Why NFTs Will Eat Hollywood (and maybe the World…)
Note: Data in this section last updated May 28th, 2022
What is Disruption?
The concept of “disruption” is overused and often misunderstood — many writers, consultants and researchers use the word to refer to any situation where a new player enters a market and starts to displace incumbents.
But the academic theory is much more nuanced — disruptive technology isn’t necessarily “better” (in fact, it’s often worse), it’s just so fundamentally different from the status quo that it can’t be replicated by incumbents or competitors. This gives it the ability to gain a foothold in an industry and, as technology improves, gradually eviscerate the market.
For a real-world example, we need to look no further than AT&T — one of the original disruptors.
In the late 1800s, Western Union dominated communications with a huge infrastructure of network cables and a massive consumer base. Although early telephones were largely inferior to the telegraph because their signals only traveled a few miles, the technology was much cheaper for short-distance communication and was therefore rapidly adopted by local businesses.
In a textbook case of disruption theory, Western Union couldn’t react because serving these local businesses would be unprofitable. This gave AT&T the niche they needed — as telephone technology gradually improved they were able to continue to take share from Western Union, eventually rendering the incumbent all but obsolete.
Why Hollywood Won’t Survive
I believe that NFTs represent a classic case of disruptive innovation and have the potential to change our lives in ways we can’t even imagine.
Like most disruptors, they definitely have a ton of problems today – such as high fees, rampant fraud and theft and a relatively poor user experience. But they also offer one advantage that traditional entertainment industry simply cannot match – true ownership of content. This will yield several benefits to artists and consumers, including:
Unparalleled economics: The almost total elimination of intermediaries such as record labels, film and TV studios, game developers, distribution platforms, etc… allow NFTs to offer artists rates an order of magnitude over what they’re getting now. They also, for the first time ever, provide a realistic and repeatable way for consumers to profit off their data and digital assets.
Unprecedented Customer Experience: NFTs offer the promise of a digital world that’s fully interoperable, free of censorship and – most importantly – democratic. And while this compelling on its face, I believe that like smart phones, ATMs or the internet, we won’t truly understand the utility NFTs can bring to our lives until we’ve experienced them at scale.
New Sources of Innovation: Not only are NFTs unburdened by regulation, knowledge is freely shared and there’s an ability to crowdsource the ideas of millions of users to rapidly create and test better products. As such, it’s not inconceivable that NFTs could catalyze a user-driven cultural “renaissance”.
Perhaps most importantly, Hollywood can’t replicate NFTs without cannibalizing itself, and regulators can’t stop their progress due to their decentralized nature.
As such, like the telegraph industry in the 1800s, I simply don’t see how traditional entertainment can survive.
Could NFTs Replace the Physical Asset Market?
While the thought of the digital asset market eclipsing the physical one may seem ridiculous at first glance, such a feat is not without precedent as:
Online shopping is nearly as big as the physical retail market
Digital entertainment is almost as large as the traditional entertainment market
Online advertising is expected to soon eclipse offline advertising
As the NFT market matures, it too will likely begin to take share. While how much is still up for debate, the fact that the digital asset market is 0.005% (1 / 20,000th) of the physical asset market means that there’s a lot of room to grow!
Indeed, the NFT market could grow 10x from here (to $250B) and still represent less than a quarter of the crypto space…
…it could grow 100x from here (to $2.5T) and be roughly equivalent to the global entertainment market…
…it could grow 1,000x from here (to $25T) and be roughly equivalent to the global technology market…
…it could even grow 10,000x from here ($250T) and be roughly 50% of the physical asset market today.
Wherever this thing ends up, it’s important to watch as it has the potential to be both an existential threat to traditional entertainment and technology and a road to almost unlimited potential for investors.
Last updated
