Full Interview: Entertainment Revolution Coming? Yat Siu, Yaros Belkin, Mauricio Silvestris Fireside chat at Animoca Headquarters
Thanks for the picture Cryptopolitan ( below is the link to see the article published on Cryptopolitan By Florence Muchai https://www.cryptopolitan.com/yat-siu-entertainment-revolution-is-coming/)
Yaros Belkin:
So I am at the office of Animoca, finally as I’ve been invited by Yat to visit many times but it just happened. Ironically, we’re sitting in “Satoshi room” conference hall, shall it be the sign that what we’re about to discuss here is exactly as revolutional as Bitcoin?
Thanks a lot for having me, you know, again, as always, and I want to take our usual conversations to the next level in a way, but at the same time something that’s I mean, you are exactly the person to have this conversation with. I mean Animoca is a known pioneer in digital ownership in gaming and right now we’re seeing that you guys hosted this amazing concert with this…
Yat Siu:
The Stradivarius, yes.
Yaros Belkin:
Legendary Stradivarius violin. Well, that’s unique for Web 3 events.
Consensus is unique, you know, being in Hong Kong for the first time. But at the same time, it’s kind of organic in a way as Web3’s coming over to Hong Kong. What do you like, do you see any similar principles that you guys have already explored in you know, digital ownership coming over to the life event industry in any way? Do you see any benefits there any, any potential in audience engagement or maybe secondary market value?
Yat Siu:
Yeah, I mean so much, right. I mean, when you talk about things like, first of all, the elements of as we see live events is a form of fan engagement and fan engagement as an economy is something that has really been quite one sided. Meaning that there is an artist who has a relationship with a fan that is mostly extractive in the sense that what can I sell to you?
And that’s just because not, I don’t think it’s because that is what the artist necessarily wants to do is that those are the only tools available to the artist, right? And so they’re sort of returned to the fan is appreciation, acknowledgement, respect, maybe love, you know, all that kind of stuff. But at the end of the day, it translates commercially to the artist in the form of buying merchandise and then listening to the music and then going to your concert and the concert and things like this is it’s just a, is a way to sort of engage more emotionally with it. The example of when we did the Stradivari, when we tokenized that the vision for that was to basically create common ownership in this case of the instrument for a couple of reasons. One, the instrument is a naturally growing asset because of the scarcity. Stradivarius increases by about 10–15% per year historically. But of course, who cares about that? Only a certain group of people.
And as I said at the concert, this is a way that you open up a form of financial literacy as well, because maybe a hedge fund trader, you know, doesn’t really care about Stradivarius instruments. There’s no connection to it, right? You might see liquidity and money, but that’s what we say. But a musician in classical music will understand the value of Stradivarius and he’ll appreciate that, but also he’ll appreciate how to value it. And this is the other point, which is that you need to have an emotional feeling connection to whatever you do in order to learn it well and to engage with it. It’s kind of a classic thing when Warren Buffett says “don’t invest in anything you don’t understand”. And that’s the same thing, right? And when you ask someone who is, let’s say, a musician to invest in classic crypto, or there’s Bitcoin or Ethereum, you can teach it to them, but do they care, right? Do they care about the principles behind it per SE? We do all in our industry. We care a lot about it. That’s why we do it. But if you’re outside of that, it doesn’t, it doesn’t have any connection with you, then you won’t do it and you won’t learn.
It’s kind of like when you go to a classroom, you know, you sometimes you’re listening to some of the classes one year in and one year out because you don’t care versus if you have a feeling or connection to it, then actually you learn much better, better and faster because you’re engaged and you’re listening and you’re absorbing. And I think it’s the same here. But from that, you know, my first experience when we saw this with NFT art in the early days, when I get into the space and I learn about the financial aspect of, you know, an asset that I love, that’s when I start moving into other areas of assets. Because then I start to learn about, you know, what is money, what is investing? What is the value of that which in our industry, in the industry I grew up in, which was the music industry, customers industry, they knew nothing about money. Money was never discussed. You go to music school, there is zero, there is zero classes around, you know how to manage an agent, you know how to negotiate, You know, how to look at commercials, right?
You know, because we would categorise Business School and economics as a category. Oh, that’s one thing, it’s money, but money is everything in the world, right? It’s basically our social order. It’s how power is distributed. It’s really fundamental. I think we need to teach money right at primary school level, which you know what I think we can do. But of course, historically and culturally we haven’t. And so the world has now become split between the percentage of people who understand money and capital, who have the power and against most of the other worlds who’s still thinking in the classic labour concept and don’t understand that actually, you know, we’ve, we’ve kind of moved on from the classic labour theory because if you look at labour, labour value has been actually on a, on a real money basis down right. So people today in the same labour economies are making less money than their parents’ generation in comparison to if you had put money in some form of investment, you would have done much, much better, right?
So this to me is kind of the interplay between that and, and I think when you talk about live concerts, how do I have a way in which I have ownership which gives me an emotional connection? Is it a pop artist? Is it, you know, an instrumentalist? Is it an athlete? They’re all kind of in the same category of how do I engage with a fan, But now I have a real ownership. And I don’t mean fan tokens. I understand the concept of fan tokens, but fan tokens to me are closer to memes in terms of where you have some utility. But really it’s more about a representation, not true ownership versus something where you have true ownership that comes with, you know, real, sort of real outcomes. The one thing I would add, you know, for instance, just recently, you know, on Valentine’s Day, most appropriately, I gave a talk at the Belvedere virtually, you know, for people who bought the Klimt NFT, which I also have one. And one of the other great outcomes of that was that all the people at who were there at the
Belvedere Museum were all NFT holders.
And you know, these are people who’d never normally connect with each other, except now they have common ownership and there’s a relationship that we’ve built from that, right? And you see this with NFT collections as well, whether it’s Mocaverse or Pudgy Penguins or Bored Apes. You know, there’s people who speculated they bought and sell and they’re out. They’re not here anymore, but there’s a core of people who were staying and they’re basically the call them the thousand true fans and they are the ones who are the foundation and the build up of that core community.
Mauricio:
Perfect. I’m curious because I’ve been working with artists all my life. It is one of the industries that they have the largest outreach in the population. When you think about the annual industry, if you combine the artists’ build up, even if it’s from labour like Sony universal, agencies, all type, you know, for instance, Placio Domingo, I’ve had an event with him in Aspentos in.
Yat Siu:
Wow, now you’re talking my generation.
Mauricio:
Placido, Alessandro Safina, Placido Domingo.
Yat Siu:
Alfredo Kraus.
Mauricio:
We basically because you know, I understand, but one of the things that the question I have is how, how can the web3 community or brands like Animoca can communicate this value to them because they are, you know, they are very in some way lazy. They don’t want to let you know or, or they don’t have the time or they don’t have the will. But how can they communicate? Because they don’t look at our medias, they don’t follow our, you know.
Yat Siu:
No, But I don’t think we need to. So I think part of it has to do with the way we talk about it because, you know, you talk community, community, community. What does it really mean, Right? So I grew up in Austria, right? And, you know, it was very customary at that time to go to church.
I’m not religious, but I would say one of the most powerful things about going to church on Sunday was community had nothing to do necessarily whether you really, really were religious, but you were there in the morning, came together, broke bread, whatever it was. You listen to a sermon, agree, disagree, doesn’t matter, right? And then afterwards, you would hang together and you would have food and there was a community. And I think there’s a correlation in society with the breakdown of religion and this activity, because it wasn’t the religious aspect. I think we’re confused sometimes about, Oh my, you know, I lost faith in God and the world was going under. No, I think the loss of this sort of religious tradition actually caused a loss of community tradition. We lost the places where we came together. Now, what is a concept? We come together, right? when you go to the Opera House, actually there was a pre stage, right? It’s like we mingle together. We meet some friends, right? And then we get seated and then, you know, afterwards, at the end of the concert, you go outside, right? And then you mingle and talk as well. So it’s that same thing. But much of that has changed when you talk about mass, right?
So when you have a massive sort of event, you know, like when there was a, you know, for my daughter who went to one of the last BTS events in Las Vegas, a huge stage, but it was so big, it became impersonal. It became hard to sort of meet, How do you meet someone? And when everyone’s screaming the way that they are, you can’t, you can’t talk, right? So it may be fun, but it’s a different experience. And also the way that they engage seems more ONE to one rather than many. And now the reason why I want to say this is because what’s really powerful is network and network effects. And in the past we had these smaller communities that actually could build a network effect. It was a community, but it was a network effect. You know, if you put 100 people together, they can build friendships and they can talk to each other and they create something. And this is kind of what NFTS and blockchain has enabled to do. But when you have a million users that you don’t know, the relationship today that I find that artists have with their community is not a community. It’s one way. So it’s a one way network effect. It’s like me to you, but the rest of the community doesn’t talk to each other. So in token economies, we think of the value of the token network to be derived from the strength of its network effect. So the strength of a network effect is 1: where you join the network, not because of, you know, maybe the artist or the individual that’s building it. That could be one element, but because there are other people contributing to the network. So when we give you the church example, how many people go to church because God told them to or because their friends are going or their family, right? And, and that is an example of where maybe that was the driver. But your motivation to go every week was whether it was a duty, whether it was because you wanted to, whether it was meet someone that part of the rest of the network brought you there. And this goes to other areas.
So what are the number one applications that we all use that make the biggest companies in the world social, Facebook, Instagram, TikTok in terms of usage? That’s it. Why are we there? For these network effects. When you look at, for instance, sort of construction of things like let’s call it Ethereum as a network, right? The network effect is why you join it. You’re not joining Ethereum and buying the token because you think Vitalik sings great Japanese or something, right? OK, you’re joining it because this other guy who is building a great DefI application or is building a game, you know, it’s doing it. And the fact that Vitalik or Consensus or those guys are building on top of it is wonderful. And it’s a value and it’s a plus effect, but maybe it’s not the reason that brought you. That’s the power of a network effect. And so I think we should try to explain to the communities in question of any industry that doesn’t understand Web 3, not to say, hey, this is Web 3 and there’s a token and there’s a network. It’s more like this is how you strengthen your community ties.
And this is how you can ascertain who are the sort of real followers and real believers of whatever network fan community that you’re trying to reconstruct. #
Mauricio:
In your interest because they do have artists, for instance, they have the private WhatsApp chats, you know, they always have with the, they call it superfast. They travel all over the world by the tour, you know, and they always chat and the artist is there with them, but it’s not public who knows about this, you know, is them and they’ve been there for a day.
Yaros Belkin:
Well same as groupies were, right? There was this bus and there was another bus with the groupies. Sometimes they would go over there, you know.
Yat Siu:
And the interesting thing on this one is how do you qualify that really the artist sort of puts the channel and people come in and engage, but it’s the one to one relationship that you can sort of build it out. But what proof do I have that I am actually your super family? And so one of the attractive points in the early days of NFTS, you know, when NBA Top Shot came out, the basketball players would say “thank you for buying this NFT”.
But now in public, they would be acknowledged, not only because the basketball player makes some money out of it too, but because the person who bought it now basically received a shout out because he was recognized, you know, by his hero of sorts, because he could now prove to him that I was serious, right? And you know, one of the problems in our industry, in one hand it was a blessing in the early days to deal with piracy like Spotify. But now the curse of it is that I don’t know who my fans are. So you have a million listeners, but there’s probably a small number that listen to your music every day. And there’s a large number of people who listen to your music once a month. You do not really care about the person who listens to their music once a month, but you care about the person who listens to your music every day. Do you know who they are? Can you reach them? No. And that’s actually why Web 3 is so powerful and that it can help bring that in and make build it direct relationship because now you know who they are versus in Web 2 with these platforms you don’t. And who has this information? Spotify.
Therefore, who has the bargaining power to tell you what you should be paid? Spotify.
Mauricio:
Yeah, for instance, because I mean that’s my life mission. I’m actually building technology Web 3 to help the artists to promote the videos, the brands and mostly the funds to be recognized and as far as you mentioned, because the Spotify of care was a solution and a destroyer at the same time. You know, I mean artist for 8 million, for 8 million listeners to get $6000. You know, imagine selling 8 million CDs in the past. You would make, you know, at least you know three times because you would sell more than $5 this CD, it would make $2.00 per second well.
Yat Siu:
What happened when we went to streaming, which is not a bad thing by the way, but what happened when we went to streaming is that we turned something that was more of a capital asset, which is the CD or an LP into essentially something that was a rented good. So we went from ownership to renting. And what Web 3 is doing is bringing it back to ownership and allowing capital information to take place that was taken away.
Mauricio:
We just discussed it with one of the artists, the AI you know that is coming and if they don’t, I mean…
Yaros Belkin:
That was my next question.
Mauricio:
Yeah, We do believe that the only safety net for the artist is not changing against the AI. You know, in Arabic, I didn’t do it forever because you can duplicate an artist with no AIS is going to be so powerful that Even so, the only way that they can start now, how can we make them understand that? Is this actually the last lifeline that they have to protect themselves?
Yat Siu:
So provenance matters. So just a funny story. I was at a dinner just a couple days ago, Justin’s son was there and he gave all of us, including myself, a banana. You know, the one that he bought, right? Because now that you haven’t eaten it yet, but I will have to because in a few days it’ll go bad. I have it actually in my office right now. it’s cute. It’s nice.
And you know, what happened was that as he buys a banana, he has the ability to basically sort of, I guess, have reproduction rights of it. So he can basically make versions and give it out to other people. Now, the version I received was not original. And in fact, the original is in Justin’s mouth, or his belly, or gone, or whatever, you know, process, OK.
Mauricio:
So really in nature.
Yat Siu:
Exactly, exactly. Already in nature, correct? Right. But him giving me this item has nothing to do with the original per SE, but the fact that there was a provenance of originality for who it came from. And so somehow that thing that I got from that art piece that I got from, let’s call it like the example I gave to Justin. I said it feels like you gave me a little graphic copy of your original in spirit, so to speak. And but it means something because it came from the original as supposed to, you know, anyone can make this take a tape or put a banana on, but it just doesn’t feel the same because it didn’t come with the same authenticity of that pattern. And that’s the point. Blockchain gives you authenticity. In music we’re going to have a problem, as we have with art and anything else, of what’s your original source, right? I mean, if someone just goes up and down the blue scales, you can actually create all sorts of things that sound a certain way. And I don’t know that with, especially with AI and composition, the way that it’s going, that you can really, truly have a case around sound origination in the way that we used to in the past. I think that’s very hard. Because we’re getting to a point where, you know, almost all sorts of sound modalities can be created, but what will matter is who made that sound. So, you know, you can go to a performance and someone can do a cover, or you want to go to the original and the original might not even perform it as better than the cover artist. But the cover artist will have a premium attached to it, right? Classical music is perhaps the ultimate cover artist industry, right?
And so you’re competing with different people performing, but if for some miraculous reason you’re able to teleport back in time and you can actually, you know, bring Mozart or Bach to life here at this moment in the original form. That will be way more valuable his experience than any incredibly famous artist, even if they will not be able to perform it at that level because of the authenticity. So to me, blockchain preserves authenticity. And then if I have the ability, and this is where it’s exciting about remixing. So if I have the ability to remix your music for which to be a license fee, I’m not paying a license fee to use your tune. I think that’s hard, right? I have the license fee to use your brand in the music I’m making. So I can kind of claim, hey, this music was Co created with The Beatles as a way because the authentic authenticity of that was licensed using elements of that track, right? Because if you look at the root of all music, they’re all kind of interrelated with each other because harmony probably speaking, sort of has an interplay with each other anyway, right? So I think that part will matter much more.
Which of course means that artists of all sorts do need to know how to build IP and their IP is their brand, which means that it doesn’t necessarily mean that you just have to be a good artist. You have to be good at your brand management. This is, for instance, what happened to photographers or when photography came up. People used to think that taking a certain kind of photo was the skill, but then it turns out to be that that wasn’t enough. Just taking a good photo wasn’t good enough. It was being able to tell the story and create a brand around it that was actually maybe more important, that it would inspire people to sort of think of it in this way.
Yaros Belkin:
Do you see Mocaverse, Moca ID blending in here nicely, perfectly without this reputation? #
Yat Siu:
Absolutely, because that’s what it is, right? You’re building your reputation. So if I have a Moca ID I have a reputation, I can build on top, I now have this identity and this identity builds value on top. Which means that I mean, think about today how you attribute something of value.
You basically look towards your network to try to determine what it’s worth or whether you should talk to them. You know, if there’s a new person you don’t know and you do business, you try to ask your network and say, is he a good person, bad person? What do you think, should I do with him? So you’re trying to get aspects of your own network to determine their reputation. And for artists, it’s the same thing. Right now, this is where I think it opens up for the creative field. When you have a reputation system, it opens up things like unsecured credit. If I’m able, right now, there is no unsecured credit market for creativity. It’s only unsecured credit based on financial history.. So you know how much money have I made? Did I pay back my mortgage? I’m going to stop. That’s the only way to measure. in the early, early days when banks were still business partners as opposed to just money managers of sorts. You know, they gave you small business loans and they gave you small business loans on the basis of So what is your prospect?
And they were trying to assess your character. Do you have talent? Can you run a restaurant? I mean, that was my parents’ generation and maybe my original generation. That’s actually where our funding came from. It wasn’t VCs, it was a local bank that would give you it.
Mauricio:
Wasn’t until the 96th last eagle for Clinton the United investment and because before they were looking for you like everybody else in the community. The bank will give you toasters to sign with that.
Yat Siu:
Yes, but you know, like those that sort of loan mechanism was just a way in which you would actually fund small businesses, right? That, and if you look at the history of many of the oldest companies in Hong Kong, for instance, I think elsewhere too, they got their first money from a bank. They didn’t get their first money from a VC. That’s a fairly new concept over the last really 30–30 odd plus years. So again, how did they assess sort of this? They assessed it based on your reputation, right? And we’ve lost that because there is no way in which you can measure that reputation at scale.
Now, if you have that as an ID, which we’re trying to do with Moca ID and you build a reputation, you can create scores around it as well. The index is other people’s scores as well. He’s very creative, he’s very talented. He can do this, he can do that. Then if someone has a proposition, you can fund that proposition, which is a form of credit. VC funding is still credit. I’m giving you credit because the security is basically nothing except you’re returning the business, right? And then these are scores that you can take to, to be as well to, to get some sort of measurement and, and advantage of sorts. You know, the reason why universities and colleges have become so ridiculously difficult to get into and have become so expensive is because they have become the first layer of that reputation, right? If I go to a good university with a certain degree, the assumption is that I will get a better job with higher pay because it gives me a higher reputation. The system was true for a while. It’s not true really anymore.
But that’s a belief and that’s why the education system has built this way that we deal with it, which is also what we’re trying to solve with Open Campus.
Mauricio:
Very interesting. Yeah, you’re completely right. The artistic party has not risked capital into this.
Yat Siu:
It’s gone away. There was much more risk capital involved in, in, in sort of real money terms before and it’s moved away because it’s hard to measure. And it’s also something that became very centralized. And when it gets centralized, then the opportunity for people to actually create value becomes much, much harder, right. So if music, if the music industry was much more distributed and was much more of an open market, which it isn’t, then you have capital formation and then you have people who can have opportunities to make money. Where now that at least on the making of music, not the performance, the only way to do that is basically, you know, get attention on Spotify. Which is for most people to look at Spotify just as a marketing platform. They don’t really look at it as a revenue generator, which is insane, right? That’s not what’s supposed to happen.
Mauricio:
Exactly. But they still, you know. Very, very amazing with the amount of potential buyers of the products they have themselves and they can’t even be the largest tier one artist. Let’s talk about, you know, without saying any specific name and some of them will have 40–50 million communities and the ability to engage them and generate extra revenues because the music is not making them any money. They’re not making any money and they don’t, you know, I talked to them many times and, and I spoke with Sonia’s CEO in Scandinavia and they literally said this war is scary for a multinational. They say we don’t know. Well, actually, yeah.
Yaros Belkin:
Well, actually, Yat, You’re a perfect person to be asked about this because you come from Hong Kong, which is a unique phenomenon.
You know, it’s a financial ecosystem that grew out of, all of these, Chinese background and like, portraying and everything. But right now, I’d say probably Hong Kong is the most conservative when it comes to legislation. At the same time, it’s been very aggressive towards Web 3. It’s constantly experimenting.
Yat Siu:
Launched their road map yesterday.
Yaros Belkin:
Exactly. So what would you recommend if you were sitting in the room with all of those big names out there and they have scary eyes, one eye is big and scared of them losing money and the other eye is exactly as scared of all of this crypto stuff and potential lawsuits, you know, affiliated with it. Do you see? I mean, with your richest, probably one of the richest men on earth in terms of like all of this experience backing from gaming everything.
Do you see any solution maybe based on Mocaverse ID, maybe something else that we could maybe offer them as a potential because that’s that market by itself is huge.
Yat Siu:
No, it’s massive. So the very first thing, you know, as is always the case, right, if you are looking into the space, you have to enter the space first. You know, and for all the challenges that Sony has had, you know, the fact that they launched, for instance, Sunayam as a blockchain, which obviously had a little bit of a rocky start, is just the perfect way or an organization to learn about what to do, or at least they need to invest to learn about the space, right. If you think about Animoca, we were a traditional gaming company and we moved into entities in blockchain with crypto kitties because our studio was involved in it actually in 2017, late 2017. And then of course, you know, the rest is history, but we’re new to blockchain in a relative age term. We weren’t there on sort of, you know, Genesis day. We were, we were, we did, we weren’t there for the Ethereum ICO like we’re, people sometimes call us OGs, but we’re not really OGs, right?
We are converts later in the journey because we didn’t quite understand its potential at the time and we came to appreciate it. But how do we enter the space? We became one of the biggest investors. Because that’s actually the learning journey at the start. And if you’re a large corporation, it’s much safer to invest than to build on day one. So, you know, we invested in open sea, we invested in Axe Infinity, we did acquire the sandbox, right? Of course Polygon and you know, all the other ecosystems. And that really gave us our start in terms of understanding what’s going on. We also invested in a lot of wallets, including consensus because of Metamask, but also other ones like Fortmatic and Fortis. And you know, all those guys are not around anymore, right? But we ended up learning about the space. So that was kind of step one. I would advise everyone in the space that is curious to put a small amount of capital. Is it you know, like think about what you spend all the money you waste on stupid marketing or other things that just don’t make sense.
Take that money and invest in some good companies in Web 3 and learn from them. That to me, I have found, by the way, I found this to work also in the early days of the Internet. So, I was both a Web 1, Web 2 founder and in the early days, many of the tech companies in the early days of the Internet were like looking at the Internet and saying, what’s going on here? e-commerce was a threat, which clearly has taken over, right? Media was kind of a threat as well. You know, I mean, what you guys are, what you guys are doing here blogging? I mean, you basically and sort of this setup here is taking away business from large media companies, right? Yeah. So how do you understand it? And the ones who did a good job are they started investing a little bit here and there and distributing it and finding a way to do that. So the venture sort of approach is very important because in relative terms, the balance sheet of what they’re putting forward is very small. By the way, this is a mentality that doesn’t exist in corporates because the marketing, investing, so the investing function is a finance function.
It is not a which sits specifically in the finance team and the people who normally run the finance team are not actually thinking about growth.. It’s more about making sure that you’re cutting your costs. And by the way, that’s their job, right? So they’re sitting in the wrong department, right? They’re, I remember in the early days of the Internet, all these traditional companies that were launching Internet businesses. But no, but they’re launching their sort of Internet thing. They launched through the IT department, right? And, low and behold, it didn’t work, because they said “oh, it uses computers”. So it makes sense that our Internet effort should start from the IT department. the IT department knows nothing about the Internet, right? Yes, they know they have a computer and they use technology. I remember when we had a, and I, we started one of the first ISPs in Hong Kong in the early 90s.
And they referred to us, some of them would refer to us as technicians. So just to give you the indication that the corporates have to first put that division in the right team, right? And so that means to me that the investing efforts have to come out of the BD efforts of those groups, not out of the finance or let’s call it in the IT team, right? Because that’s not what they’ve been trained for and that’s not what they’re thinking. So I think that’s the first thing they do. The second thing they do more often, this is where we come in with mocaverse, open campus and so on, is talk to the larger groups to understand how they can help. That’s the safer approach, right? It’s kind of like, if you want to enter Web 3 and you don’t know how to do it and you’re a very large corporation, it makes more sense to do it with a partner that you can trust. And so that’s what’s happening. So for SK group, in Korea, we launched the Moca ID and they came to us and we launched a massive partnership in Korea and it was a big success in December when we did that and continues to develop. And that’s kind of a situation where, you know, SK Telecom, which is the largest telco through SK Planet, basically had a partnership to launch Moca ID and Mocaverse in Korea. And you know, I think they reached something like 30 million customers. So it’s basically almost all of South Korea, right. So that’s kind of one example of an approach. But of course, we have limitations as a company.
We cannot handle every deal, like, we can’t do every single large opportunity, which then means that they need to, they really can work through a portfolio. So they can work with 1 / 540 portfolio companies because if we as Animal Co made an investment in them and are working with them, perhaps they could be the right partner for you. But again, it’s kind of the theory and there’s other companies that can help them as well. I’m not just saying it’s just us. I’m just saying that you have to adventure into the space and you know, with, I guess also some humility knowing that you’re here really to learn.
Mauricio:
Exactly. Well, very interesting, yes, especially when it comes where you just mentioned that in the market, you know you have the other portfolio companies in which you can cover a lot of verticals around the world.
Yat Siu:
We are probably one of the largest, if not the largest Web 3 investor, maybe I don’t know, I mean 540 plus actually more portfolio companies today.
And I think by the way, in web 3, there is no way that you can be a serious business without being an investor. This is different in web 2. In web 2 you can think about building I believe that we have more investments than Google and Apple and possibly Facebook combined. Now just think about that for a moment, OK, Just think about that as a concept. They have much more money than us. They should be investing a lot more, but they don’t because it’s just not part of the business model. Because in web 2, you are not about creating common ownership. You’re about essentially extracting from your customer, right? The business models, the thinking inside the company is I make a product, I sell you, I take your money, I give you value from the service, but really I’m about selling your products. Whether it’s fun, entertaining, useful, doesn’t really matter. In Web 3, When you sell, when you, when you sell a token or you sell an NFT, which is also a kind of token, you’re actually selling ownership of a network. So the relationship you have is very, very different than when you’re selling something that you will constantly sell.
And that mind shift has to change. In a world where it’s about creating common ownership across networks, that means how do you make these ownership? You have to invest, you have to contribute back. And to us, I feel very strongly about this because I think that if Apple, for instance, created an ecosystem fund, I think I mentioned this in a previous interview here, Apple has like, I don’t know, $250, $300 billion cash. I mean, some crazy amount like that. Imagine if they took 1% of their cash and made a seed stage funding program for App Store developers. That would be billions of dollars that goes to small companies that are trying to build something on the App Store that is not that different from governments giving tax breaks or small business loans that they do. They’ve built an ecosystem.
Apple is a nation, Facebook is a nation. Microsoft, what they’ve built, they don’t build a nation. They don’t use any of their balance sheet to put back into the ecosystem. But they do charge you 30%, right? And they also on top of it charge take your money for advertising. So they’re constantly value extracting. If you look at the business model in gaming, once you take away the advertising cost, then you take the distribution cost, like what you have to pay the platform, you end up probably giving away 70, sometimes 80% of everything you make to others and the rest is margin for you. Because you pay 30% to the platform and then you pay 30 to 40% in advertising. That goes also back to Apple, Facebook, Google. The reason they’re so big is because they take everything out of the ecosystem and they don’t put anything back into it.
Mauricio:
But do you believe that mentality is essentially the one company that’s it all and all in the early 80s-90s and beginning of 2000 American business corporate mentality that they were more focusing on covering like the UK century was a supermarket, but then suddenly they have something that became a bank, you know, insurance companies and and we are going to change that. I believe I can see that there is more like you say, ecosystems of very specific verticals, instead of one company does it all.
Yat Siu:
But that’s decentralization. I mean, decentralization isn’t just about one thing. Decentralization, for it to work, has to be fraud across everything.
Mauricio:
And I think that’s, I mean we will see in the next decade probably be longer, you know, a shift from new entrepreneurship to more worth decentralization because it’s more convenient actually than to do one company does it all.
Yat Siu:
So one way to think about this, and this is how we often think about Bitcoin and crypto, broadly speaking, decentralization doesn’t work unless the power structure supports it. And there’s power in decentralization, shall we say. So you can create an organization that is decentralized, but there’s no power, no point, no influence, no voice, nothing. But because of Bitcoin and because of crypto, you have power because it’s because it’s a form of money or it’s a form of value. That form of value, which is now 3.2–3.3 trillion depending on you, is power. And so that is the basis that makes decentralization possible because the ownership of the value of that power is decentralized. So you need to have agreement to do something with it. Without blockchain, without crypto, any decentralization effort wouldn’t work. But you can create some kind of common socialist framework somewhere. Doesn’t matter, right? You’ll be North Korea. No, nobody cares. And then it won’t be socialist. It will be in dictatorship, right? This aspect of where does a power sit starts with the fact that money is a form of power.
And this form of money is now owned in common ownership through a distributed and decentralized framework such as Bitcoin. That’s what makes it possible. And if an artist doesn’t understand that he has to participate in the blockchain ecosystem so that he or she can be in a truly decentralized value of the system where that power is truly distributed, they will never be free. They will never be free because you will always be dependent on the centralized power structures that control all the money, which in this case for musicians would be Spotify, but for artists would be agencies and that kind of stuff, whatever that means.
Mauricio:
YouTube and the communities in Instagram, they have power whatsoever on their own, on their own creation.
Yaros Belkin:
But do you gentlemen think, OK, you mentioned Spotify, it all started with Napster, which some say revolutionized.
Yat Siu:
It created a problem that needed to be solved.
Yaros Belkin:
Exactly. Do you see the entertainment of today and tomorrow, going through revolution, or evolution rather, because of what we discussed?
Yat Siu:
Here, yeah I mean to me, I would say it would fit more revolution. And the reason why is because, an evolution is gentle in my definition, it’s a derivation that is gentle and smooth and it doesn’t upset the current power structures. A revolution by definition upsets the power structures. And from centralization to decentralization, that’s pretty disruptive, OK? It doesn’t matter if Spotify one day wakes up and says we need to decentralize, that’s still a revolution. That’s like going from a monarchy to a democracy. That’s a revolution, right? It could be done gently, but it’s a big change. As opposed to creating, you know, a parliament where the king has veto rights on everything. And there’s a little thing, and countries have gone through this and when they haven’t reached that status, you have really bloody revolutions, right?
So to me, this is a revolution. And here again, the revolution is clear because of where the value shifts. If I’m an artist and I make more money, Simply put this way, I’m not going to be going the other way. But I first have to see that path, right, as supposed to trying to overthrow it and then start again and then recreate the sort of the same problem all together, right. So, I think of this as a revolutionary path. But the nice thing is, because it’s technology, it won’t have to be bloody.
Mauricio:
Well, it is in a way, You know, there is a lot of sadness happening when disruption. I wouldn’t say that I remember Alta Vista when it happened to them. You know, they just collapsed.
Yat Siu:
Yeah, Yeah. But people lost jobs and stuff, but it’s different, right? My point is, I think there is a market part and I agree, of course you don’t want that. But I think to me, that’s the natural flow of what capitalism is supposed to bear. Which is to say this didn’t work, was not sustainable.
So we go and find something new and something better, right?
Yaros Belkin:
And the harsher it is, the more proof there is as well. Like so it was this much blood wrong. So now we need this approach.
Yat Siu:
AndI think one of the challenges, and I think we kind of see this in the politics of today as well. When you start building on top of things where the actual free market didn’t really decide which way it would go. The structures are being created to basically protect something that then the bureaucracy. By the way, this is true even for companies, right? When the company gets too large, then you build a bureaucracy that doesn’t really protect the interest of what they initially tend not to serve, but the bureaucracy and the structures in and of itself.
Mauricio:
Bureaucracy protects bureaucracy.
Yat Siu:
Exactly, right. And then suddenly it gets too large and this famous saying, and I think this applies to everyone, including the Spotify, like, absolute power corrupts absolutely. Spotify did not set out to do what they’re doing today, right?
And I’m very sure that everyone in Spotify believes they’re doing good things. In a way, they are, because they essentially solved the Napster problem, right? But what ended up having is they ended up creating this incredible power structure because all money and all artists basically flowed through them. They became the ultimate agency of sorts, right? And then of course, what happened was that they suddenly had bargaining power. And the question becomes, how do you use that bargaining power? In music, If you remember, you know, the US had this crisis with ASCAP. And ASCAP had to be broken up as a monopoly because they were abusing the fact that all licensing of music had to go through them.
Mauricio:
It’s happening to Live Nation now. They’re going to be broken down like, because they have their news, Ticketmaster, they’re going to be broken down.
Yat Siu:
So do you see that it doesn’t matter if your government or country or if your company when you start amassing too much power that’s centralized, then elements of it will begin to corrupt. And again, people don’t believe they do bad things right?
It’s the intention may not have been there, but it ends up getting there because you suddenly have this ability to wield a certain type of power that you didn’t have before. And decentralization basically keeps us honest.
Mauricio:
You know, fair enough. I mean, my business partner met the guys from Spotify in London, a party he was #62 signed up to the Spotify, they didn’t have anyone. It was very, very London. The guys have no bad intentions. They were really like guys. Of course they did. I mean, think about from that day when Estefano, you know, sign up, it was #62 e-mail in the platform.
Yat Siu:
I assure you that, you know, when Facebook started off, of course we know it’s some of its history, but when it was growing mid year, word was today and word was then, of course, no idea where we’re going.
Mauricio:
It also intended, it just happens, but it is great.
I mean really, really impressive because like I said, with mocaverse and your approach, I think that’s the event entertainment industry that is a massive 1.5 trillion industry worldwide. You know, it’s not to be ignored. I think that if they get informal like that, you mentioned, it’s starting only by the core, you know, community, not just jumping right away to the same model that I got to the masses. I think in that way, this industry could be the next big industry that moves before aviation and before…
Yat Siu:
Oh, for sure. I agree with you only because it’s consumer and the engagement of that, one of the really powerful things around our blockchain, I find is that it really opens up a next level intellectual property framework. Imagine what the world would look like if you didn’t have intellectual property protection. No innovation, no capital for it, no flows, none of that stuff, right? You wouldn’t have a music industry, there wouldn’t be a film industry. Actually, there wouldn’t be pharmaceuticals, fashion, nothing, nothing.
None of that would exist if we didn’t have IV protection. But for IV protection to work in the current framework, you need to pay a lawyer, you need to register, you need trademarks, you need copyright. That’s a lot of money. So if you have an idea and you want to protect some intellectual property you created, how do you do that without spending all this money? And most of the time it’s only worth doing it if it already makes a certain kind of money, like if an artist, right. So the mode of a publisher is the fact that they have the machinery that says, oh, I can do the license protection, I can do the trademark, but I want something for it. And how much do you want is the question. With blockchain, I can do it by basically just minting an NFT for less than a dollar. Yeah, right. And that means you create and to your question around, what should places like Hong Kong and so on do? From that vantage point if Hong Kong creates more and other nations create more clear frameworks as to what are the digital intellectual property rights, then actually you can democratise the protection of intellectual property rights. So I’m not saying that, you know, like someone could just copy the Nike swoosh and then just put it on blockchain. That doesn’t make it theirs. That’s true, right? But what you can prove is original origination on day one. If I was the first person to do it, then I can at least prove that and what is it worth relative to someone else, right? There’s a fame, there’s a story that we had in one of our portfolio companies called dance fight. They started this business because the dancer had some special moves that were really cool on TikTok and then it was used in Fortnite, one of the biggest games in the world. And you know, he played Fortnite, he loved the game. So he asked like, hey, this is cool, but this is my dance move. So can we talk about this? No feedback, nothing, like he didn’t exist. And essentially just literally turning him down because he couldn’t prove he was the owner. And actually maybe they didn’t even care, right?
And if he had some proof to indicate that he was a creator of this, he would have had a case. So, this is true for all sorts of, we might say dance moves seems like a funny thing to protect, but actually there’s an originality involved, the structure around that. And there’s something around the fact that you can prove. And by the way, much of that proof, it’s kind of like a test, like kind of like, citations in like in scholarly work. It’s not even about the money, it’s about the respect given that you actually were the inspiration. Because I think there is an argument that can be made about how much of this is IP and how much of this is really just inspiration, right? Like if someone gives a talk and that’s really inspiring and they use 90% of the talk in their work, I don’t know that’s commercially predictable, but there should be a way to say because it’s inspiration maybe.
And it’s like if I look at some art and I’ve brought original art, but based inspired, it doesn’t necessarily mean that I should be entitled to a royalty, but I should give credit because that credit is a different kind of income that goes to someone else to say, oh, that was I got inspired by seeing this. And there’s value that the other person receives that’s also virtual as a result. So, I think that’s important. And blockchain basically secures that.
Yaros Belkin:
Perfect. And as always, any last words.
Yat Siu:
I mean look, I mean I think…
Yaros Belkin:
To conclude it all, because it was amazing, We really got carried away. And thank you very much for opening up today.
Yat Siu:
My pleasure.
Yaros Belkin:
Let’s sum it up.
Yat Siu:
Well, I mean, OK, to sum up, I think we discussed it quite a fair bit. I do think that you know, culture, entertainment, things that we’re emotionally attached to, that we have great feelings for. To me, that’s the great on border. That’s why we did game focused on games as well, because people aren’t just playing games for so-called fun, they’re emotionally connected. They make it’s community gaming is 80% social.
Most people don’t really fully recognise that just the reason why people play games is because of social for the most part.
Mauricio:
Can I say something? In the club industry, I know a company. I was going to say the names. You know, a good friend of mine, they own 250 clubs. They cross 30% and the deep story they’re down is that they are generally new generation, they spend most of time on the gaming and they’re not interested to go out. But what was the dream to say about why? I mean young guys, one girl is because the girls now they are there, so they start to create. The girls are gamers and they stream and that is how they make their friends and their relationships. No need anymore to go to the bar to hit on a girl. Well, I can be on the right group. The right group I show my skin on my avatar how cool I am. Yes, sorry I just wanted to remember that because it is taking a huge amount of people that is evolving.
Yaros Belkin:
Guys, and the top demand right now, even among the highest, they’re paying $5–6–10000 per day to top gamer girls, just to be flown there just to game with them.
Yat Siu:
Indeed.
Yaros Belkin:
Those are the proofs of your words. Yes.
Yat Siu:
Absolutely. So I didn’t think it would go there, but I agree with you. I agree with you and it is very much, it is very much that. I think the other message I want to close off with, which is sort of tangential but related. We’re all talking about things that are valuable to society that create utility. I think for the last couple of years, again, I’m not anti meme. I’m actually quite pro meme in terms of it’s fun and it builds community. But I think this era, especially when you think what happened over the last 30 days, starting with Trump, Melania, most recently with Libra is calling the top on essentially, I would say the more speculative type of meme. Again, they built a form of community, but I think now the emphasis will be on utility and the form of usefulness as the narrative, right?
And I think this is also a good shift because now I think we’re going to enter, you know, there’s a bit of pain, but we’re going to enter an era where people are going to be much more interested in projects that are focused on something that they can believe in. Because when you think of the foundation of how blockchain first started, it’s kind of this wave people first entered because they believed in something. And then a lot of money was being made and then you get a whole bunch of different types of people coming in. And even though it’s not a bear market in crypto really, because if you compare it to what happened in, you know, during FTX and you know, even, you know, pre Trump was elected, I would argue that the feeling in altcoins, not Bitcoin, in altcoins is definitely much more bear market feeling because of all the bleeding that’s happened and the value extraction, which is interesting because while the rest of the world like the stock market and Bitcoin is doing well, the altcoin market feels more bearish, which is the best time to build. It’s also the best time to regroup and do stuff. But it will recover much faster because it’s not how the rest of the industry is.
And the other thing, the message I want to put in this one, why we were so bullish on particularly entertainment and gaming and culture, is because there’s two major events this year that I think will kick this industry back in a really big way. Not just Web 3, but just gaming culture. And that’s the launch of Nintendo Switch 2, which hasn’t launched a new console in eight years. And GTA6. There’s nothing bigger in our industry globally. I don’t mean just gaming, right? And culture and everything than GTA6. And they’ve been delayed many times, but I think rumor has it they had that it will be September. And if not Q4, what will happen? People will buy two major indicators. One, people will buy hardware to play GTA6. How many people are waiting to play GTA6? They’re going to buy a PlayStation or an Xbox just for that. And that means other games are about that. So that’s one revenue boost 2 and this is even bigger. Most people don’t talk about this. The gaming industry in Web 2, which has affected the sentiment in Web 3 because we’re very narrative driven, has been flat in growth. And the reason why in large part is also because the cost of buying a game has been the same for almost 10 years now. Let’s think about that. Pre COVID, pre QE, even you would buy a game for about $50. That’s still what you buy a game for today. So in real money terms, the gaming industry is making less money. When you think about the money supply that’s out there, GTA6 is going to push that. And if there’s one game that can change this, it’s GTA6, means that they’re probably going to try to push closer to $100. I don’t know. We don’t know what the price is. Is it 90? Is it 100? But if they can push that and they can get through, this will reset the entire industry. Revenues will absolutely increase just because of the floor price, so to speak, will go up. This will have an impact in gaming investment. This will also create a different feeling around web 3 games where it feels expensive.
But actually when the pricing goes up, because again, you know, there’s been essentially no inflation protection on the gaming industry. The cost of milk is more, but not the cost of a game, right? So these are things that will impact the industry this year. And I think we’re going to create a big shift. Most people aren’t talking about this, but I think this is something that will have a big impact for us this year.
Yaros Belkin:
Thanks bro.
Yat Siu:
Thank you.
Yaros Belkin:
As always.
