metaverse projects like The Sandbox and Decentraland, or art and lifestyle platforms like Spotify away. If they manage to generate new demand through new innovations in the coming months, sustainable value creation could work. If not, there is the risk of low transaction NFT platforms in which the companies and investors behind them quickly lose interest.
Music: the most underrated NFT sector
For the sector-specific NFT branch to work, an ecosystem with the most relevant players in the relevant industry is needed. Most importantly, the use cases must be easy to implement and scale quickly across the board. These terms are more common in the music industry than in other NFT industries. The world’s largest record label, Universal Music, and the world’s largest music streaming platform, Spotify, both invest significant time and money in NFT business models. Other music players such as Warner Music or file sharing platform Limewire are also planning to enter the NFT sector, some with their own NFT marketplace.
At the same time, there is hardly an industry with more reach in social media. After all, the biggest Instagram accounts include musicians like Beyoncé, Ariana Grande, and Taylor Swift, all of whom have between 200 and 300 million followers on the platform. Their NFT promotion could very quickly create high demand, which would be unthinkable for Metaverse NFTs, for example.
Finally, the music industry offers easy ways to generate NFT use cases. In addition to the collector aspect, specific services such as access to exclusive (online) concerts, exclusive chat groups or the development of entire communities can also lead to enormous added value. There are no major hurdles for the music sector, neither technological nor regulatory. Except for the prospect of also regulating music licensing revenue through NFTs, which should be even more exciting for some artists than the mentioned fan revenue.
The aspects that argue for NFT’s rapid establishment in the music industry also speak against NFTs in the Metaverse. While almost everyone consumes music, hardly anyone spends time in the Metaverse. The Sandbox has only 30,000 active users per month. The Metaverse blockchain is the industry leader with a market cap of approximately $3.5 billion.
This has nothing to do with widespread use. On the contrary, with an elitist image and marketing platform on which companies build useless landmarks only to publish a press release that they too are now in the Metaverse.
In the long term, the potential of the Metaverse is undoubtedly gigantic, but in the short to medium term it is overstated. One still wonders why one would want to spend an extended amount of time in the current metaverses? Except for rounds of testing and NFT speculation.
It lacks basic ecosystem aspects and usability. So if you rely on real and sustainable use cases, you’re better off with the relatively simple music and lifestyle industry. The announcement that the developers behind the Bored Ape Yacht Club also want to build a Metaverse doesn’t make these prospects any better.
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