Music and media giant Warner Music Group reportedly joined in an $11.2 million investment in Dapper Labs, the creator behind the virally popular distributed ledger blockchain game CryptoKitties.
According to a report from Forbes today, the funding round was led by Andreessen Horowitz and joined by Digital Currency Group, Union Square Ventures, Venrock and others.
The objective of the funding will be to support the launch of a newly created blockchain platform designed to deliver high transaction volumes named Flow.
Flow is intended to be developer-friendly and provide the foundation for a distributed application ecosystem for gaming, collectibles and financial tokens. The blockchain is explicitly designed to support gaming and is claimed to provide a larger throughput than Ethereum – the blockchain upon which CryptoKitties is built.
“After almost two years of research, we’re excited to share Flow with the world,” said Roham Gharegozlou, chief executive of Dapper Labs. “Flow is a blockchain built from the ground up to support high-performance ecosystems of apps and games without compromising decentralization. Bitcoin and Ethereum show how crypto can make the world of finance more open and transparent; Flow will do the same for consumers of entertainment and culture.”
Thus, enters Warner Music’s interest in Flow. Using the blockchain architecture the company would be able to mint tokens on the blockchain that could be used to purchase music, provide rewards to consumers and deliver limited-edition digital memorabilia.
“Warner Music is always searching for new opportunities for our artists and has dedicated itself to exploring emerging technologies to enable these,” said Jeff Bronikowski, senior vice president of Global Digital Business Development at Warner Music.
This is the first time Warner Music has participated in any investment involving blockchain technology.
Last year, Warner Music generated $4 billion in revenue from projects including partnerships with both Facebook and Instagram. By using Flow’s architecture, it will become possible for Warner to use its already broad audience and distribution to add digital collectables to their virtual shelves.
For example, it would be possible to mint, publish and distribute provably-unique assets such as digital album art signed by Cardi B – an American hip hop artist. Made possible by what are known as non-fungible tokens, these sorts of items could be treated as unique digital objects, traded between collectors and therefore accrue real value.
“When I was in college, you’d walk into someone’s room and you’d see 200 CDs and you would say, ‘That guy’s a big music fan.’ And now you just see somebody with a music subscription service and some playlists,” said Bronikowski. “We think that as people spend more time crafting their persona in the digital realm, digital goods and collectibles is a great way to express that fandom.”
The concept of uniquely tradable digital objects has been given proof of concept by Dapper Labs’ CryptoKitties, which launched in 2017.
CryptoKitties are breedable virtual pets, which are unique and represented by non-fungible tokens. As a result, the average CryptoKitty sells for about $2.05. Although, in May 2018 a CryptoKitty named “Celestial Cyber Dimension” sold at auction for over $140,000.
According to market data from NonFungible.com, CryptoKitties averages a total weekly volume of approximately $12,500. The entire blockchain game is estimated to have a market cap of $5.3 million.
In addition to this investment, Dapper Labs also announced partnerships with other entertainment publishers to design enterprise-scale use cases. Ubisoft, best known for developing games such as “Far Cry” “Just Dance,” and “Assassins Creed,” has taken an advisory position on Flow.
“When it comes to new technologies and innovation, Ubisoft has always favored a collaborative approach,” said Nicolas Pouard, blockchain initiative director at Ubisoft’s Strategic Innovation Lab. “We are eager to learn more from Dapper Labs, some of the most talented pioneers in the field of blockchain-gaming, while bringing our own experience of the gaming industry and triple-A development.”
Video games represent an even broader industry where uniquely tradable virtual items are part of vast player economies.
Games such as Epic Games Inc.’s “Fortnite” has seen more than 250 million users, many buying and trading virtual items. Gaming market research company SuperData estimated that “Fortnite” alone raised over $2.4 billion in 2018 from sales of virtual items in the game, declaring it “the most annual revenue of any game in history.”
Virtual items in Blizzard Entertainment Inc.’s “World of Warcraft” have seen huge popularity – such as the Celestial Steed, a $25 item (a star-studded ridable horse) that sold over 140,000 copies within three hours, with an estimated revenue exceeding $3.5 million.
“We believe that crypto is the future of the gaming industry,” said Yat Siu, co-founder and chairman of Animoca Brands, one of the first game companies to build on Flow. “In order to support the scale expected from games that reach and are adopted by mainstream consumers, we need a strong platform that takes into account the needs of developers and the superpowers of decentralized entertainment.”
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