The NFT space is still transforming as we continue to unlock new possibilities using the underlying blockchain technology. Serious projects are pushing narratives away from just digital artwork and into a new world of potential use cases. While many understand NFTs to be a medium for creative expression, the technology goes well beyond art and businesses are beginning to take notice.
NFT utility is now a major focus for those building in the space. The most recent example of this is the emergence of subscription NFTs, which represent a massive revenue opportunity for web3 businesses.
What is a Subscription NFT?
With subscription NFTs, you don’t necessarily pay for ownership of the digital asset but rather the services associated with it. This is similar to any monthly subscription service, in which users pay a recurring fee for access. An example would be community discord membership, with access only provided to those that hold the NFT and pay the subscription fees.
The potential here is huge, as subscription NFTs unlock new potential business models for web3 projects. As secondary market royalties become less reliable, businesses are seeking new ways to sustainably finance their projects. Old models incentivized high trading volume to generate royalties, but subscription NFTs inspire long-term users with a real interest in a project’s offerings.
A great example of a company driving innovation around subscription NFTs is Unlock Protocol. Unlock is helping web3 communities launch their own membership programs using NFTs as keys to unlock gated content and experiences. Unlock Protocol was created “to provide an open, shared infrastructure for memberships that removes friction, increases conversion, enables scale, reduces costs, and evolves the web from a business model built on attention toward one based on membership.”
This is a great example of what subscription NFTs represent in the future of web3. There is an opportunity to deploy business models focused on sustainable growth of communal value.
Focusing on Customer Lifetime Value (LTV)
Where NFT projects were once reliant on quick flippers to pump the trading volume, now focus can be applied to acquiring the right users with more LTV. NFT flippers represent a massive churn rate for projects, always looking for an opportunity to sell and jump to the next trade. This is not a good fit for businesses aiming to acquire long-term users, as a user base of flippers changes by the minute.
Now that creator royalties are being phased out, businesses require community members that add value over time. This is where inspiration from proven web2 business models can be helpful. As I see it, subscription NFTs currently represents one of the most sustainable revenue options for web3 projects.
Where most NFT value has been driven by hype and virality, subscription NFTs derive their value from utility. This attracts customers that are interested in the subscription offerings, making them more likely to remain engaged for the long run. LTV goes even further when you consider how some D2C SaaS products are used by consumers.
Netflix users frequently add their friends and family, making it easy to handoff subscription ownership when one user no longer wants to pay. While the end user might be changing, the subscription is remaining active which is the most important thing for the business. Subscription NFTs incentivize similar behavior, retaining value should the owner choose to resell. For the first time, this creates a vibrant secondary market for subscription resellers, a value proposition that most subscribers would love to see.
The Power of NFT Subscriptions
We’ve all had membership to one organization or another, whether it’s the local gym or a company Slack account. While membership experiences vary, there is one challenge that is consistent across subscriptions…an inability to resell. I’m sure we’ve all looked back on a yearly subscription that went unused thinking how great a refund would be. Until now, we as members have been stuck with our subscriptions.
NFTs are shifting this paradigm, allowing membership access to be resold. This sustains the value beyond one user and opens the door to new opportunities for value creation. Members can now “own” their subscription as an NFT, selling access and forfeiting membership whenever they’d like. This utility helps NFTs retain the core value associated with the subscription offerings, and adds a layer of value based on the NFT’s unique history.
As resellers list their subscriptions on secondary markets, value will be attributed to the historic data retained in this asset. Perhaps it has a year membership pre-paid, or it comes with five years of subscription content. Projects can even factor this into their NFTs, delivering more access to NFTs with the longest active subscription.
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Web3 represents a world of new opportunities for brands and creators. I believe that some proven web2 business models can be adapted and improved upon using web3 infrastructure and tooling. Subscriptions have fueled both B2B and D2C web2 revenue models for years and will continue to remain relevant well into the future. NFTs elevate subscriptions by deepening ownership and retaining value for the end users. This is why web3 projects with true utility should be exploring subscription NFTs to drive revenue and growth.
We are true believers in NFT subscriptions over at my company, Liteflow. So much so that we are working on a subscription model for our own business. Soon, our customers will purchase an NFT from us and pay a subscription fee, gaining access to our web3 infrastructure solutions. If you’re interested in learning more, and how you can explore the same business model, just reach out! At Liteflow, we bring the flexibility of building web3 projects according to your needs, while helping you own your revenue model for the internet’s next era.