The Metaverse Big Bang: Preparing for the Internet's Evolutionary Leap

Content creation and distribution companies amp8211 including video gaming platforms film studios music labels event promoters and sports organizations amp8211 are eager to leverage the metaverse39s immersive qualities to connect with customers in entirely new ways All are at different points in their metaverse journeys some already operate in the metaverse while others are formulating their strategiesWill they find success in these new virtual worlds Several things must fall into place before the metaverse becomes as ubiquitous as today39s internet Content and distribution companies will be challenged to acquire the relevant technologies and skills while regulators must strike the right balance between allowing innovation and protecting consumer safety privacy and dataIn many respects video games are early metaverse prototypes After all gaming platforms are virtual worlds where players purchase accessories and use social features such as ingame chats Keeping audiences engaged for long sessions is a key metaverse goal and game publishers excel at this It39s little wonder that they are seen as a key starting point by companies that aren39t involved in that sector In fact many companies are already hosting events on game platforms like Roblox and Fortnite Others do so on virtual world platforms like the Sandbox and DecentralandYou don39t need to look far to find examples of how content creators and distributors have monetized popular brands franchises characters and stories across gaming platformsC21 Media noted several in a Jan 24 2022 article titled quotIs TV Ready to Venture Into the Metaversequot Among the examples cited Warner Bros partnered with Roblox to create a virtual movie launch for the musical film quotIn the Heightsquot British broadcast company ITV launched a playable version of its game show quotThe Voidquot inside Fortnite In late 2021 NBCUniversal debuted quotBravo Bazaarquot which lets users journey through virtual quotroomsquot based on Bravo39s shows and talent Disney launched its quotGolden Momentsquot collectible nonfungible tokens NFTs inspired by its Pixar Marvel and quotStar Warsquot titles which can be exchanged much like physical trading cardsAs the metaverse grows to encompass more ways to work play learn and transact gaming titles will become just one of many quotrealmsquot in the metaverse competing with a variety of destinations and activities Many nongaming businesses are expected to build their own branded metaverse destinations Think virtual theme parks sports stadiums or art exhibitions and museumsCreating metaverse equivalents will give people around the world a greater ability to consume entertainment and art Because there are virtually no constraints on event capacity or geography the number and types of events that can be held in the metaverse are limitlessIn the metaverse every virtual seat can be in the front row amp8211 with premium pricing Over the last two years music labels have teamed with Fortnite and Roblox to hold very successful virtual concerts that allow fans to interact with their favorite bands In the future soldout Broadway shows could be accessible to audiences around the worldAccordingly this increase in fan engagement could drive additional licensing and sponsorship opportunities along with incremental ad revenuesNFTs Drive RevenueNFTs provide one of the best opportunities for building recurring revenue streams for both creators and owners For instance a musician can sell a stake in a song to investors With a smart contract these investors will be compensated every time the song is played on a streaming service Smart contracts are programs that are stored on a blockchain and run when specific predetermined conditions are met So if one condition is met then another action automatically executesIn the playtoearn model if a video gamer creates an NFT character that someone else uses to earn crypto the original creator receives a portion of that revenueA handful of filmmakers are funding film projects with NFT token quotdropsquot releases Investors in those projects will share the film profits and they39ll receive certain perks like visiting the production set Two articles published last December report on this One in Forkast News discussed the strategy of quotThe Irishmanquot producer Niels Juul who hopes to make a film fully funded by NFTs And MailOnline released a story about producer Mike Sheen who39s worked with Martin Scorsese and reportedly secured backing for the first Hollywood movie funded entirely by NFTsThe moviebased NFT opportunities go beyond that For example a theme park could fund the creation of a ride or attraction by tying it to a popular film character Buyers of characterbased NFTs would have exclusive or preferential access to those attractionsGiven these possibilities content and distribution companies must develop and articulate an overarching metaverse vision They will need to ask themselves quotWho are our customers and what will they be doing in the metaverse What value proposition do we bring or plan to bring to our customers and how can we keep them engaged How will we differentiate ourselves from our competitorsquotCreator EconomyIn addition to offering content based on legacy franchises a mix of entirely new characters and stories will materialize in the metaverse That will require a significant skills upgrade for many companies We expect to see rising RampampD spending as they work to improve technology and operational capabilities However many will also find that tapping into the skills and competencies of partners in the consumer products retail and technology sectors can effectively complement their internal metaverse effortsBecause of this a creator economy will emerge Individual content creators such as musicians game developers and visual artists will have a greater incentive to monetize their intellectual property independently rather than through traditional content or distribution companiesThis will force such companies to reevaluate their value propositions to talent They should consider what they can offer newly empowered content creators beyond what they provide todayFor instance multiple video game companies already provide the ecosystem and tools for creators In the future these companies will need to enhance and streamline the endtoend development experience by improving their enablement toolkits amp8211 from game development to analytics to monetizationRecord labels can leverage their marketing muscle and industry relationships to help artists find new ways to connect with audiences and brands and create new revenue streamsPossible Friction PointsEveryone agrees there need to be rules around data gathering and use content moderation as well as physical and cyber safety in the metaverse However there39s considerable ambiguity about what those rules will look like and who will enforce them What is certain is that the metaverse is moving too quickly for regulators to keep upContent and distribution companies should not wait for regulators to develop effective policies related to governance data use security and content moderation By instituting effective measures now they will be in a better position to help shape industry dialogue going forwardThere are other challenges which relate to the current complexity and cost of NFTs They could be barriers to widespread adoption NFTs are complicated to buy and come with expensive feesAt the same time companies and brands will also need to consider which blockchain a particular activity is hosted on There are several commonly used blockchains amp8211 each with relative strengths and weakness related to transaction speed and costs ease of programming security and energy usage All of these factors will have an impact on the user experience and how a company transacts businessMany individuals and companies may be discouraged about the viability of these new asset classes given the recent volatility of the crypto and NFT markets However we are in the early stages of this latest technologydriven revolution While some will stay away because of disruptions and uncertainty the winners will be those who focus on the longterm structural implications and economic opportunitiesThe metaverse promises to transform the way we live work and play Yet there are technology and business hurdles to surmount before the metaverse becomes ubiquitous in our daily lives As the contours of the metaverse start to come into focus content creation and distribution companies must refocus their organizations and investments to be ready for this fully connected immersive 3D worldThe views expressed by the authors are not necessarily those of Ernst ampamp Young LLP or other members of the global EY organizationThis article was originally published in the SepOct issue of TFMScott Porter is the media and entertainment consulting services leader at Ernst ampamp Young LLP He can be reached at scottportereycom Adrian Ang and Rich Golik also at Ernst ampamp Young LLP contributed to the research and the article itself It39s based the study quotWhat39s Possible for the Gaming Industry in the Next Dimensionquot available at eycomClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillagecomMyersBizNet

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