Exploring transformation of value in the digital age
By Michael J. Casey, chief content officer
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The news of the week was undoubtedly the New York District Court’s ruling on the Securities and Exchange Commission’s long-running lawsuit against crypto payments company Ripple. In declaring that exchange-based secondary market sales of Ripple’s XRP were not investment contracts – even as the judge ruled that Ripple’s primary sales of XRP were in breach of securities laws – the decision breathed life into crypto markets as it appeared to greenlight various tokens to trade on exchanges that had become wary of listing them in the wake of the SEC’s June lawsuit against Coinbase. The entire crypto world was suddenly energized.
This week’s column, however, is drawn from news outside of this navel-gazing industry. I look at this week’s Hollywood actors’ strike to make the case that it proves the failure of Web2 streaming as a business model and should open the door to Web3 alternatives.
In this week’s episode of the Money Reimagined podcast, my co-host Sheila Warren and I talk to Noelle Acheson, CoinDesk’s former head of research, now the author of the Crypto is Macro Now newsletter about the implications of BlackRock and other institutions nudging their way into the industry.
Have a listen after reading the newsletter.
Hollywood Strike Shows Need for Web3
(Alexi Rosenfeld/Getty Images)
This week’s strike by Hollywood actors, who have joined writers on a work stoppage, reflects a hard truth about the Web2 economy: the platform streaming industry’s economics don’t work.
It’s another reminder that everyone involved in creative production should now be looking at Web3 solutions, irrespective of ill-informed media commentary that has stripped the term of its mainstream appeal.
During the COVID pandemic, a battle for market share saw platforms like Netflix, Amazon Prime, Hulu and Disney Plus fork out big for all manner of content. Now, makers of feature films, TV series and documentaries are being repeatedly shown the door, which is why there’s no money to pay actors or writers.
In music streaming, it’s arguably worse. Spotify now completely dominates the market. Pandora, owned by Sirius XM, is a shadow of its former self, as is Rhapsody, which rebranded to Napster after it acquired the legendary file-sharing service’s name in 2016 and then was acquired by blockchain developer Algorand in 2022. Yet Spotify itself has never made a profit since its founding in 2009. Last year, it posted a $430 million loss, its third biggest ever.
If it’s not the platforms or the musicians, then, who are the winners? Maybe it’s the record labels, which a decade ago infamously inked multibillion deals with Spotify and other streaming platforms to license their music. (Spotify recently said total payments it has made on royalties approach $40 billion.)
By keeping so much for themselves and leaving musicians with the dregs – the labels could be killing their own business. New musicians are abandoning them. To make ends meet, they’re working in content marketing, or producing soundtracks for online games or finding other ways to make money that don’t entail entering into a bondage relationship with a label and Spotify.
Many are emphasizing live shows, where they can sell merchandise, get people on their mailing lists and, if their audience members still have the players, directly sell them CDs. But, unless they’re Taylor Swift, live performances leave artists dependent on another monopolistic intermediary: Live Nation Entertainment, the ugly offspring of the Live Nation and Ticketmaster merger.
A new way
Musicians, filmmakers and other creators of content must find a way to bypass these giant, rent-seeking gatekeepers. And, as true believers in digital assets have been saying for some time, Web3 offers them the path to getting there.
For all the hype, bubbles and burst hopes of the non-fungible token (NFT) market these past three years, this innovation contains an undeniable breakthrough: the creation of unique, one-off digital assets, a construct that was impossible in the everything-can-be-replicated internet that preceded it. NFTs are a building block for a more creator-centric system, since they recreate, in the digital realm, the direct peer-to-peer ownership relationship that fans and performers used to have with LPs, books, films and so forth.
Now that we’ve gotten beyond the speculative madness around collectible digital rocks, wildly inflated art and monkey pics, a new breed of innovators is directly tying NFTs and related technology to regular content production. The strategies are not about pumping a limited number of “rare” NFTs in the hope they’ll “moon,” but rather using these unique assets as an access key for fans to unlock added value from their engagement with the content. It’s about connecting creators with their audience, adding value, fostering a sense of shared interest and ownership.
People will debate for some time the implications of Thursday’s split ruling by the U.S. District Court of the Southern District of New York, which declared that Ripple Labs breached securities laws in selling XRP tokens to institutions but that secondary market sales of those tokens on exchanges are not investment contracts. However, the market’s judgment was pretty clear: many traders focused on the second half of the ruling, concluding that exchanges would now be free to list and trade not only XRP but also various other “altcoin” tokens, many of which were caught up in a recent Securities and Exchange lawsuit against Coinbase.
That Coinbase case had had the effect of boosting Bitcoin dominance, a measure of the largest cryptocurrency’s proportional representation of the total market capitalization of the industry, throughout June. Thursday’s news has reversed some of that trend, as this chart from my colleague Sage Young shows.
The Conversation: XRP Army Victory
Crypto Twitter also took the view that the Ripple ruling was positive, not only for XRP and other altcoins, but also for the rowdy group of Ripple fanatics known as the XRP Army. Here’s an example of the many memes generated about the group’s supposed mood on Thursday.
Relevant Reads: Ripple Day in Court
Despite the ambiguity, the Ripple ruling was a very big deal, as it was the first judgment to weigh in on the giant question of whether cryptocurrencies are to be treated as securities under the United States’ 90-year-old securities laws. CoinDesk was all over the story.
The response from U.S. exchanges was remarkably swift, with Coinbase and others immediately moving to relist XRP tokens following the ruling. Aoyon Ashraf reported.
Meanwhile, in another Manhattan courthouse, the SEC’s lawsuit against Coinbase got a hearing, into which the Ripple ruling loomed large as a factor. Tracy Wang reported.
