Welcome to another edition of In Transit. This one is longer than usual, but I hope you take the time to read it!

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Key Takeaways:

• Disney's patent filings explore blockchain's role in its future strategies.

• Innovations focus on merging online-offline experiences and enhancing interactivity.

• Disney's blockchain exploration could guide other brands in digital engagement.

• Strategic investments signal Disney's shift towards immersive digital ecosystems.

• Patents propose NFTs to unify Disney experiences, offering personalized fan interactions.

A few weeks ago, I found Disney patent filings about NFT technology, which led me to explore the Google Patents rabbit hole.

Did I read them all? Yes.

It paints a picture of Disney’s (potential) onchain future.

In this post, I'll piece together insights from these applications and make educated guesses for the world's biggest entertainment conglomerate.

Understanding how Disney plans to use blockchain technology is valuable for several reasons.

• It can inspire and set a precedent / playbook for other brands.

• Moving towards a future state of the internet where users have more ownership requires attracting more people. That happens through a) a relevant value prop and b) distribution. Disney has the latter, and they can create the former (if they execute well). This benefits everyone building in the space.

This post comes a week after Disney announced a $1.5B investment in Epic Games (creator of Fortnite) and a partnership to “collaborate on an all-new games and entertainment universe that will further expand the reach of beloved Disney stories and experiences”.

Unrelated to NFTs, it lays a solid foundation for this essay. The announcement signals Disney's adaptation to changing consumer behaviors and shifting attention to digital platforms and economies.

An NFT strategy is another vehicle for that.

The Pre-Show

Before discussing the patents, let’s set the stage. Disney has done some experiments with NFTs already. Three major ones relate to digital collectibles.

• Collectibles on VeVe platform

• Collectibles through Cryptoys partnership

• A Disney Pinnacle app in partnership with Dapper Labs (still in beta)

It’s natural for the first experiments to be simple, familiar (merchandise) and safe (third party).

These initiatives don’t have utility or connection to the broader Disney ecosystem (for now).

For the company to succeed with a broader NFT strategy, it must incubate it from within and integrate it into its ecosystem. The patents suggest the company is on its way.

Instead of listing patents, I’ve created a few themes for us to explore:

• Online-offline experiences

• Location-aware NFTs

• Interactive stories

• Digital collectibles

• Loyalty and customer journeys (onchain-offchain)

Disclaimer: I refer to “patent” throughout this essay, but that is shorthand for “patent application”. All insights were derived from pending patent applications, and as far as I can see none have been granted (and maybe never will).

Online-offline experiences

The Disney ecosystem is a huge digital-to-physical experience, from movies and TV shows to theme parks and toys. Despite being one company, I imagine the tech stack powering everything from Disney+ to theme park ticketing is fragmented and complicated. Operating globally adds complexity, and distribution channels like the Apple AppStore and other platform dependencies also add to it.

As far as I know, Disney doesn’t have an ecosystem-wide loyalty program that connects every consumer touchpoint, digital and physical. But they should. It’s likely part of their NFT strategy (more details in the last theme).

A common counter-argument against using blockchain technology is “you can do it without blockchain”. This is an example where that argument applies. It could be done, but it's impractical, maybe even unrealistic. Using a public ledger and a standard (like NFTs) is easier.

Many patents focus on how NFTs can connect the fragmented touch points of the “Disney experience”.

One patent describes “Linking onchain assets with off-chain systems and accounts”. The application mentions mechanisms that enable actions like watching content on a streaming platform, attending an event, or being at a certain location to issue an NFT or modify one that’s already in a user's wallet.

This could be done by linking a wallet and a Disney+ account, or an app experience where you scan a QR code after a movie on your TV screen and it's recorded in a “loyalty NFT” in your wallet.

Location-Aware NFTs

Theme parks are big money-makers for Disney. Enabling tailored and memorable park experiences is key. Some patents point to this, from blockchain-based digital tickets (preventing fake tickets and enabling tickets as data points in a broader loyalty experience) to the more esoteric:

Tailored real-world experiences based on held assets

The patent describes real-world experiences that adapt based on assets held (or actions taken) by a wallet. For example, an “Iron Man” menu item revealing itself at a theme park restaurant, but only if you watched all the movies on Disney+.

Location-Specific Mints

Describes using on-location camera footage (e.g. sports event, photo from a ride etc.) to mint a memory NFT. It goes further, describing how two patrons in the same place at the same time can “collaboratively engage” and combine their minting experience to collect special “group NFTs”. This gets fun when you imagine that taking special actions like these could unlock something exclusive (like behind-the-scenes footage unlocking for your Disney+ account).

Collectibles – Digital and Physical

As we covered, Disney has ventured into digital collectibles already. It's a massive opportunity for the company if done properly.

IP and NFTs share a similar trait: network effects accrue to the asset, regardless of the platforms and formats used to distribute and consume.

Combining the two creates a potential super-vehicle to make intangible value tangible. Disney may have the most untapped intangible value in the form of brand, character and story affinity among fans in the world. An abstract gold mine.

Succeeding with digital collectibles requires making them matter. Early Disney digital collectibles exist outside the broader ecosystem, and in this context, doesn’t matter (beyond ownership).

When a fan holds a digital collectible, it should tailor other experiences in the ecosystem. NFTs can have levels of utility. A Star Wars collectible could also function as a ride ticket when you visit a park. And the ride ticket could level up the collectible. This is the kind of interplay the company should create with its collectibles. It’s consistent with what we previously discussed about entertainment franchises building character-first loyalty experiences.

One patent emphasizes the importance of sinks for NFTs and tokens; Incentives for collectors to burn NFTs for some other utility or value. The patent suggests this is important to prevent value dilution over time as more NFTs are issued. Disney is already considering NFT ownership to be value accretive for the fan-owners, and that maintaining stable and healthy marketplaces is important. That’s a good signal.

Toys With Brains(?)

Another patent on this topic taps into the relationship between physical and digital objects. Merchandising is a big part of Disney’s business, and we’ve already seen them start to bring the value of collecting to the digital realm.

In the web3-native world, Pudgy Penguins have successfully dropped physical toys with a digital connection; scan a QR code to create a wallet and redeem a digital collectible.

Disney’s patent describes taking this a step further: enabling physical objects (like toys) to change behavior based on digital cues. For example, a toy Iron Man with a chip inside that connects to a user's mobile wallet. If you went to a certain location to collect an NFT or saw a certain show episode, it unlocks a new ability that you can transfer to your physical toy. It’s a fun design space to consider.

Interactive Stories

Some patents open the door for interactive and gamified stories, where the content is adjusted based on user actions. It’s not a space I’m particularly excited about, so I won’t spend much time here. It’s my personal preference (obviously), but multiple-choice, scripted content with fixed outcomes is a faux participation mechanic. I’m more bullish on IP brands letting fans participate by building and remixing on top of the IP. There aren’t any indications of Disney going in that direction, though.

Customer Journey & Loyalty

The initiatives and NFT applications have a common element: using NFTs to connect fan engagement and actions across the ecosystem in one place; a blockchain-based wallet controlled by the fans.

One patent focuses on digital wallets in general, while another delves into loyalty to describe a wallet that generates a visual composite based on its contents. I envision this coming together as a wallet for collecting and engaging across the Disney ecosystem. As you add different contents, the visual badge/membership card representing your wallet changes character (color, material, tier, etc.).

This could become a collectible itself, and a social signaling object.

The patent can also describe character-based wallets where the assets can customize the wallet's visual. Imagine a wallet “in the shape of Elsa from Frozen,” its contents: different dresses and skills.

Worthy Mentions

As we wrap up, there are a few other things worth considering.

Technology stack

Which blockchain network(s) Disney would consider for their NFT initiatives is an interesting question. The patents reference different solutions: Ethereum, layer 2 scaling solutions (non-specific), EOS(?!) and “private enterprise blockchain networks”.

Disney's current initiatives are already dispersed across different blockchains. VeVe collectibles are on Immutable (Ethereum layer 2). Disney Pinnacle and Cryptoys are on the Flow blockchain.

This leads me to my next point.

Early collectors

As Disney potentially launches new NFT ventures, I hope they recognize the value of early adopters and bring them into the fold. It would be a mistake if the first generation of collectibles end up as disconnected and forgotten initiatives.

Gaming

There’s a patent that references gaming with onchain assets and “battle scores”. I didn’t pay much attention to it, considering Disney’s limited direct gaming exposure (but maybe I need to reconsider based on the Epic announcement?)

In Summary

Let’s summarize this. Disney's early exploration of NFT technology is the “NFT as product” approach. Nothing wrong with that, but it only taps 1% of the potential. The patents indicate a shift towards a more comprehensive approach, “NFTs as connectors”.

I tried my best to illustrate below:

I bet Disney will create a unified customer identifier that's wallet-based and runs on blockchain, likely branded as a Disney wallet considering the absolute need to make it user-friendly for a wide audience.

We'll see more NFT-powered initiatives that connect to the idea of ecosystem-wide loyalty and tailoring. Your Disney theme park tickets go in the wallet. So does the NFT you collect from going to the movies. And so on.

While the themes and examples aren't groundbreaking alone, the big opportunity is to have a foundation that enables Disney to create connections between the various parts of its ecosystem. When done right, this will create moments of tailoring that feel unique and special for consumers.

The opportunity for Disney is immense because they have massive distribution and amazing IP. It also makes it incredibly difficult to execute flawlessly.

It may also be that they don’t do anything, and that these patent applications just end up unused and forgotten. We’ll see.

For reference, these are the patents mentioned in the post: US020240013233A1,  US020240013196A1, US020240013179A1, US020230114235A1, US020230037296A1, US020230127351A1, US020230169492A1, US020230195855A1, US020230297345A1, US020230376572A1, US020230410066A1.