# Applying NFTs: Publishing By [Origins Research](https://paragraph.com/@origins-research) · 2022-09-21 --- ![https://twitter.com/S4mmyEth](https://storage.googleapis.com/papyrus_images/11b3e9657611115ec26f6b688961e66b9abd439e2bc30fa457b085f762e93178.png) https://twitter.com/S4mmyEth The publishing industry has gone through a paradigm shift with the introduction of the internet and digital media. Physical books and newspapers are becoming notions of nostalgia as we transition to electronic news articles and digital content, maintained via applications, consumed on portable devices. Technology has been the catalyst for change - blockchain and NFTs will advance the sector further in how content is stored, consumed and operationally processed. This article will focus on the application of blockchain and NFTs within the publishing industry. Article Outline: ---------------- * Industry Background * Industry Challenges & Blockchain/NFT Solutions * Risk Considerations * Real World Case Studies * Closing Remarks Industry Background ------------------- The global publishing market revenue in [2020 was $245.1 billion](https://www.marketresearchreports.com/blog/2021/12/21/global-publishing-market-revenue-2020-was-us-2451-billion#:~:text=December%2021st-,The%20global%20publishing%20market%20revenue%20in%202020%20was%20US%24%20245.1,1.9%25%20between%202016%20and%202020.) USD. The growth in digital copies over the past few decades puts it in third place behind books and newspapers, albeit with a significantly smaller market share in comparison. Most of digital revenue is derived from the USA. The following illustrates the global publishing market segmentation: ![Source: Statista](https://storage.googleapis.com/papyrus_images/be75b1bcefbd83046e8172654f3053876a4119b4652e31137778d7bc38505164.png) Source: Statista Book publishing revenue has [remained relatively static](https://www.ibisworld.com/global/market-size/global-book-publishing/) over the past decade, maintaining top spot in terms of market share although slowly conceding revenue to digital which has seen reasonable growth in the same time period. There has been a recent up tick in book revenue with 2.9% growth in 2022: ![Source: IBIS World](https://storage.googleapis.com/papyrus_images/8ba3dc3945e80568d921634a0917c761e2e49c42c3ff51576ff6b007dbec62c6.png) Source: IBIS World [Pearson](https://www.pearson.com/en-gb.html) leads the way in book publishing revenue with [$6 billion USD](https://blog.bizvibe.com/blog/top-book-publishing-companies#:~:text=The%20biggest%20book%20publishers%20in,this%20list%20of%20publishing%20companies.), closely followed by [RELX Group](https://www.relx.com/), [Thomson Reuters](https://www.thomsonreuters.com/en.html), [Bartelsmann](https://www.bertelsmann.com/#st-1) and [Penguin Random House](https://www.penguinrandomhouse.com/): ![Source: BizVibe](https://storage.googleapis.com/papyrus_images/692da04b9606a705e461e393e8a235dd54e938e7d2d63350d3bf871f2df7982e.png) Source: BizVibe There is intense competition in the market. Companies need to specialize to maintain an edge. Pearson’s focus is on books for Universities and other educational establishments. Similarly, Thompson Reuters Publishes research papers in scientific journals. Whereas, Penguin Random House has numerous editorially and creatively independent publishing imprints that market to their own unique demographics, worldwide. Nonetheless these large publishers have found their niche and capitalized on the demand in their particular area of expertise. This specialism enables them to dedicate more time to providing high quality content for their particular target markets. There’s an increasing demand for low cost consumable content, particularly from poorer regions of the world. For instance the [Indian market is price-sensitive readers often purchase books on a budget](https://www.becomeshakespeare.com/trending/challenges-faced-by-the-book-publishing-industry/). A recent market report indicates that [63% of projected growth is anticipated to come from the APAC region](https://www.advfn.com/stock-market/stock-news/88743083/publishing-market-63-of-the-markets-growth-will). These cost pressures and heightened competition create a demand for efficiencies, one of which is technological advancements. Blockchain and NFTs offer the industry an opportunity to do this. This article will examine the various sector challenges and blockchain/NFT solutions. Industry Challenges & Blockchain/NFT Solutions ---------------------------------------------- ### 1/Royalty Management Royalty management can be a major challenge for small and medium (“SMEs”) publishers. The legal documents that articulate the complex partnership between copyright owners and publishers need to be well-defined. The relationship between intellectual property rights holders and supply chain partners has to be classified diligently. Most SMEs do not focus on this aspect, thus rendering their businesses vulnerable to legal risk. By making sure that royalties are managed in time and all legal facets are clearly delineated in the contract, any such issue can easily be avoided. NFTs have smart contract functionality, which facilitates and automated royalty management system. The caveats and conditions are set from the beginning and coded into the contract so that subsequent sales are automatically remitted to the creator’s wallet using a predefined royalty percentage. This removes the manual calculation and remittance of payments, reduces the risk of inaccuracies or human error. The initial setup may take slightly longer to embed, but once this is done it should reduce the overall time taken to execute the royalty payment process. ### 2/Changing Demands Readers’ and authors’ requirements are becoming more demanding and complex. Readers are more organized and tech-savvy, while authors are looking to create interactive, customized content. Small publishers struggle to keep up with the changing demands, so have an increasing need to specialize. Publishers will need to work towards improving their functionalities, developing interactive applications, and creating multimedia content to maintain engagement levels. particularly in the modern era whereby many of us suffer from [shiny object syndrome](https://twitter.com/omega_eth/status/1514335487372103680?s=20&t=FgjUDRylq1QnyhKHpPnWnQ) and are distracted by the next thing that catches our attention. Harnessing big data is a method of analyzing and tracking changing consumer sentiment. Using this data in a reliable way can enable publishers to provide meaningful insights to authors as an additional value add as to how the demographic or target market attention is shifting. Data recorded on the blockchain can offer an immutable alternative to centralized databases, thus mitigating concerns over integrity of information and reliability of the insights. The data is also more transparent so facilitates a holistic view of the consumer behaviour when it comes to first hand purchases, and potentially secondary sales activity, provided the content is transacted digitally as NFTs on chain. ### 3/Inconsistent Revenue Publishers need to diversify their channels of financing and conduct a detailed customer credit risk analysis to ensure they maintain a consistent revenue stream. Failure to do so can cause cashflow shortfalls in off peak seasons, or periods where media sales drop. Maintaining a consistent pipeline of content can be challenging. Publishers can launch authors’ books as NFT collections. This would then guarantee up front cash flow from the NFT sales, with continued revenue from subsequent sales from the royalties embedded within the NFT smart contract. The secondary market will then dictate the value of the content on the open market, but the publishers could sell the digital content for a slight discount so as to sell out at project launch. The subsequent sales should then help bridge the short fall in the usual market sale price with the benefit of securing cash flows. Alternatively, NFTs can be launched as an access pass to subscription content similar to subscription models that [Spotify](https://www.spotify.com/) and [Netflix](https://www.netflix.com/browse) use for music and films, respectively. Publishers can offer tiered NFT access for different types or genres of content. The higher the tier the greater access to available content. However, one would need more consumer traffic for this to be a viable option, after all we as consumers only have a certain amount of capacity to consume. There is a risk that a subscription model may be counterproductive for authors if there is only marginally more purchases of subscriptions than there would be book sales. ### 4/Opaque Market Activity Authors may have very little transparency over tracking sales of their content or books. This means publishers become the fountain of knowledge, relaying the performance back to their clients. This system for processing information can be made more efficient. There is a risk publishers become a bottleneck in feeding this information back if they have a number of alternative responsibilities that take up their time. Blockchain can offer a single source of data for publishers and their authors. Permissioned access can facilitate a more transparent solution for authors to track performance of book sales via their publishing houses, in real time. This may also help authors feel more connected to their publishers given the increased transparency. It could then enable better conversations around performance of a particular publication or how to improve the marketing strategy to reach the correct target market. ### 5/Increased Competition Economic integration and globalization has caused many multinational companies to enter new markets. As a result, SMEs in the publishing sector are subject to intense competition and need to specialize to thrive. SMEs have limited experience of dealing with international markets that exist outside their domain. Specializing in bespoke fields help them add high value services to both authors and readers, that are sufficiently niche to capitalize on a market segment that the larger publishers are unable to penetrate effectively. Blockchain data can facilitate a reliable source of information to track market trends in these niche segments. The publisher may have access to the wider market activity and provide insights to the author around opportunities in alternative markets that the author could penetrate. A more harmonized, global single source of data could lead to the creation of new roles in the industry such as data analysts. Their role could be to analyze market data with a view to providing meaningful insights to authors to help bridge the gap between changing consumer demands and authors’ content. Those that move first to harness this data could gain a competitive edge over traditional publishing houses. ### 6/Authenticity of First Edition or Collectibles First edition books command a higher price than the subsequent editions. Collectors pride their libraries with these limited edition publications, but as these physical copies become older it can be harder to prove their authenticity. Attributing an NFT with a physical book enables a digital representation of that real world asset. Similarly when a digital book is launched as an NFT it provides the same level of verification and proof of authenticity. The NFT attached to this first edition could command a premium compared to those without, given the additional reliability. A complete transaction history of that NFT can be traced back to when the NFT was minted. If there is a question over the integrity of a particular book, an investigation can be commissioned and traced back to counter parties for that transaction. If there is an indication that an NFT has been stolen or lost, then this can be flagged by the owner of the physical copy so that a new equivalent is issued and the underlying value of the compromised NFT is nullified. An approved authority could be used to issue a revised proof of authenticity in the event of compromised NFTs. We see this in the [PFP market](https://medium.com/geekculture/a-beginners-guide-to-understanding-pfp-nfts-8714e9d30d0b) whereby high value NFTs are stolen and subsequently sold. [These are flagged by the victim (original owner) as stolen assets so that secondary market places prevent / freeze these assets from being sold again](https://www.saunders.co.uk/news/osbourne-v-opensea-the-right-to-freeze-nfts/). This adversely impacts the NFT value as the number of available secondary markets platforms is reduced. For instance frozen assets on [Opensea](https://opensea.io/) are typically sold at a 20% discount on [Looksrare](https://looksrare.org/). This is a familiar [“buyers beware”](https://www.fosters-solicitors.co.uk/insights/buyer-beware/) concept in traditional asset markets. While this system [isn’t necessarily fit for purpose for the NFT PFP sector](https://twitter.com/punk9059/status/1540204252638973952?s=20&t=cq3X2wHORAJ4FHNYeO7row), it could work sufficiently well with NFTs that are purely used for real world asset verification purposes. ### 7/Publishing Costs (Disintermediation) Publishers take a cut of the authors revenue for providing their expertise. For those authors that are new then this may be a cost well spent as having knowledgeable participants in the market can grow an author’s book sales. But for those authors that know their target market, and have an established fan base, could perceive these costs as unnecessary. Blockchain technology enables the author to connect directly with their fan base. An author could launch a unique NFT collection of 5,000 of their books or articles. This would act as a finite number of copies that can be verified to have been launched directly by the author. Imagine if you could own a unique digital copy of a [Charles Dickens](https://www.britannica.com/biography/Charles-Dickens-British-novelist) book known to have been launched by him. Unrealistic given the tech wasn’t available then, but this can be used for current authors like [JK Rowling](https://www.jkrowling.com/). We’ve seen this already done with renowned artists like [Damien Hirst, who launched his “Currency” collection in 2021](https://news.artnet.com/market/damien-hirst-the-currency-results-2155325#:~:text=One%20year%20ago%2C%20Damien%20Hirst,digital%20token%20connected%20to%20it.). The NFT holder had a choice with a one year window to burn the NFT and redeem the physical copy of his artwork, or keep the NFT. After the year had passed, the physical copies for which the NFT had not been swapped, were destroyed. A similar concept could be brought in for famous authors and first edition prints or a limited edition. That has value. ### 8/Effective Story Telling Immersing the reader into a fictional story can be a challenge for any author. The character needs to be engaging and grip the attention of the author’s audience. New forms of delivering content have been trialled, such as listening to a story through applications like readable. This has inevitably increased the reach of written content to those that typically wouldn’t pick up a book. NFTs offer the next iteration of this notion. Characters within collections have received spin off series using its intellectual property (“IP”). Examples include [Bobu the Bean Farmer](https://opensea.io/assets/ethereum/0xed5af388653567af2f388e6224dc7c4b3241c544/40) from [Azuki](https://twitter.com/AzukiOfficial) and [Jenkins the valet from BAYC](https://twitter.com/jenkinsthevalet). This new iteration of unexplored storytelling enables the audience to own the underlying assets of the story, which is especially true with [Bobu](https://opensea.io/assets/ethereum/0xed5af388653567af2f388e6224dc7c4b3241c544/40). [Br0ke](https://twitter.com/broke0x) explains how novel this approach is within [his thread](https://twitter.com/broke0x/status/1506251082607083523?s=20&t=7F-WLlcnZeTwTHrRausG9Q). This has untapped potential and could see a shift in how fictional content is delivered to the audience. Risk Considerations ------------------- ### 1/ Intellectual Property (“IP”) complexities Launching original copies of author’s publications as NFTs can open up to [Intellectual Property (“IP”) complexities](https://creativelawcenter.com/nfts-publishing-contracts/). * The royalties of deceased authors may be sent to their heirs and hence an inflated value of a first edition could see a percentage of that book be attributed to that author’s family. Whereas historically a sale of the book on a secondary market would realistically be between the original and new owners. * Alternatively there are licensing agreements whereby the holder of an NFT retains the commercial rights to that NFT. For instance [BAYC](https://finance.yahoo.com/news/craft-beer-crypto-collide-alternate-140500236.html) NFT holders are able to use their specific [NFT to generate revenue](https://www.ledger.com/academy/nft-commercial-rights-explained). It is a change from your typical original creator of the art on that NFT being the IP holder. ### 2/ Counterproductive Market Behaviours Using NFTs as proof of authenticity could create counterproductive market behaviours. Bad actors may see value in the NFT and create a black market for compromised NFTs to then sell for a discount so that those with fake physical first edition copies can pass them off as authentic versions. ### 3/ Challenges in Allocating Royalty Revenue If NFT subscription models were to be used then this could make it difficult to allocate the royalty revenue to the books/content under a publishers brand. Monitoring clicks on certain books could be a way of allocating it fairly, or alternatively having a stepped royalty allocation model may be equitable. A base fee could be allocated to all content within a subscription tier and then additional bonuses included for a certain number of downloads / clicks. ### 4/ Legal Risk Publishing services sold as NFTs are open to legal risk. The existing NFT trading platforms have a relatively low barrier to enter, whereas traditional centralized marketplaces would have more stringent due diligence procedures in place, making it more difficult for bad actors to trade. Currently all that is required to trade NFTs on [Opensea](https://opensea.io/) is a crypto wallet, which has minimal KYC procedures in place. ### 5/ Circumvention of AML Regulations The value of NFT transactions and the widespread use of cryptocurrency inevitably raises concerns about whether these transactions are being used to circumvent anti-money laundering regulations. Wash trading is a big concern with the underlying substance of the transaction being difficult to substantiate. This is banned in typical equity markets as it gives the impression that there is active trading for the asset when in reality it is fake volume. ### 6/ Lack of Education Education on tech would be required given the lack of knowledge on the subject. With implementation of the required infrastructure, publishers and authors would need to up skill to understand how to use the decentralized applications effectively. ### 7/ Automation and Loss of Jobs The new tech could lead to many roles in the publishing industry becoming redundant. Increased automation comes with fewer manual processes in terms of royalty distribution or payments/remittance. These firms could cut costs further by reducing the size of graduate intakes as a form of head count reduction. It traditionally acts as a good education / training ground. There may be cost savings in the short term from automation, however there could be ripple effects down the line as fewer graduates receive the same depth of understanding from on the job experience. ### 8/ Lack of Legal Framework There is a lack of a legal framework in place for these digital assets and hence will take time for this to become established. There may be disputes around royalty payments or intellectual property which could take time to resolve until the legal ambiguity is clarified. In the UK there is a [HMRC crypto assets manual](https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual), but NFTs fall into a grey area for tax purposes. ### 9/ Adverse Macro Conditions The adverse macro economic conditions will likely cut publishing houses’ tech budgets, so innovation may be put on hold while strategies focus on the most profitable outcomes in the short term. Those investments with longer lead times may not be viable until the conditions shift to being more favourable. ### 10/ Transparency and Loss of Competitive Advantage Competitive advantage may also be a consideration with regards to the transparency of data being on the blockchain, shared with other entities within the supply chain. Client data can be sensitive and there are confidentiality requirements for publishers, so the risk can be high. Establishing a means of harnessing this new verified data to inform those in positions of authority will also be required to maximize its use. Real World Case Studies ----------------------- ### 1/Pearson Pearson recently [announced plans to use NFTs](https://cointelegraph.com/news/textbook-publisher-wants-to-use-nfts-to-skim-the-used-textbook-market) to track digital textbook sales to capture revenue lost on the secondary market. ![Source: Pearson](https://storage.googleapis.com/papyrus_images/76fef344ba4a65fbbf5c8b57098efd0676eccc64bf65259937abdfde109c734d.png) Source: Pearson NFTs enable the creator to earn commission on second-hand digital textbook sales, which are normally done privately, over the counter, between students. Creating text books as NFTs will still provide the ability for students to resell their books, but a percentage will be provided to Pearson in the form of royalties embedded within the smart contract. ### 2/Time Magazine Time are launching their [“TIMEPieces”](https://time.com/collection/timepieces-nft/) NFT project collaborations. This includes creating 1 of 1 NFTs of their flagship magazine covers. The properties of [ERC-721](https://eips.ethereum.org/EIPS/eip-721) tokens facilitate this digital scarcity. ![Source: https://time.com/collection/timepieces-nft/](https://storage.googleapis.com/papyrus_images/f0e2d362c6eb8fb4f6de58a5bdfa6295c2406145f550cc3b19548d163f8cd6b4.png) Source: https://time.com/collection/timepieces-nft/ ### 3/South China Morning Post Hong Kong-based media outlet South China Morning Post (“SCMP”) launched its NFT collection. ![Source: SCMP](https://storage.googleapis.com/papyrus_images/701833f111954329653bcc74d6b0ef8b66bb64025b57d3f3e6b9563a4ed10902.png) Source: SCMP 1000 “boxes” of NFTs depicting some of its 1997 print front pages. The boxes had to be purchased with FUSD, a cryptocurrency on the Flow blockchain pegged to USD – contained an NFT that was given a rarity rating based on the historical significance of the event it depicted. Closing Remarks --------------- The publishing industry has had to offer digital alternatives in media in order to meet the shift in consumer demands. It is no stranger to technological change, blockchain and NFTs offers the next iteration in this innovative journey. The infrastructure may take time to implement. The larger publishing houses, and their larger reserves, may be the first to dip their toes before the SMEs can afford to take the risk. Automated royalties, secure data for industry analysis and proof of authenticity for those valuable first editions are all viable use cases for the relatively nascent tech. It’s not a matter of if, but when these ideas come into fruition. Cost is main barrier, but as development continues this will become more affordable over time. That’s when we will see a greater rate of adoption as the benefits begin to outweigh the cost of implementation. At [OriginsNFT](https://originsnft.io/) we leverage data-driven decision making, educational resources, and proprietary analytics to remain ahead of the curve with respect to blockchain tech and specifically NFTs. To find out more, please visit our [website](https://originsnft.io/) or [Twitter](https://twitter.com/OriginsNFT?s=20&t=32UYETa5iiqxkDBj0NcVrg). To purchase a pass, please visit our [Opensea page](https://opensea.io/assets/ethereum/0x495f947276749ce646f68ac8c248420045cb7b5e/63763212585141476199723449601564140078511354041472126739157516503384422613942). ![](https://storage.googleapis.com/papyrus_images/e12f880845d6a12d90110640422b60ce7f517cccf703763cacc8661b5d793176.png) --- *Originally published on [Origins Research](https://paragraph.com/@origins-research/applying-nfts-publishing)*