Thunder Studios bet big on the metaverse—and it’s now paying off.
The Long Beach-based production studio and Infinite Reality, the metaverse platform in which it was the lead investor, were acquired this week by Display Social, a social media network that pays creators for their original content. The deal will see Thunder Studios and Infinite Reality integrate their virtual production capabilities into Display’s creator network. Known for producing virtual live events, Thunder Studios notably utilized Infinite Reality’s platform to create a virtual Burning Man experience.
The acquisition is part of a larger foray into the metaverse for Display Social. In November, the company acquired an intellectual property patent from digital content platform LookWithUs.com that allowed it to expand its metaverse capabilities. Now, it has Thunder Studios’ 150,000-square-foot Long Beach facility at its disposal; the studio’s virtual production capabilities include an esports arena, a dedicated XR stage, and motion capture and volumetric stages—all of which allow Display to work with creators and entertainers looking to produce metaverse content.
“The metaverse is, in essence, the reinvention of television,” Thunder Studios CEO Rodric David told dot.LA. “It's the new TV, as we will go there to entertain and be entertained and interact and socialize. We recognize that it's also the convergence of the three primary behaviors that youth culture exhibits on a mobile device: gaming, entertainment, and social media.”
While the companies declined to disclose the financial specifics of the deal, Display co-founder and CEO John Acunto said it values the combined company at “over a billion dollars.” Acunto will continue to serve as CEO of Display while David will become its president. Though Display is based in Connecticut, the combined entities will have a significant presence in Los Angeles and New York.
Display prides itself on being creator-centric and promises creators a payout rate of up to 50% on ad revenues generated by their content. With the merger, Display can now provide those creators with a metaverse platform and an app enabling them to distribute content, engage with their fans, and build virtual stores.
“It's always live, it's always on,” Acunto said of the metaverse. “We believe fundamentally that being able to bring the best possible content to that live environment is super important.”
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The Democrats’ trifecta victory in 2020 marked a significant change in the way Washington views tech policy. The Biden administration has signaled consistently that they’re looking to get more involved in tech policy than their predecessors, whether through regulations or reworking previous legislation. The administration is populated with officials who are knowledgeable and opinionated on issues like consumer privacy, cryptocurrency and antitrust and as the Democrats fight to enact their policies, we are likely to see at least some major changes in 2022 — here’s what to watch for.
Everybody in Washington agrees that Section 230 of the Communications Decency Act is a problem. Enacted in 1996, the policy protects internet platforms from liability for third parties content. Section 230 was a hot button during the 2016 and 2020 elections, when misinformation ran rampant on social media. Republicans believe Section 230 gives tech companies cover to censor their content on social media; Democrats say the law gives tech companies too much immunity for content posted on their platforms. Donald Trump has been a vocal opponent of the law, framing it as a general boogeyman. Given that he still carries the banner of the GOP, Republican lawmakers hoping to get his support are likely to attack the policy. As a candidate for the presidency, Biden said he would revoke Section 230, but his Justice Department is now defending the constitutionality of the statute in Trump’s lawsuit against Meta.
Facebook’s Overseas Acquisition of Giphy
Meta faces a difficult battle overseas (and one that may set a tone in the States) after the UK’s antitrust regulatory agency blocked their $315 million acquisition of Giphy. It was a major step in the ongoing tech antitrust battle; Facebook will begin 2022 by challenging the ruling. But with the agency making such a substantial move, it’s unlikely they’ll back down. Federal Trade Commission Chairwoman Lina Khan, a known antitrust advocate, is sure to be watching how Facebook and the Europeans battle it out.
DMCA Section 1201
Section 1201 of the Digital Millennium Copyright Act has become a hot issue in tech policy over the past few years as iPhones became the standard communication and Apple’s lawyers have proven themselves tenacious on copyright issues. Section 1201 deals with right-to-repair issues—that is, the right of consumers to fix their own hardware or to take it to third-party repair shops. The Biden administration has come out on the side of the right-to-repair movement and in a 2021 executive order, he encouraged the FTC “to issue rules against anticompetitive restrictions on using independent repair shops or doing DIY repairs of your own devices and equipment.” Section 1201 is updated every three years, and new exemptions to the law were issued in 2021, meaning they are likely to be tested in court in 2022.
ISPs and Title II
When Federal Communications Commission Chairman Ajit Pai repealed the Open Internet Order in 2017, it meant removing Internet Service Providers from their classification under Title II of the Internet Communications Act. Pai’s move took away the regulatory powers the FCC previously had over ISPs, meaning that the job of overseeing regulation has fallen to the FTC, which is a law enforcement agency rather than a regulatory one. But the Biden Administration has been critical of how ISPs have operated and monetized the data they get from consumers and Federal Communications Commission Chair Jessica Rosenworcel has previously supported reclassifying ISPs under Title II. In an October report, the FTC blasted ISPs, saying they collect troves of data, surveil users and “place consumers into sensitive categories such as by race and sexual orientation; and share real-time location data with third-parties.” Restoring the FCC’s regulatory powers over ISPs is a top priority for a number of Democrats, including Sens. Elizabeth Warren and Ed Markey and we can look for that conversation to continue in 2022, especially with FTC Chairwoman Lina Kahn remaining vocal on the issue.
A New Look at the Office of Technology Assessment?
Washington is slowly beginning to talk about restoring the Office of Technology Assessment, the nonpartisan congressional agency that for two decades informed members of Congress on tech and science issues (until then-House Speaker Newt Gingrich abolished the OTA in 1995). The Brookings Institution, an influential and left-leaning D.C. think tank has come out in favor of restoring the Office of Technology Assessment. This is likely to be a Democratic priority, a The duties of the OTA have been taken up by the Government Accountability Office, but critics say the GOA is woefully equipped to examine critical issues like AI ethics.
SEC & Crypto
Cryptocurrency has boomed in an unregulated market over the past decade but that era may soon be coming to an end. SEC Chairman Gary Gensler has been vocal about his desire to have crypto regulated at the SEC, though Republicans have pushed back upon those ideas. When Biden signed the infrastructure bill into law, it included a provision that would tax cryptocurrencies, but that language was broad and upset many in the crypto space. The SEC hasn’t put a timeline on when they might try to strap regulations on cryptocurrencies, but in December the agency charged Ripple Labs with selling $1.3 billion in unregistered securities. The procession of that case in 2022 will tell us a lot about the SEC’s power in the industry. The appetite for crypto regulation stretches across the Biden Administration — in November, the Treasury Department published a report on stablecoins which quoted Treasury Secretary Janet Yellen as saying “the absence of appropriate oversight presents risks to users and the broader system.”
California Privacy Law
The California Consumer Privacy Act is viewed as one of the most important pieces of tech-related legislation in the United States. In 2020, the ballot proposition created the California Privacy Protection Agency, which will not begin enforcement activities until 2023. The agency is headed by Ashkan Soltani, who has a long pedigree and has worked on federal investigations into multiple big tech companies. His agency will enforce the California Consumer Privacy Act, which gives users more control over their data — consumers will be able to know who is collecting their data and how it is being shared. The Act also limits the usage of sensitive personal information like race and sexual orientation. The CCPA is aimed at large industries — those with a gross annual revenue of over $25 million and sell consumers’ information. In 2022, the bill may be amended again. But more interesting is how other states aim to copy California’s law which might hint at some federal statutes in the distant future. And some states, like Nevada, have brought on similar legislation. Look for more of those bills to pop up in statehouses next year.
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Next year is expected to be the first trillion dollar year for U.S. ecommerce.
Adobe Analytics predicts that the online shopping growth witnessed this year – it jumped 42%– will only march on as consumer habits shift online.
The pandemic both accelerated these trends and sprouted new problems as supply chains bottlenecked and consumers often found products sold out. And as retailers scrambled to make up for inventory shortages, online retailing took new shapes as the crypto craze seeped into products and NFTs became popular among creators, collectors and investors and established a framework for artists to operate outside of the conventional art-world.
It’s the backbone of Los Angeles companies like Thrive Market and GOAT, the sneaker marketplace and it’s a bet that investors in DoorDash and Instacart to ChowNow are banking on.
Augmented Reality (AR)
AR has redefined how consumers shop. With this technology, shoppers can see the item they're shopping for, which helps the decision process. For instance, Warby Parker, the glasses retailer, allows customers to try on the frames virtually before they purchase. Specific industries like fashion and home decor have seen the biggest impact from AR technology because the customer can try it on before visiting the brick and mortar.
In May, Snap announced their creation of the AR Spectacles. The glasses –still in Beta– are meant to augment tours of certain locations and Snap’s technology can identify objects in the camera's field of vision. The device includes a touchpad at the frame's hingepoint, two cameras, four microphones and two speakers. This further cements AR technology to be a useful tool that brands will use to increase sales.
Crypto is becoming mainstream. This year Mastercard began a partnership to offer crypto credit, PayPal began accepting the currency and it wasn’t unheard of to see crypto ATMs in malls. As if to underline the point, Staples Center is also being renamed Crypto.com after a Hong Kong based company that runs a crypto exchange.
What it all means is that there’s another payment form to match the digital age. But as its popularity expands, further regulations are likely to follow. Securities and Exchange Commission Chairman Gary Gensler has indicated that he will be seeking regulations to protect investors.
NFTs have been a new way to make money online.
Whether it's a flying cat shaped like a Pop Tart or the viral “Bad Luck Brian” meme, NFTs (non-fungible tokens) have been all the craze. Images, domain names, artworks, and music can sell as NFTs. All NFT’s have smart contracts attached to them and are goods that you can obtain in exchange for crypto, typically Ethereum.
There are thousands of digital creators and artists looking to cash in on this trend.
Paris Hilton is one celebrity that has jumped on the NFT train creating a collection of her own with Blake Kathryn as the designer.
In August, one of the world’s biggest fashion brands joined in on the NFT hype, with Louis Vuitton launching its NFT game marking its 200th anniversary.
“Brands that historically thrive on scarcity and exclusivity make a tremendous amount of sense like Louis Vuitton and Dolce and Gabbana,” Summer Friday President Rob Simone said. “Scarcity is a big component of the current Metaverse climate.”
While it’s unclear that these digital buys will have any staying power, Grant Gelt from Masscult, a creative strategy and services agency said, “The second word got out that artists and creators can make money in the space. Magically, it created a bit of a gold rush, but what I'm really excited about is what people are going to start doing with NFTs outside of just the art space.”
Facebook changed its name to Meta this year and sparked a conversation about the next wave of the web.
The metaverse is a term that refers to digital spaces made lifelike with the use of technology like virtual reality or augmented reality. Currently, most spaces still look like the inside of a video game, but companies are increasing their efforts to push those bounds forward. As most jobs and schooling take on the hybrid model, there is a demand for online interaction to be more lifelike.
Gucci, the designer brand that prides itself on Italian craftsmanship has tapped into the virtual space by offering a digital-only limited collection for Roblox, the online game platform for users to accessorize their avatars. For two weeks, Roblox’s 42 million users could spend from $1.20 to $9 on collectible and limited-edition Gucci accessories. Now that the window to obtain Gucci collectibles is closed, the value of each collectible has increased exponentially.
The interest in virtual spaces was expedited as a result by the COVID-19 pandemic.
Simone said, “People were consuming more content, people were sleeping less and staying online more, gaming more, people were investing more and there was more cash readily available for people to try stuff.”
The Creator Economy Is Booming
Influencers are the new brand spokesperson. While this is nothing new, next year, brands and others are only likely to increase their reliance on influencers and creators. The influencer marketing industry is on track to be worth $15 billion by 2022 according to Business Insider.
YouTube and comedian, Elizabeth “Liza” Koshy collaborated with Fabletics, James Charles known for glam make-up videos striked a deal with Morphe, and the controversial Logan Paul went toe to toe with Floyd Mayweather in the boxing ring that generated more than one million PPV buys.
“The entire creator economy is growing, with larger amounts of advertising and platform money each year. This means that the big creators are growing, but importantly, so too are the mid to long-tail of creators that make the creator economy vibrant. We’re excited about our role in making the creator economy a core part of the global economy,” said Creative Juice co-founder and CEO Sima Gandhi.
97% of Gen Z consumers use social media as their top source of shopping inspiration according to the Influencer Marketing Factory. From viral trends like #TikTokmademebuyit or #AmazonFinds are causing fans to follow suit and purchase. After all, Gen Z has a 150 billion spending power.
Due to the shift in fans no longer resonating with faceless brands, creators are now garnering the power in the media ecosystem through their online personas.
Sustainability, More Than a Buzzword
The climate crisis is making consumers rethink their shopping habits.
Fast fashion has made the industry one of the biggest culprits in the climate crisis. TheRealReal, ThredUp and Santa Monica based marketplace, Tradesy have thrived offering second hand clothes and keeping waste from landfills.
According to ThredUp’s report, the secondhand clothing business is expected to see double the sales from $36 billion to $77 billion by 2025. First-time buyers of secondhand apparel jumped by 33 million last year and a majority of them plan to continue spending in that market.
While companies like H&M have moved away from their fast fashion roots using materials like organic cotton and recycled polyester; other companies like For Days, a Los Angeles-based clothing company have integrated sustainability into their branding.
Big box retailers are getting in on the positive trend. Target pledged to use 100% sustainable, organic cotton in all products from Target-owned brands by 2022. Amazon also pledged to go carbon neutral with half of its shipments by 2030.
According to Nielsen, the global measurement and data analytics company said that ninety percent of millennials, ages 21 to 34, said they are more willing to pay more for products that contain environmentally friendly or sustainable ingredients which indicates that the tides are changing. Consumer behavior has changed and the industry is adapting.
Correction: An earlier version of this post misstated the name of Rob Simone's agency Summer Friday.
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