Are NFTs the future of digital media business models? South China Morning Post thinks so

The South China Morning Post (SCMP) is launching an independent tech startup to turn historical content into non-fungible tokens (NFTs) and help other media companies use blockchain.

Artifact Labs is the evolution of what started as an internal project, also called Artifact, and it comes after SCMP's first NFT collection sold out in under two hours on Monday. Current SCMP CEO Gary Liu will step away from his role to head up Artifact Labs, but will continue in his post at SCMP until a successor is appointed.

"Eventually all media organisations will need to understand blockchain and the potential of NFTs," Liu tells Journalism.co.uk.

"Ignore the hype and the noise around NFTs, it's about the fundamental change that NFT technology can offer to the media industry. At its core, what they are is a tech advancement that brings real value to digital content – verifiable, authentic value. That solves the business model problem of digital media."

There are three main goals for Artifact Labs: using blockchain to preserve history; building a community of collectors and issuers of NFTs (and in the case of the latter, helping them understand Web 3 and the opportunities it offers), and creating new business models for media companies and others that are involved in documenting history.

How it works

For anyone not familiar with the technology, NFTs are unique digital items that are bought and sold online, using cryptocurrencies. A Tweet, a photo or a meme can be made into an NFT. Some of the most well-known NFTs are the Bored Ape avatars – pictures of a cartoon monkey wearing different accessories.

SCMP began turning its own historical assets (pictures and articles, for example) into NFTs last year. As part of that initial project, the team also worked with experts from media organisations, museums, universities and other archival organisations to create a standard for the metadata of historical artefact NFTs.

For most NFTs, the metadata attached includes a handful of attributes; in the case of the Bored Ape, these attributes would be the items the monkey is wearing and the rarity level of each one.

"Those pictures are about membership of a specific community, so that metadata may be okay because it's the rarity that matters. But for a historical asset, significance comes from having context, and value comes from the historical significance," Liu continues.

He says that while working on developing this standard, there was interest from other organisations in the project, but doubts over whether users would truly be willing to pay for NFTs of digitised historical artefacts.

"So we put our money where our mouth is and we launched ours first. We spent six months building it, and it took a lot of time and energy – the technology was more complex than we expected, even as a product and engineering company."

Who are the buyers?

For its first launch, called 1997 Premium Series, SCMP created NFTs from its coverage of news events in 1997 – a pivotal year in Hong Kong history when the UK formally handed over authority to China.

The prices were set at relatively affordable rates, with a pack of five NFTs selling for 97 Flow, a blockchain currency that is pegged to the US dollar. This means that SCMP sold a single NFT for under $20 (approximately £15).

The 6,500 NFTs in the series sold out within two hours of the Monday launch, netting the company approximately $130k in income from selling on historical content. SCMP sees this as significant demand they can meet.

But why would people fork out for these assets? People have a range of motives, and Liu notes that "it’s not just consumerism; everybody wants to buy into a purpose".

Some of the buyers are Hong Kongers who wanted to own a piece of its history; some bought into the idea of an NFT project where the goal was preserving history; others are supporters of the SCMP brand and therefore believed the products would be a good investment.

And some were attracted by the gamified manner in which the sale was conducted: each pack was a randomly chosen set of five NFTs and around 24 hours after the launch, users could "turn over" their NFTs like a card hand to see which ones they had drawn.

How others can get involved

The metadata standard SCMP have created is intended to allow other institutions around the world to do the same thing with their digital assets. Over time, this standard will be updated and improved by a council of experts from organisations that work with historical artefacts.

SCMP is inviting institutions to create or "mint" their own NFTs using the same code. They will be vetted by Artefact and the council it develops, to ensure the authenticity of the historical assets that use the code.

Now, Liu sees opportunities in blockchain and NFTs - even for publishers with less technological expertise.

"Some will already know what kind of product they want to build and what community they're going after. Artifact Labs will become a vendor to help them mint it. Others will have no idea how to start; maybe their assets aren’t even digitised, and Artifact Labs will hold their hand, help them build the product and understand the community.”

When it comes to his replacement as CEO of SCMP, Liu does not think that whoever succeeds him needs to be an expert on blockchain. But he does believe that they – and other media leaders – should be open to it.

"The growing adoption of blockchain technologies and Web3 is part of understanding users. To be an expert on changing user behaviours, you need to be thinking about these emerging technologies and how they can be used," he concludes.

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