The Next Level of the Entertainment Industry: Could Web3 Be the Answer? – Tiger Research

# Web3 Technology Reshapes Entertainment Industry, Transforming Fans into Participants and Creating New Value Opportunities Web3 technology is poised to revolutionize the entertainment industry by transforming fans from mere consumers into active participants, thereby creating new value opportunities. However, its widespread adoption faces significant hurdles due to technical barriers and market volatility, necessitating a thorough examination of practical applications. Companies like Modhaus, Yoake, and Alt.Town are pioneering the integration of Web3 technology to enhance fan engagement and innovate industry structures. By incorporating on-chain voting, tokenomics, and artist tokenization, these entities aim to foster a more sustainable ecosystem by involving fans more actively in the decision-making process. These initiatives are reshaping the relationship between fans and artists, potentially expanding the market and enhancing predictability. However, the investment risks and potential market distortions associated with speculation call for a balanced approach. # Introduction The entertainment industry is witnessing various attempts to apply Web3 technology, signifying not just a technical experiment but a paradigm shift. Traditionally, the industry operated on a support-centric, passive model. Now, Web3 technology is enabling a transition to a more participation-oriented, active structure. However, integrating Web3 technology into the industry is not without challenges. High technical barriers make fan participation difficult, limiting broader adoption. Additionally, the high volatility and negative perception of cryptocurrencies contribute to fan apprehensions and resistance, presenting multiple obstacles. Therefore, a detailed review of Web3 technology's application in the entertainment industry is essential. Further, a fundamental exploration of how Web3 can create tangible value in the industry is also necessary. This report examines recent Web3 applications in the entertainment sector to identify future development directions, with a particular focus on fan-driven popular entertainment. # Web3-Based Entertainment Projects ## Modhaus: Revisiting the Essence of the Industry Modhaus is a South Korean Web3-based entertainment agency that planned and produced the country's first fan-participating artist groups, TripleS and ARTMS. They have established systems that actively leverage Web3 technology, allowing fans to participate directly in artists' activities. Fans can earn tokens through community activities and NFT photocard purchases and use these tokens to influence critical decisions like unit composition and concept selection. TripleS and ARTMS have amassed a substantial fan base over about two years of consistent activity and have been highlighted by Billboard as K-pop albums to watch in 2024. The key to their success lies in staying true to the essence of the entertainment industry—content competitiveness and fan experience. Unlike other Web3 projects that focus on short-term, speculative interest, Modhaus has gained mainstream acceptance by concentrating on high-quality content production and genuine fan communication. Web3 technology played a significant role in their success, particularly for projects like ARTMS. Given the past incidents of vote manipulation and settlement issues in the Korean entertainment industry, fans yearned for greater transparency. Web3 technology provided a suitable tool to resolve these issues, allowing transparent recording of artist-specific NFT sales revenue, which builds trust between artists and fans. Additionally, Web3 technology significantly enhanced global fan accessibility, evident from TripleS and ARTMS's prominent presence in markets like North America. Token-based systems have facilitated the expansion of global fan economies, allowing fans worldwide to participate equally in governance. The introduction of digital goods has also reduced time and cost burdens for international fans, who previously faced high shipping costs and unnecessary expenses to purchase albums or merchandise. In conclusion, the success of Modhaus stems from the agency and artists' relentless efforts, popular musicality, and strategic use of Web3 technology. Notably, they did not foreground technology like Web3-native projects but naturally integrated it into the mainstream music industry, setting them apart as a prime example of successful Web3 adoption in the entertainment sector. ## Yoake: Introducing a New Paradigm in Fan Economy Yoake is a Japanese blockchain-based entertainment fandom platform led by legendary producer Yasushi Akimoto, known for producing numerous artist groups, including AKB48. Developed in collaboration with Startale, key partner of Sonyum, Yoake released a beta app on the Sonyum mainnet. Fans can participate in activities like setlist selection and best dresser voting through on-chain voting, attracting over 60,000 new users. Yoake's core objective is to create an ecosystem where fans are transparently rewarded for their contributions. The recent trend in the entertainment industry sees fans becoming active participants, creating fan art and videos and promoting artists. However, such voluntary activities were neither recorded nor rewarded adequately. Yoake aims to rectify this by transparently logging fan activities on the blockchain and offering fair rewards, enabling fans to support artists while gaining recognition and economic benefits. Furthermore, Yoake seeks to integrate fragmented content within the entertainment industry. Currently, fans navigate multiple platforms like TikTok, YouTube, and Weverse to consume content. Yoake plans to consolidate these experiences into "Yoake Space," providing fans with a more accessible platform for enjoying and participating in fandom activities while recognizing and rewarding their contributions. Yoake also plans to issue $YOAKE tokens, performing two key functions. Firstly, these tokens serve as 'currency' for streaming, purchasing merchandise, and ticketing on the platform. Secondly, they act as a reward mechanism, distributing income fairly based on fans' on-chain contributions. Unlike Modhaus, these tokens are transferable and tradable, allowing fans to monetize them or use DeFi services, potentially transforming the industry from a one-directional consumption model to a value-creation and sharing model. This approach is expected to resemble YouTube's revolution of the creator economy by sharing ad revenue with creators, leading to new content forms and consumer demographics that catalyzed market growth. Yoake aims to create a similar virtuous cycle where fans earn income from producing and consuming content, subsequently reinvesting in the ecosystem and presenting a new paradigm in the entertainment industry. ## Alt.Town: A Model for Tokenizing Artist Value Alt.Town offers a platform that tokenizes the value of virtual celebrities (artists) for trading. Unlike other Web3 fandom platforms that present token models centered around rewards for fan activities and contributions, Alt.Town distinguishes itself by tokenizing the unique value of an artist's popularity and growth potential. Each artist on Alt.Town issues a unique token called 'DNA,' enabling fans and the community to directly participate in the artist's development. The value of DNA tokens is determined by market demand and supply, with plans to implement an evaluation system using external data like popularity, activity, and fanbase size for more objective criteria. This model is expected to complement the entertainment industry's traditional funding structures. Moving away from a system dominated by major agencies and investors, Alt.Town establishes a decentralized support system involving fans and the community, diversifying the industry. This approach opens new funding channels for small and mid-sized agencies and independent artists, fostering a more efficient environment for content creation and promotion through community-based support. # The Transformative Potential of Web3 in the Entertainment Industry Web3 technology's integration into the entertainment industry, as illustrated by the aforementioned examples, is expected to bring significant changes to industry operations along three main trajectories. ## From Hit-Driven Industry to Predictable Industry The entertainment industry has traditionally relied on a few hit successes, making it difficult to predict mainstream popularity and heavily influenced by rapidly changing trends. Consequently, content creation and investment decisions come with high uncertainty, compounded by issues like chart and album sales manipulation prevalent in the K-pop industry, which distorts the market and complicates objective decision-making. Blockchain technology addresses these issues with its potential to transparently record and utilize all data generated throughout content creation, distribution, and consumption processes, enhancing predictability across the industry. By identifying who the actual fans and consumers are and understanding their behaviors and preferences in real-time, a reliable data foundation can be established, facilitating clear decision-making, and eliminating market bubbles and distorted information, paving the way for a more sound and sustainable growth structure in the entertainment industry. ## Expanding Diversity Through Decentralized Fundraising Models Traditionally, entertainment industry funding is led by a few major agencies and investors with significant capital. The idol industry, in particular, necessitates considerable expenses from debut to activity, reinforcing a market structure dominated by large agencies. Web3 technology is changing funding methods within the industry. DAO-style fundraising allows consumers to expand their roles from mere fans to active investors participating in project decision-making. For instance, the Nippon Idol 3.0 project introduces a fundraising model using Initial Exchange Offerings (IEOs). This enables fans to gain governance rights and economic rewards, realizing projects without relying heavily on institutional investments. This fundraising approach offers new opportunities to small and mid-sized agencies and independent artists, playing a crucial role in expanding market diversity. Even projects with uncertain commercial success but strong niche support can secure funding, ultimately promoting innovation in the industry akin to how traditional crowdfunding has provided opportunities for diverse creative projects, leading to industry-wide innovation. ## The Expansion of the Fan Economy and the Flywheel Effect While the entertainment industry has grown based on fandoms, fans were primarily limited to content consumption. Despite significant fan contributions, existing business models did not adequately recognize their economic value. Web3 technology fundamentally changes this structure by facilitating the creation of economic value through fan activities, which can then be reinvested in the ecosystem. Activities like fan art creation, community management, and content curation, previously unofficial or difficult to monetize, can now be rewarded through token economies. As a result, fans' roles expand from mere consumers to active ecosystem participants. Increased participation strengthens fandoms and creates a virtuous cycle (flywheel effect) where generated revenue is reinvested into content creation and artist development. This transformation is expected to foster a closer relationship between fans and artists and support a more sustainable economic structure within the entertainment industry. # Conclusion While Web3 technology is gradually transforming the entertainment industry, it remains in its early stages. Current user-perceived changes are limited to functional improvements like on-chain voting. However, as fan participation and economic reward models become more refined, long-term structural changes in the industry and a redefined perception of fan-artist relationships are possible. Web3 technology will not replace all aspects of the entertainment industry. Direct communication with fans, content quality, and mainstream acceptance will remain crucial. However, Web3 can complement these existing elements by promoting market transparency and healthy growth. Moreover, by connecting global fandoms through open infrastructure, Web3 can enhance the industry's scalability beyond regional limitations. Rather than creating innovation from scratch (0 to 1), Web3 technology will play a crucial role in the industry's growth from 1 to 10. It will not fundamentally alter the industry's framework but will add new possibilities and enhance scalability. However, the adoption of Web3 technology should consider potential risks. The influx of short-term profit-seeking investors could overshadow the actual value of fandoms, focusing on price gains. Distorted governance structures due to capital power may increase fan fatigue and undermine market fairness. An overly competitive environment could also create a draining atmosphere for both artists and fans. Therefore, a balanced approach that minimizes these side effects while maintaining intrinsic value is essential when utilizing Web3 technology. This balance could help the entertainment industry build a more sustainable economic structure and foster innovative collaborative models between fans and artists. *The above article is an excerpt from "Can Web3 be the Answer for the Next Level in the Entertainment Industry?" by Tiger Research, a global Web3 specialist research institution, partnered with Block Media. The full report is available on the official website.