Author: S.Y. Lee, Story Protocol CEO and co-founder; Translation: Golden Finance xiaozou
A few years ago, I sold my last company, Radish, to Kakao, and today, I’m very excited to launch Story Protocol, which has received $54 million in funding led by a16z crypto. I’m also very excited to be working with my amazing co-founders Jason Levy and Jason Zhao and my teammates.
Media has always been the industry most significantly impacted by technology. For the past decade, I have been working to fix the business model of news and media. Here is my journey from news platform Byline Supplement and serial fiction app Radish to Story Protocol, and why Story Protocol’s infrastructure (turning IP into a “network”) can provide a solution to the structural problems facing the content and IP industries.
In 2014, I founded Byline, the former Substack news platform. Its goal was to use Patreon and Kickstarter-style crowdfunding to support journalism — an industry dominated by an ad-driven business model dominated by giants like Google and Facebook.
We support amazing journalists like Peter Jukes, who uses crowdfunding to keep exposing media mogul Rupert Murdoch and his lieutenants, and who interviewed Julian Assange through heavy security at the Ecuadorian embassy and gave him lamb kebabs, which was really fun.
I admit, it was a bit ambitious and premature to be declaring the solution to journalism straight out of university, but it was well worth it to have the support of my heroes Harold Evans, Hugh Laurie and Hugh Grant.
Later, I moved to Radish, a platform focused on mobile novel series that helps authors create streamlined IPs, gain insights for each chapter, and monetize through micropayments. We have become a very active serial content platform, and some top IPs are even updated several times a day. It took us several years to learn to make popular IPs. Like many startups, Radish became an overnight success on its 2,000th day. Fortunately, we grew significantly and were acquired by Kakao.
This all sounds like a win-win situation, and while the results are satisfying, it also means giving up the dream of becoming the world's largest bottom-up original IP creation platform. The content industry lacks network effects and must rely on huge content and marketing budgets to stay afloat. Last year alone, Netflix spent $16.7 billion on its content budget and $2.5 billion on its marketing budget, while their annual revenue was $31.6 billion.
When Apple banned targeted advertising, Radish, like other mobile apps, faced rising CACs (customer acquisition costs). I mentioned the CAC surge when I first introduced Radish to a16z Crypto.
Below is a graph from Moloco showing the peak CPI (cost per install) after Apple banned ads targeting paying mobile users.
The content industry faces an endless vicious cycle of investing content and marketing budgets to maintain the business model and compete with other content platforms. Look at the current streaming wars.
That's why you see Hollywood keep riffing on the same sequels, prequels, spinoffs, and remakes of existing franchises. Studios are just throwing all their budgets at what works. No one wants to take any chances.
In fact, the chart below shows that the top ten grossing movies last year were all from existing franchises like Marvel and DC.
This led to a recognition that we needed a structural solution to the top-down studio business model that required constantly pouring astronomical content budgets and marketing dollars into the same old series.
IP itself must become a network. Our lead investor cdixon.eth said, “The killer app of the Internet is the network. Web pages and email are networks. Social apps like Instagram and Twitter are networks. Marketplaces like Uber and Airbnb are networks.”
I envision a model where the IP becomes a network of fans and creators - spreading the word and promoting the IP in games. Your users will bring the best ideas for optimizing your IP. They will even bring the distribution and funding needed to launch the IP.
That’s why I started the Story Protocol project, Web3 finally provides all the tools to assign ownership to network participants, such as fans and contributors. My co-founder and I firmly believe in the vision of transforming IP into a network of fans who will not only consume, but also actively recreate, expand, spread the IP, and even provide financial support because they feel a sense of ownership in the project.
To achieve this future (rather than building an NFT project as has been done many times before), Story Protocol is starting from the ground up, leveraging networked creativity.
Just as Git revolutionized the development of open source software by enabling the networked development of code, Story Protocol is changing the development of creative IP. We are building Git for IP with ownership and incentives.
It does this through a protocol architecture consisting of two elements: data structure and modularity. Data structure is the "noun" and refers to storing IP on the chain, just like Lego bricks. Modularity is the "verb" that supports functions such as licensing, royalty sharing, re-creation and co-creation.
With this infrastructure supporting IP Lego, each IP can easily leverage global creativity and capital to launch a network around its IP. Web3 can finally deliver on its promise of composable IP, where IP atoms can be frictionlessly transformed into IP molecules.
Imagine the next Game of Thrones being born from the Story Protocol. The creative minds behind the series register a basic outline of the story, characters, and places — stored using data structures on the protocol.
Using the licensing module, they kick-started their project by selling licenses to thousands of their earliest fans as well as professional creatives seeking to expand their reach.
As the initial IP accumulates and expands, the value of contributing to the IP also increases. Creatives can share part of their IP rights or revenue by using the licensing and royalty modules of the protocol, thereby providing participants with a real gaming experience. As the IP grows, contributors (both amateur and professional) will have more incentives to join the network and share the mission of expanding the IP and creating network effects.
On top of these IP collections, we hope to see a developer ecosystem that brings crowdfunding tools, IP discovery, licensing modules, asset authentication, and community development.
