Analysis

Music Ally Startup Files: Fanaply’s limited-edition digital collectibles


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In November 2019, WMG’s head of innovation, recorded music, Scott Cohen told Music Ally that he was interested in the ways that blockchain technology could create new value for the industry. One example: digitally-scarce collectibles that fans would buy and show off.

Fast-forward six months, and one of the startups in the latest cohort for the Techstars Music accelerator, Fanaply, is working on exactly that.

At a time when tips economies are creeping onto the music industry’s radar again, the company’s pitch is different: why ask fans to tip to show their devotion, when they could buy an exclusive, limited-edition virtual item that displays their fandom to the world?

What is Fanaply and its collectibles?

Co-founder Grant Dexter explains why Fanaply has chosen a different path to tips. “Fans want to connect and show off their tribes – we think this is a much better idea than tipping,” he says.

Fanaply does that by creating digital products and engagement tools for music, sports and entertainment. Think of it as the Gen-Z equivalent of band t-shirts: virtual, limited merchandise to express your love for an artist.

“Mike Rosenthal, my co-founder, said to me, ‘how do you show you’re a fan these days?’ That’s really hard right now. In the past you had keepsakes: CDs, ticket stubs – and even Myspace allowed you to show off your fandom!”

But today, keepsakes are more limited in scope and fandom is about proof. You can stan all you like on Instagram, but fans can often simply end up taking part in a shouting contest with other obsessives. How do you show the level of your commitment? Cue virtual goods.

This “show-off economy” is already booming. “Think of virtual things for sale inside of video games, but for music,” says Dexter. “Fortnite sells $300m a month mainly in virtual items: Gen Z are buying things for their avatars to wear or use.”

And, Dexter argues, we want others to know who we love: “There’s no tapestry of fandom any more. Digital collectibles are like flicking through someone’s record collection in the old days: you can tell everything about that person.”

Who wants these digital products, and why?

Fans aren’t buying a keepsake as much as they’re buying social status. And this is where blockchain technology creeps into proceedings. Look beyond the hype, and blockchain’s strength is setting parameters and creating proof of ownership. With virtual goods, that can also facilitate proof of fandom.

“Artists can sell virtual goods for all sorts of reasons. Drake could say, ‘If I get to 10 million streams for my new song, I’ll release a special item for my top thousand fans who helped get me there.’ On YouTube, thousands of fans chat as they wait for a video premiere to start. Imagine if they got a badge for that – ‘I waited two hours for this video.’ These virtual goods mean that fans are recognised or rewarded for their fandom,” says Dexter.

Fanaply’s strategy is not to make fans come to its site to show off their items, however: the plan is more about making these virtual goods using existing features in big social and streaming platforms: a Billie Eilish Snapchat AR filter that only 1,000 fans own, for example.

“We don’t want Fanaply to be a destination site,” Dexter explains, “We’re in discussion with TikTok, YouTube and Reddit – we want fans to show off their fandom where they are living.”

There are additional features that these items unlock, he adds. “Anyone who owns a digital collectible can receive rewards – like news about a secret show at a festival. Or Instagram becomes a display network for your exclusive filter. For fans, it’s social flexing.”

These kinds of things can be even more granular. Fanaply has recently been testing “fan reward / accomplishment’ collectibles. “If you were the first 100 people to see a new video by your fan artist you get the ‘Top 100 Watcher’ fan collectible for artist X, or if you were the number one Spotify listener to Frank Ocean that day,” says Dexter.

Fanaply also created an ‘I Was There’ collectible for fans who attended Travis Scott’s recent concerts in Fortnite. They were free, and the limited run was claimed “super fast”.

On the newly public-facing marketplace, the digital items are presented as collector cards, with titles like ‘Day One Fan – Lizzo’, or ‘I Was There – Billie Eilish, Coachella 2019’. Right now, some are free as the service takes off, and others require you to link Fanaply to your Spotify account, and follow the artists to claim the reward.

(Your excited writer is now the proud owner of one of 100 “1st Edition Day One Fan of Travis Scott” cards.)

It’s weirdly addictive, and any uncertainty around the “value” of ethereal digital items vanishes as you scroll through pages of the cards and spot an opportunity to become the one of the ‘First 100’ fans of your favourite artist.

Fanaply

How is Fanaply working with the music industry?

Dexter says he knew Fanaply was onto something when it collaborated with a major music festival last year.

“We did a small pilot where folks did activities around the festival site and got digital rewards – ‘I visited all stages’ badges, ‘eco-friendly’ badges for recycling, etc. We had 30,000 people doing multiple quests, and 22,000 people earned a digital collectible. We were expecting one to two thousand. That was our “aha!” moment.”

But Fanaply isn’t just for superstar artists or big events: it wants to help newer artists with long-term ambitions to create digital goods that nurture a burgeoning fanbase and create income for decades.

Suppose you followed Ed Sheeran from day one, were among the first 100 people to sign up for his mailing list, and had been given a digital reward proving your early fandom, which you still own today. Not only could you show it off to other fans, but Sheeran himself would know you were there…

“It helps artists identify early fans – those first thousand fans could get exclusive rewards for the rest of the artist’s career. And artists love these first fans – but they don’t know this or have this information at the moment.”

How will Fanaply make money?

Dexter, who has some previous experience in building fan businesses, is clear: “I think it’s a multi-billion dollar industry. Any decision-maker in a vertical that has fans needs to think about how the majority of under-35s have spent their lives online, and supply them with digital, personalised products.”

Digital collectibles are not only things you can buy and earn – you can also sell them on if you want to. Because each item has a smart contract on the Ethereum blockchain: “it’s fans selling to fans – but the original rights holder gets a percentage of the transaction. You could start seeing an ecosystem for these special items.”

Fanaply has safeguards in place to stop touts snapping up virtual collectibles and selling them on at a huge profit: “99.9% of folks will come through our (and our partners) front-end customer management application layer and buying them with debit, credit cards etc, and we limit one token per wallet/client.”

It’s hard to game the system: the blockchain’s rigidity of proof means you need “a token ID, and an ID from Fanaply” for a collectible to be valid. And unlike scalpers who pay $50 for a ticket, sell it for $250, and keeps the difference, collectibles send royalties back to the artist on every resale, “and that will certainly dissuade scalpers. We can adjust each smart contract at its creation point.”

Conclusion: flex sells?

Digital collectibles seem to offer something attractive to artists: a new discrete, parallel income stream, enhanced fan data, and a direct connection with those fans.

Paying for limited-edition products isn’t a new idea, so virtual collectibles are something fans and the industry could quickly adapt to. The persistence or growth of asset value; the possibility of royalties; and the tradability factor may also appeal.

Teenage fans, raised on free-to-play games and free-to-watch videos, may take some convincing to pay for music subscriptions themselves. But from Fortnite V-Bucks to YouTuber merchandise, they do pay for virtual goods and fandom-proving products. A business model combining the two may just have legs.

Need to know: Fanaply factfile

Category: Digital collectibles
Headquarters: New York / LA / Toronto
Founders: Grant Dexter, Mike Rosenthal, and Edward Vetri
Funding so far: $1m

Ampled is currently seeking relationships with:
– Rights Holders, e.g.: Labels, Festivals and Events, Venues, Management Groups, Sports Teams, Leagues, Merchandise rights holders.
– Display and Distribution Platforms, e.g.: Youtube, Twitch, Apple, Facebook, Instagram, TikTok, Reddit, Pinterest, Spotify, Peloton, iHeartradio
– Strategic Investors who will not only invest but also use the technology, e.g.: Tech Companies, Global Entertainment groups, Global Agencies, Large Management Groups

Contact details: grant@fanaply.com

Read Music Ally’s previous startup files interviews here.

Joe Sparrow

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