Spotify, Universal, Meta, Coinbase, Twitter, Ebay, GameStop etc.: The list of world-renowned companies working on NFT business models is huge. New marketplaces, some with a special industry or topic focus, such as GameStop, ensure an important infrastructure expansion. JPEG thumbnails with no context, story, or strong branding have on marketplaces like OpenSea however, hardly a chance.
Marketplaces as a basis
A well-developed NFT marketplace infrastructure alone is of little use if the virtual goods to be purchased on the marketplaces have no relevant use case. The largest social media platforms, Meta and Twitter, come into play at precisely this point or at the other end. Assuming that there is enough supply, then nothing stands in the way of a big NFT wave, right?
NFT images are not enough
The most important question is: Is there a sufficiently large demand for the created offer. After all, this has plummeted in recent weeks – the trading volume on the largest NFT marketplace OpenSea has fallen 76 percent year-to-date. Profile pictures alone should not be enough to justify the high investments and sometimes high ratings of individual platforms such as OpenSea.
The hopes of the NFT sector are therefore primarily in the differentiation of individual NFT sectors that offer more than just hip little pictures. So success depends on communities like the Bored Ape Yacht Club (BAYC), gaming 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, then sustainable value creation could work. If not, there is a risk of low-transaction NFT platforms in which the companies and investors behind them will quickly lose interest.
Music: The most underrated NFT sector
In order for the sector-specific NFT establishment to work, an ecosystem with the most relevant players in the respective industry is needed. Above all, however, the use cases must be easy to implement and quickly scale across the board. These conditions are more likely to be found in the music sector than in other NFT sectors. 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 the 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 a high level of 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’s 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 technologically nor regulatory. Except for the prospect of also regulating music license income via NFTs, which for some artists should be even more exciting than the fan monetization mentioned.
The aspects that speak in favor of a rapid establishment of NFT 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 just 30,000 active users per month. The Metaverse blockchain is the leader in the industry with a market capitalization of around 3.5 billion US dollars.
This has nothing to do with widespread use. Rather, with an elitist image and marketing platform on which corporations build useless landmarks in order to then be able to publish a press release that they too are now in the Metaverse.
In the long term, the potential of the Metaverse may undoubtedly be gigantic, but in the short to medium term it is overestimated. One still asks oneself why one would want to spend a longer time in the current metaverses? Except for test rounds and NFT speculation.
It lacks basic ecosystem aspects and usability. So if you rely on real and sustainable use cases, you are better off with the comparatively simple music and lifestyle industry. The announcement that the developers behind the Bored Ape Yacht Club also want to build a Metaverse does not make these prospects any better.