It's good news for entertainment giants and video game producers — but bad news for the physical stores that sell this content.
Citi has revealed which companies have the potential to benefit most from non-fungible tokens — as well as those who could see their profitability suffer as these digital assets become more prolific.
In a note, its analysts forecast “significant disruption” in sectors with exposure to intellectual property, licensing and merchandise. That practically encompasses the entire creative sector — meaning that video game makers and film producers could benefit the most.
Disney and Electronic Arts were among the brands identified as having the potential to experience an upside from NFTs — along with World Wrestling Entertainment, ViacomCBS and Discovery Inc.
A number of brands — including Fox Entertainment — have already begun to explore how NFTs could introduce new revenue streams. Although these digital assets have mainly focused on pieces of artwork so far, it’s very possible that tokenized versions of TV characters, concert tickets and memorable movie moments could soon become commonplace.
On the Other Hand…
Of course, Citi’s analysis will only prove correct if such companies seize the opportunity and start creating NFTs. The technology remains at a nascent stage — however, there already have been a number of successes. One that springs to mind is NBA Top Shot, built in collaboration with Dapper Labs, which has become one of the bestselling NFT collections of all time.
Its report warned that the advent of NFTs could actively hurt some big brands, too — primarily physical stores that sell video games. (GameStop was already struggling before its stock became a pet project of the WallStreetBets group.)
Streaming platforms and old-fashioned music labels were also named as the companies that may be unable to capitalize on NFTs — especially if content creators end up having a more direct relationship with their customers.
Citi’s Thomas Singlehurst wrote:
“To be clear, in each case the rise of NFTs is unlikely to be terminal for any of these players, but to the extent that there is pressure on take rates as content ecosystems become more decentralized/democratized, it potentially heralds (relative) pressure on revenues and returns.”