Cryptokitties: The digital cats that broke part of the blockchain

What do digital cats have to do with blockchain?

The answer, it turns out, is quite a bit, and it’s because of the game Cryptokitties.

In less than a year, CryptoKitties has become one of the world’s most successful blockchain applications. The gameplay is centred around the breeding, collecting, and trading of unique digital cats, with players using cryptocurrency for the transaction. And whether or not you’re a cat person or a game person it’s worth pointing out that in CryptoKitties’ first 9 months of existence over $40 million in these digital feline transactions have taken place.

In this episode of Now & Next, the podcast series I'm hosting, I talk to Bryce Bladon, co-creator of CryptoKitties. He explains how the popularity of these screen-based cats has not only broken part of the blockchain but has also reintroduced the idea of a dollar value for digital goods.

To subscribe to the Now& Next podcast, click here.

A full transcript of the interview appears below.

Episode highlights & shortcuts:

• Why does blockchain matter its potential of letting us work around the intermediary (7:07)
• How scarcity can be re-introduced to the digital economy with blockchain technology (13:05)
• How the community-minded CryptoKitties players invest in the ecosystem (18:50)
• CryptoKitties to showcase how art could be personalized, it could be interactive, and it could be extensible in a way it wasn’t before (23:25)

Full Interview Transcript

Leora Kornfeld (LK)
Bryce Blaydon (BB)

LK: 

Bryce, I have a challenge for you. I have this hunch that any time you go, let’s say, to a dinner party and then people find out what you do, they go, oh, the blockchain, I’ve heard of that, and then you have to go and explain it in 25 words or less. And I’m going to make you do that, but you’re not allowed to use the terms “distributed ledger” or “immutable.” So go ahead, and you can say “decentralized” maybe once or twice, but that’s it. So go ahead. Take the challenge.

BB:

None of that’ll be necessary. So this isn’t my official answer, by the way, but I do want to point out that if you go to the Crypto Kitties website, you will notice that none of those terms appear there, because that is actually a big part of what we are trying to do with this product is to make this technology accessible and avoid all the industry jargon. But to answer your question, what is the blockchain? Simply put, the blockchain allows two people to trade value with no one in the middle. Got it down to less than, I think, 10 words for you.

That is a very simple answer, but one of the issues you run into with this technology—and it is in no small part because it is such a new technology, because a lot of us are still just figuring it out—when people are asked what is the blockchain or why does the blockchain matter, people default to trying to explain how it works. And if I were to ask you “What is the Internet?”you probably wouldn’t tell me about IP addresses or hypertext protocol. You would probably say it’s a giant network that connects a bunch of people and makes ideas and media accessible. And that’s what we are trying to do for the blockchain is make it accessible, make it matter to people so they understand the value attached to it. And this technology can ultimately realize its potential because a lot of that potential is potentially very good for consumers. It’s just a matter of making sure that consumers access it and understand it so it doesn’t just stay in the hands of industry insiders who know what distributed ledger technology is or the Byzantine protocol and things of that effect.

LK:

Yeah, and this is a really radical idea. I’m going to use a little bit of jargon: the intermediary, it’s often called the middle person, but it’s a way to work around the intermediary, the middle man, and that’s a very revolutionary idea, isn’t it?

BB: 

It absolutely is, and to be clear, that is also not the entire extent of what this technology does. That is the most immediate and most meaningful answer to why does the blockchain matter, what does the blockchain do, but it’s also worth recognizing that there’s substantially more that the blockchain can do. 

Since 2010, the headline has been “Is this the next bitcoin?”, and everything about the blockchain was kind of tied to bitcoin, the cryptocurrency, and that is very understandable. The first success in the blockchain was bitcoin, and that is perhaps the most obvious application of this technology. As I said, it allows two people to trade value with no one in the middle. That is basically what currency is supposed to do, but currency has an immense amount of centralization tied to it, i.e. a government usually, but the blockchain changes that. And bitcoin is the first and biggest example of this, but it is only a sliver of what this technology is capable of. 

And what we set out to do with CryptoKitties was show other potential use cases, other things about this technology that are incredibly exciting but aren’t being explored, because, again, everyone is just defining success and what this technology is capable of by the biggest shining star, which was bitcoin, and I really do want to make clear, they earned that. I say it earned that, but it’s going to be . . . this technology’s never going to realize its potential if we only limit it to that understanding.

So, with CryptoKitties, what we did was we wanted to showcase what this technology means for our relationship with digital assets as a whole. To put this in real world context, I’m sure you remember in the ’90s, the RIAA got very upset because suddenly music could just be copied and shared infinitely and as a result . . .

LK: 

Without payment involved, that one little detail, yes.

BB: 

Without payment and without anyone in the middle and that, as a result, kind of led to us not valuing digital media like we used to. In the ’70s and ’80s, our favourite song comes on the radio, we would have a microphone under the speaker so that we had a copy of that song. It wasn’t something that you could just create out of nothing, but in the 1990s we saw things like torrenting, and larger file sites, and the Internet as a whole allowed for digital media to be instantly copyable and infinite. And that’s very good from a proliferating media viewpoint, but it’s not so good from a valuing the digital asset, the digital art, whether it’s video or text, even, or music.

So, what we showcase with CryptoKitties is, for the first time ever, thanks to blockchain technology, digital scarcity is possible. There can be just one of a digital asset. This asset can actually belong to someone. There is a record of who made this asset, where it came from, who it belongs to, who has owned it, such and so forth. 

And when I say asset, that’s a very esoteric way of putting it, but to put this in other terms, this means that, say, a song could be sold to fans, and hypothetically—and this is a real weird example—but if an artist did fund their next song from their fans, if they then chose to license that song, it could be a relationship with the fans where anyone who invested in that original song actually gets money from that licensing deal.  To be clear, that requires somebody to build that thing, and I think Imogen Heap is actually at the centre of some really cool advances that way.

LK: 

The first musician to use the blockchain to sell and license her music.

BB: 

Yes, she’s been involved since 2015, and there are some incredible examples of the music industry, and this can be applied to the art industry as well. Because digital assets became instantly copyable, we stopped valuing them as much, and how we access these things ultimately shapes our relationship with them, and 20 years later very few people own digital media. The closest thing you’ll get is a physical representation, like a DVD or an album, but most people just stream music. We subscribe. We have a short-term, basically, access that we’re basically paying for the convenience of accessing it because torrenting is difficult now and that is how our relationship has been shaped. 

And with blockchain technology, our relationship to digital assets is, once again, going to change. And it might not be tomorrow, it might not be next year, but 5 years, 10 years, 20 years from now, I think we’re going to have a completely different relationship with digital goods and assets, things like scarcity—and I hope that’s not too esoteric a term—but things like scarcity make us value things more, and when things are scarce, they kind of become real. If something is infinite, it is a variable, it is incalculable. You cannot put a number on it.

LK: 

This is important because what you’re doing now, you’re talking about this like an economist would, actually. Because what you’re doing, you’re talking about scarcity and abundance, so when there’s scarcity, prices go up. When there’s abundance, prices go down.

There are these other ideas like there are rational actors in economics, but there’s also irrational economic behaviour that happens and I believe that you’ve seen some of this with CryptoKitties, there’s benevolent behaviour going on. There’s a kitty orphanage. Can you explain what that is?

BB: 

A lot of people have started to understand the value of this technology and, yes, that could lead to people being a little dogmatic sometimes, but it can also lead to some incredible insights and some incredibly iterative thinking that results in some really cool stuff. What the adoption agency somebody set up with CryptoKitties is, is basically users who have played a lot of this game, have bred a lot of cats, can donate cats, and those cats are then donated to new players, people who are just getting started. Because at the end of the day, a lot of the people who are playing this game believe in our vision for this technology and what we are trying to do with CryptoKitties as a platform, frankly.

What we’ve seen with we actually just launched something called the KittyVerse and what we saw within a month of watching CryptoKitties was about a dozen third-party products created on top of it. And now there are dozens of these things and they were created and some of them have actually started having revenue created too, completely outside of us. They do not, in any way, have to go through a central authority, i.e. us. They can just contribute to this ecosystem. Everyone is a stakeholder in this experience because they actually own their digital assets and there are all sorts of unique and neat ways to engage with this technology.

LK: 

So we’ve talked about some of the benevolent behaviour which is charitable and generous. What about the competitive behaviour, which is what we would expect in online games? Tell me a bit about the people who are maximizing value or maybe even doing more, the less benevolent behaviour that you’ve seen with CryptoKitties.

BB: 

To be frank, most of the behaviour I have found frustrating in this industry hasn’t actually been tied to CryptoKitties. Pretty much the moment CryptoKitties became successful, we saw . . . so many puns, copycats come out of the woodwork, and I think Baidu, which is China’s Google, announced Cryptodogs within the month, or Cryptopuppies, I can’t remember the exact name, and some of these games which just are basic concepts came out and for the most part, that’s fine. Again, in much the same way the next bitcoin was a headline, I saw this as a very positive sign that the next CryptoKitties became a recurring headline. 

When somebody wants to innovate and do something really interesting, they start by imitating and then they start tweaking it and then the real change starts to happen. That’s when real innovation happens and that’s mostly fine. What I’m less okay with are those scam artists I mentioned. I’m less okay with some of these games that quite literally stole our art. I’m less okay with people stealing all the words I wrote and just copy and pasting them into their thing. 

Again, to take us back to the 1990s problem. The time and thought we put into things, it’s a little frustrating to see somebody just take that, but to see somebody build up from that, that is incredibly exciting.Within the community, the only real “controversy” we have right now—and again is one of those very interesting things unlocked by blockchain technology —is people have coded bots to basically breed incredibly difficult-to-get cats at a pace a human player can’t keep up with.

So, I’m going to need to explain this just a little bit more to explain why this matters, but basically there are these special cats we call fancy cats and they have custom art and they look really cool. And we limit how many of them can be created, and users can find these cats, usually as a surprise by breeding together two cats that have certain genes associated with them. And once this happens, once somebody discovers this fancy cat, they have cat 1 of let’s say 500. But the moment that is figured out how to do, all these bots come in and they start buying up cats with the traits that are necessary to breed this special cat and then they start breeding them and they start breeding them at a pace that your average human player can’t necessarily keep up with.

To be clear, the bots as a whole, they’re a controversial issue right now but they’re an incredibly interesting one. Bots as a possibility within cryptogames or frankly just the blockchain as a whole is fascinating, but it’s also very new and very challenging to account for, because as much as we are trying to create the best possible experience for players foremost, we are also incredibly interested by these new possibilities. While these bots might be frustrating for some players, the people who make these bots have shown a lot of that benevolence.

We have an incredibly active online community. When we had a low number fancy cat come out, the creator of one of the bots was asked by the community to start a breeding system of them, to get on this one, and it was like no problem. So, as much as there might be controversy, I really can’t overstate how impressed I am with this community and how criticism and feedback and benevolence all has been like a true example of people being stakeholders in this experience. They don’t necessarily all agree but they’ve all invested in it in a way and that leads to them valuing it and their community as a whole.

LK: Right, and what you’re talking about, it’s something that wasn’t necessarily foreseen by CryptoKitties designers that emerged from this community, and it’s a very imaginative community and engaged community. Looking beyond CryptoKitties itself, what do you see for the broader creative industries with this kind of behaviour and activity that’s happening outside of the framework of what was designed?

BB: That is a question I literally gave a 20-minute talk on in Amsterdam last month at the Next Web conference. I think that is incredibly exciting.  So, earlier we talked about the music industry and how art became instantly copyable. And most people think about new technology in terms of what industry can this disrupt and the art industry and the creation of art, things like—and excuse these words that I’m going to be throwing at you—but provable scarcity through ownership, traceable history, asset storage, fraud reduction, payment for creators. Those all have immense potential to disrupt industries, but as far as actually creating art, that is something that we were also trying to showcase with CryptoKitties. We were showcasing how, for the first time, art could be personalized, it could be interactive and it could be extendable in a way it wasn’t before. What I mean by this, so personalization, customization, there are more possible visual combinations of CryptoKitties than there are people on the earth. And to be clear, CryptoKitties is an incredibly rudimentary example of how art can be personalized, but that is neither here nor there.

LK: 

So, you’re talking about in the tens of billions then?

BB: 

I believe 17 billion. There is a chance it’s trillion, but I think that might just be genetic combinations, not necessarily visual. At least 17 billion, I’m fairly confident in that number. There is a set number of CryptoKitties that can ever be created. However, the CryptoKitties themselves are eternal, basically. Short of the entire world destroying every piece of technology that’s ever been connected to the Ethereum network, these cats are going to outlive us all.

LK: 

Can you just say a couple words about the Ethereum network, because that’s the first time you’ve used the phrase today.

BB: 

The Ethereum network is the world’s second-largest blockchain, and it is what CryptoKitties is built on. It’s also partially why CryptoKitties became infamous is because when we launched CryptoKitties in late 2017, our product proved so popular that we kind of broke the Ethereum network. It had never had that many people trying to interact with it before, and we kind of shut down what is colloquially referred to as the world’s super computer or at least made it very, very, very difficult for people to use.

LK: 

Well, congratulations. There’s no bigger compliment than that. It would be like breaking the Internet.

BB: 

My parents were never really happy with me when I broke their computer, so I do feel a little bad. It is worth noting that, yes, it is a point of pride in some ways but it’s also a serious challenge in this industry. We want to run into these problems so that we can solve them but we want to do it in a way that doesn’t compromise what other people are trying to do.

The Ethereum network is the world’s second-largest blockchain. Bitcoin’s blockchain is the biggest. What makes the Ethereum network unique is it introduced something called smart contracts, and we don’t need to get into too much detail about what those are, but basically a smart contract makes it so that you can put computation, i.e. creative applications, or to just put this simply, apps, on blockchain technology. I’m probably oversimplifying something there but that is a fair way to say it, I think.

To bring it back to the question of what the blockchain means for art, for the creation of art, I touched on personalization. I don’t think I’ve touched on interactivity, which is what makes a digital asset real for a lot of people. And by this I mean, CryptoKitties showcased how you could take two pieces of art, i.e. two CryptoKitties, put them together and create a third one that was essentially a remix of the other two. And again, that’s a somewhat rudimentary example, and I think there are going to be far more interesting ones in the future, but you can’t do that with an oil painting and you can’t even do that with most digital art as we understand it right now. 

And then finally, and perhaps most interesting to me, is extensibility. I talked a lot about you can collect and breed these digital cats and that’s really cool, but as I said with the KittyVerse we launched, people have made it so that these cats can now battle one another. These cats can now race each other, and how your cat does in a battle relates to its unique genes, which are represented on the token, and all of these experiences happen outside of CryptoKitties. We do not control them. We are not gatekeepers. And there are dozens of these things being built right now. Somebody has made a social network for the cats and the profile belongs to the cat itself. So, if you trade that cat, you also trade that cat’s social media profile.

LK: 

So it’s a series of parallel universes that, like you say, exist outside of the framework that you built for CryptoKitties.

BB: 

Yes and no. So while people built them outside of us, they also diversified the ecosystem. These things are in parallel, implied that they don’t touch each other. They can in some ways. We haven’t seen exactly what that looks like yet, but keep in mind, we just launched like seven months ago. So, parallel universes isn’t quite right, but an ever-expanding universe. Potentially infinite experiences.

LK: 

Something that happened recently, which is things that go up must come down, and we’ve seen a little bit of a or maybe more than a little bit of a CryptoKitties crash, like a market crash. Can you explain what happened there with the median price of the CryptoKitties?

BB: 

Something I do want to point out just from a product perspective is we aren’t trying to make cats as expensive as possible. We are not trying to make a cryptocurrency where an individual thing should always be worth 100 million dollars. As much as people are, like, the average price is going down, that to me says CryptoKitties is now more accessible than ever.

From day six, to be perfectly honest, we made a very conscious decision to be very careful about how we talk about these cats selling and how much they are selling for. We worked with regulators before launching to make sure we weren’t classified as a security. I don’t actually know of any other blockchain products that worked with regulators before launching and launched a practical product besides us, and again, this was one of those challenges of emerging technology is working with an existing understanding and what you are trying to showcase as a new use case. 

So, earlier I talked about how bitcoin defined success for the blockchain or what a blockchain is capable of and again, I’m not going to name any names, but some incredibly reputable publications were incorrectly calling us a cryptocurrency and that is not at all what we are. Yes, these cats can have an immense amount of value placed on them and yes, that value can be in dollar figures for some people, but I think that would be like equating taking every sale of every oil painting ever created and if it’s on a slight decline, being like, well, art’s dead.

Maybe that just means there are more people creating oil paintings. Keep in mind, there are also over 800,000 CryptoKitties now, and people can breed them and create new ones and I’m getting some limitations in place to keep it from just exploding exponentially. There is a cooldown time with each breeding action a player takes that kind of doubles each time basically up to a maximum of two or four weeks.

LK:

Is this like supply management?

BB: 

A little bit. We’re actually trying to hire a crypto-economist because we have some pretty interesting things going on here but yes, that was an economic decision to basically keep the scarcity aspect of what we are trying to showcase with this game and with this platform a central aspect of it, basically.

LK: 

I’m not surprised to hear that you’ve just hired an economist, like an in-house economist for this, because like you said, one of the defining characteristics of CryptoKitties is the scarcity. If you flood the market, it’s great for the mainstreaming of the technology but then it goes more into being something that is primarily a financial-based instrument as opposed to all of these other ideas that you both have for CryptoKitties and the things that you guys haven’t yet imagined, and that’s the coolest part. It’s like where this can go, a lot of that is up to the community, isn’t it?

BB: 

It absolutely is, and that is actually why we are trying to invest so much in our community. I talked about how we launched the KittyVerse, which is basically just our term for all these third-party tools, games, projects created on top of it, but we also launched something called the Nifty Kitty Fund, or program I should say, and basically people can apply to it. We’ve already started this with a few projects and we give them a small loan and if they pay that back via revenue and if they never make revenue, no problem. That’s the current incarnation of it. We’ll see how it goes, and we’ll see if we can increase it, but we basically—in much the same way we launched CryptoKitties with a sustainable revenue model instead of doing something called an ICO, an initial coin offering, which is basically fundraising with the general public and selling a dream and a promise—we want the people creating these experiences to be able to create these experiences but also to do so in a way that gets them to a sustainable practical place.

So, we want to allow that room for innovation and for interesting development, but we also want it to move in a meaningful direction and not just be playing with our toys. When CryptoKitties launched, we launched with something called ERC721. We do not need to get into too much about that, but basically it’s how non-fungible, that is to say non-money, things can exist on the blockchain, and over time it became the standard. Why this matters is now there is an immense number of people creating projects using this token. So we open- sourced a licence for those people to use for things like how does art ownership work in the world of the blockchain, what does licensing these things mean. 

If I own a thing with a digital asset, what can I do with that art? And to put this in more understandable terms, so if somebody owns a CryptoKitty, for example, you can take that art, you can put that on a T-shirt, you can put that on an oil painting and we can’t stop you. That’s yours. You can do whatever you want with that, but not every project has a lawyer. Not every project has somebody who can go after these people who rip off your art necessarily. And again, the blockchain is introducing some incredible and neat things for what the future of ownership will look like, but it’s still an emerging technology.

There’s still an immense number of insights to be gleaned and some potential use cases to be unlocked and, yeah, so we really just license to the blockchain industry as a whole, and anyone is welcome to use it and anyone is welcome to get the back end and we already have some thoughts in mind for how we’re going to improve it.


Related Links:

• An article previously published on CMF Trends on the CryptoKitties phenomenon and digital scarcity;
• An article explaining why Imogen Heap wants to use blockchain technology to revolutionize the music industry;
• A talk by Bryce Bladon on What blockchain means for the future of art taking part at TNW Conference 2018;
• A beginner’s guide to the Ethereum, the open-source blockchain-based platform that essentially enables hundreds of decentralized cryptocurrencies.

Note: This material originally appeared on Trends

What does an 'end to end ecosystem' for the creative industries look like?

There’s a lot more going on in Toronto’s east waterfront area than just condos, restaurants, and retail, although there are plenty of all of those things popping up in the formerly industrial area that was perhaps best known as the site of the now defunct music venue complex The Guvernment. The area is rapidly turning into a full- fledged innovation district, with hundreds of thousands of square feet and hundreds of millions of dollars being invested into such large-scale projects as a recently announced partnership between U of T and MaRS aimed at serving the city’s burgeoning tech ecosystem and Sidewalk, the not uncontroversial digital mini-city from Google parent-company Alphabet.

Among all the cranes and steel and glass dotting the waterfront corridor is the so-new-it-still-has-the-new-building-smell Artscape Daniels Launchpad. The Launchpad is a 30,000 square foot multi-disciplinary arts and technology centre, comprised of studios for digital production ranging from music to film to photography and graphics, spaces for artisans such as jewellery, textile, and fashion designers, a learning centre for entrepreneurship programs and special events, and, of course, the requisite co-working space where creatives with laptops can already be found working away on album covers, merchandise plans, and even robots.

Debunking the myth of DIY

“When you’re working away in your bedroom you tend to think you have the things you need but in reality you don’t have the right toolbox”, explains Launchpad Managing Director Karim Rahemtulla. And this is indeed the predicament in which so many artists find themselves. They may have the tools to make the digital or physical thing that is their passion, but in today’s supply-heavy creative economy the mere act of making is not enough. “How do you find graphic designers, merchandise people, connections to industry”, continued Rahemtulla. “It’s about figuring out what makes up the creative ecosystem and creating collaboration points between talent, skills, and industry.”

And this is where the centre’s thinking is different. Launchpad is a manifestation of the question of what would happen if a physical space brought together the latest and greatest in studio facilities, access to coaches and mentors, entrepreneurship and business skills programs, and pathways to funding, all under one roof. The public-private partnership is the result of over a dozen years of research into the changing face of the creative economy around the world and may be the only centre of its kind in the world with such an all-encompassing model.

Rahemtulla and Launchpad Creative Studios Manager Robert McMahon described what they call an ‘end to end ecosystem’, one that supports the journey from the digital version of a sketch on a napkin to design, prototyping, and a go to market plan. As an example of this model they cited Launchpad’s state of the art jewellery design studio, which enables artists to go from digital design to 3D printing for a tiny fraction of the cost of the conventional method of creating molds and handcrafting or machining metals and gems.

McMahon also pointed to some of Launchpad’s not yet designated studio spaces. “At first were going to have the digital print studio as part of our opening but then we realized a better approach would be to see how people are actually using the spaces we do have. We want the creatives to dictate to us, not the other way around”, said McMahon. “We want them to tell us what SDKs (software development kits) they want to use, how they’re combining and re-combining different elements, what they need to work in VR and AR.” Added Rahemtulla: “then we layer on specialty skill sets like SEO, how do you grow your Instagram following, how do you get yourself in front of companies, basically how do you get yourself ready for a global market.”

And not unlike the parent that wants to be both supportive of their offspring’s creative endeavours while making sure the basement is not permanently occupied by them, Rahemtulla pointed out that Launchpad’s ultimate goal is to teach the skills that creatives need to have an actual career, to make money, and to be independent. As he succinctly put it: “How do we get you out of here” is a question that won’t be shied away from.

On the importance of 'strategic dependencies'

Rahemtulla believes that it’s all part of moving from thinking about system change, which is largely driven by policy, to network change, which is about how people interact, form relationships, and actually work. “One of the problems with the Canadian creative economy is that we have too many independencies”, he said, referring to the hundreds of thousands who work away on their projects largely in isolation, often supported by a combination of precarious work and grants. Rahemtulla then went on to describe the cross-disciplinary groups he’s been witnessing at work at Launchpad. “They might have a core of 1 or 2 people and then they add people for specific projects. People come and go and bring their skills and talents as needed and then go on to other things. We want to facilitate these kinds of strategic dependencies between creators who generally work independently. It’s a new way to scale and an entirely new model for the creative economy.”

Within Launchpad a prime example of this approach is House (pronounced ‘house’), an incubator and accelerator program integrated with for credit programs at George Brown College and OCAD and founded by LaMar Taylor, Creative Director for recording artist The Weeknd. In addition to the obvious connections to the entertainment industry that come with the participation of the Hxouse crew, the organization also includes a creative agency, with brand deals with Puma, Adidas, Nike, and others. “We came to the conclusion the system was broken and we didn’t want to complain about it”, said Taylor. “We just wanted to reverse everything we were taught and change the game.” Hxouse co-founder Ahmed Ismail added:“We have the kind of relationships where we can turn to our industry partners and ask: ‘what is the new trend you guys are hiring for? If they say they need an all-in-one video producer, editor and content creator, we can then incorporate that into our curriculum in real-time.” The result is a combination of creative expression, educational credentials, real world experience, and a path to revenue streams.

Taylor and Ismail’s thinking blends well with Rahemtulla’s larger vision for Launchpad. When asked how success of the centre will be evaluated he referenced his many years working in the NGO world with the Aga Khan Trust for Culture. “We use these metrics called SDGs– sustainable development goals – which are defined around all aspects of quality of life. We look at how members’ lives are impacted, physically, socially, creatively, and financially. This is how we create better communities and better urban fabrics.”

Note: This article originally appeared on Trends

Rewriting the entertainment industry with 1B points of data per day

Why are some of the biggest TV networks now paying attention to the online written word? It’s because of Wattpad, an online platform with more than 65 million users worldwide spending 22 billion minutes reading its stories every month.

Wattpad started out a dozen years ago as a user-generated writing community, and 2 years ago launched a division called Wattpad Studios. Through its studio division the company leverages the 1 billion data points the site generates every day to help its partner companies place better bets.

In this episode of the Now & Next podcast I talk to Aron Levitz, the head of Wattpad Studios.

Under Aron’s guidance the studio has secured multiple book, TV, and film deals with traditional book publishers like Harper Collins and Simon & Schuster, traditional media companies like NBCUniversal and TBS, and, not surprisingly, the data-friendly streaming giant Netflix.

Interview Highlights:

What do data-driven insights and built-in audiences look like in practice? (3:14)
Because nobody knows what’s going to hit, it’s often said that the big challenge in the creative industries is maximizing the creative risk, while actually managing your financial risk. How does that translate in Wattpad Studios’s world? (11:24)
How Wattpad Studios describes what it gets from the data? (13:30)
Wattpad Studios’s creative approach to its own data. (18:40)

Interview Transcript:

Leora Kornfeld (LK):

I’m going to start by throwing one of your lines back at you, and hopefully this is okay. You have said, “I have one of the easiest jobs in entertainment because I don’t have to guess what’s important. I only have to listen to millions of people telling me what’s important.” But I only kind of believe you because, in general, the entertainment industry is run on something like a 97% failure rate, whether it’s music, or books, or TV, or film, because it’s really, really hard to figure out what will resonate with an audience. Please, I want you to come clean. Your job is not easy.

Aron Levitz (AL):

I would say that when you’re working in a moment of disruption across an entertainment industry, starting a new methodology of finding new IP and developing IP in new ways, that’s . . . A harder part is to have an industry who’s been based for hundreds of years, as you talk of all those creative industries, off their gut, and helping them learn that audience and data can really make a difference. I’d say that’s the hardest part of what we have to do. And the nice thing is, is while it makes my job easier to not necessarily have to understand how good something is if a million people tell me that it’s important, my job is to understand why they think it’s important. And that can be part of the trick in working with great creatives like directors, producers, etc., to really understand why the audience likes something.

But, absolutely, the fact that we can use data to better predict success, to your point whether it’s a 90% overall fail rate or 80% of shows that can’t make year two, that audience is going to make the difference, and it is going to make it easier for us to better see our chance of success. Not guaranteed success, but what an audience can do. There’s a lot of things that can go wrong between the written word and the screen, but we really believe that following the audience using data-driven stories, we can have a better chance of success.

LK:

We have a sense of what you’re talking about, data-driven insights and built-in audiences, but what does that look like in practice?

AL:

Really, if you look at Wattpad as really the world’s largest social network for readers and writers, what it means is 65 million people coming every month to re-write and tell their stories. Four million people contributing stories to the platform, 565 million stories across genres. What it really means is finding a way to listen to what people like, what resonates with them, whether on a micro-level and by that I mean what story may be shot to the top of a lis or macro-levels, being able to look at what subgenres of horror are trending this month.

In practice, it really is looking at the billion points of data that we collect every day in trying to understand and analyze that so we know what audiences are resonating towards. It’s not always the biggest, it’s great to look at some of our biggest stories, be it a Chasing Red or an After, that have both seen off-platform success already in publishing, and the cast of Afterhas already been announced for the feature. But it’s often being able to say, “Okay, this story got to a million reads before any other story,” or “This story had six-and-a-half more reading time than any other story in that genre.”

Really, the practice looks like a lot of really understanding what audiences want and what audiences are attracted to, not what my gut feel is or my development team’s gut feel is, but ifChasing Red is one of the most-read stories over the last two years, why did audiences love it? We’re able to bring that kind of insight to our producing partners, not just to find Chasing Red, but to actually be put in to develop it where we can say,“Look, this paragraph,” —because on Wattpad you can comment directly down to the paragraph level— “This paragraph has 5,000 comments, so something is obviously important here, but let’s see what the subtext of it is.” Or, “This chapter has no comments whatsoever, if we have to cut something to write the script, that seems like a prime candidate for it.”

LK: 

And how do you do that? Without giving away any secret sauce, but what kind of proprietary systems do you use to determine these things?

AL: 

We definitely have a unique set of data around genre, around storytelling, around audience, that nobody else has. It is something that only we get to look at along with our partners that we’re working with. It’s not something that’s publicly available that you can just go look at Wattpad. Now in Wattpad, if you went on you would see reads, the amount of reads the story has, and that’s a great metric and it can show that a lot of people like something. But we’re often looking at metrics that aren’t publicly available, things like the amount of reading time spent. You can imagine . . . It’s not important that someone opened the book, it’s important how long they spent reading it or how many people finished it, how many people re-read it, how many times it was shared, what sections are most shared, what quotes were most shared.

We’re really diving into data that nobody else has access to, which does give us that unique view of how stories are growing, how genres are changing, how writers are writing. And that’s a very important way we look at data. We can look at what readers are reading and that might be a little more akin to how industries have looked at content to date, which is, “Here’s a story, did people like it?” We can flip that whole piece on its head and look at what writers are writing. We have four million people that contribute to the platform every month. We can look at what they’re writing. This doesn’t have an audience yet, this is just what creators are interested in creating, and that gives you a totally different view of the data. With the billion points of data every day, we really can cut that in almost an infinite number of ways to learn new insights about the audience, genres, writing and writers themselves.

LK: 

And you’ve mentioned a billion points of data every day twice. I’ve heard you use that number twice, so I’m guessing that’s not just a generalization, that’s actually what you’re working with.

AL: 

No, that is actually what we’re working with. It is a phenomenal amount of new pieces of information we gather every day.

LK: 

What you’re describing actually sounds not unlike Netflix. Every start, every stop, every rewind. How simpler would your system be, would you say?

AL: 

It’s actually quite a different use of data. They’re really focused on taking the insights that they could draw from their community, creating something, but they can’t figure out if audiences like it until they post it, until they put it up on their platform, until an audience starts streaming it. And then it goes back to a really traditional way to use data and your Nielsen rating: “I made this. Did people like it?”

What we’re doing is actually flipping that axiom on its head and saying, “People like it, let’s make it.” We can see that something like White Stag, which is a phenomenal fantasy story on Wattpad, written by an author who goes by Pandean, that it was getting, I think, seven times more reading time than any other fantasy story on Wattpad. And we read it and it is a beautiful, beautiful universe. And we say, “Okay, there’s an audience here who really enjoys this.” Well, that’s going to take some of the risk out of developing it further.

If we publish it in a book and it got a three-book deal with Macmillan, for example, they know that people are going to come from Wattpad, show up at bookstores and pick that off the shelf. That’s a real difference than saying, “Okay, well, people like political drama. And people like this actor, so let’s put them together and hope the show turns out well.” And then it goes into a purely traditional development process, versus saying, 'Look, we’re trying to be predictive of what people like, but we have the underlying IP and the storylines, and the characters, and the universe lying right in front of us.'

LK: 

Something I read about the creative industry, I found it a really interesting way to have it expressed, is that the big challenge is actually maximizing your creative risk because nobody knows what’s going to hit. If anybody knew what was going to hit there wouldn’t be that 90-something percent failure rate we already talked about. So you have to maximize your creative risk while actually managing, if not minimizing, your financial risk.

AL:

I think that’s what happens when you shoot from the hip, when you have traditional development, which is four people in a room, the same four people with the same backgrounds, and lack of diversity they’ve had for the past 70 years, 80 years, making these decisions. And saying, “Look, we know what’s best.” At that point, do you have to maximize creative risk? Maybe because you want to try to stand out in a crowded room, but if you’re starting with the audience, with the data that people already like story X or series Y, here’s why they like it. Here are the parts they like, here are the parts they don’t like. Here’s the subtext on that character that while you think this is where everyone falls in love with the male lead, this is actually the point where the audience splits and half of them love him, and half of them hate him.

With that kind of context, it’s not about maximizing creative risk, it’s making really smart creative decisions. And it’s also not about just letting the audience say, “Okay, we all said go left, so you have to go left.” It’s still dependent on taking something from the written word to screen to have great development execs who have a vision on how something goes from written word to a visual format. It needs great show-runners, it needs great actors, it needs great directors.

Those creative layers still have to be there, and there’s different risks you can take in any of those creative layers. But what the audience is going to let you do is to just remove a creative risk where the development exec’s job does not have to be to choose the next best story, it should be to have a view on how to make a story someone’s favourite. And I think that’s a real difference that we get to bring to the whole development process, not just finding the story.

LK: 

Right, a lot of people think that there are these things called answers that exist in the data. And I can hear you chuckling. I’m dying to hear what you have to say about this because it’s not, you don’t get answers. How would you describe what you get from the data?

AL:

I think what you get is . . . Here’s how I put it, if you’ve ever sat in a writers’ room for long enough, there comes a point where everyone gets stuck. It doesn’t matter how many people are in
there, how many awards they’ve won, and how long they’ve been doing this. You have a point where everyone starts to stare at each other, refilling their coffee, and really trying to break this scene. We can’t figure out if the premise is right.

What if there was a way to take a dark room and brighten it up a bit? What if there was a way to say, “Look, we don’t know whether to cast person A or B in the show. What if we could ask people who already love this IP, who love this universe, and they could help us?” Data is not the end to be all from the standpoint of the amount of creative layers that have to go in to get something from written work to screen. What the data is going to do is brighten that dark room, it’s going to give you a better starting point. It may even give you a better ending point, because you can go back and market to the same people who helped you find the story in the first place to show up and tune in night one, or show up at the box office, or go to a book store.

But at the end of the day, the data is a tool. It becomes part of a development executive’s, director’s, show-runner’s and editor’s repertoire that they don’t have today. By no means does this negate the necessity for a great screenwriter. We need a script to be generated, we need someone with a creative vision on how to take 300 pages and turn it into 90 for a feature, for example. But the data is there to help you understand what people have loved already and what people will love in the future.

LK: 

You’ve given some examples of some really great success stories. I’m curious to hear more about times when data actually didn’t steer you in the right direction.

AL: 

Very good question. I think we’ve been pretty lucky in how our projects have proceeded early in our studio’s lifetime. We really started the studio about two years ago. We launched it at the Banff Media Festival and we’ve just seen that, by using audience, we have had great successes. We look at something like Cupid’s Match, which was a story we found that, at the time, probably had about 20 million reads on Wattpad, maybe a little less. It’s now close to 40, 45 million reads on the platform. And we created a totally new development methodology for it, we took it actually to a community of 120,000 filmmakers and said, “Pitch us how you’d do a trailer for this.”

So now we’ve taken our data that said this is important and taken it to a massive group of creators, who all pitch differently. We get three that we create trailers from, the audience chooses the production type they love. We take it to distribute on CW Seed, which is the CW channel in the U.S. digital platform. And within a matter of weeks, it becomes the second-most-watched pilot on that platform of all time. Why? Because the audience continues for us to be predictive. It continues to show that if you adapt, the audience is going to go check it out.

Now, it has to be adapted well for them to stay there. But we lucked out because the audience helped us then choose the producer and director who had a vision that they thought resonated with them. And by the way, it resonated with people who had never heard of Cupid’s Match before, and those people went back and read the story on Wattpad. We continue to show with our successes that the data is predictive. It is about changing an 80% year-one failure rate to 70 or 60%. We’ve been quite successful to date, I’d say, in really showing that the data does have answers for the creative industry to help them make better decisions.

LK: 

That’s interesting. So far you’re seeing that incremental bump of about 10% and, because you’re a data guy, you wouldn’t just throw a number out if you didn’t have science behind it.

AL:

I would say that’s the goal. The goal is to change, not a 100% success rate. And I think that’s the biggest thing to take away there is. I’m never going to tell you that if you start with a story that 10 million people liked, you’re going to get a 20-season TV show out of it, because there’s a whole lot that goes wrong during the adaptation process that has nothing to do with the underlying IP. We all know that one big snowstorm can wipe out an audience for a first weekend of a movie and that takes it off half the screens in the country the next day.

But what I can say is that the aim of the studio is just to improve that success rate. It’s to improve it 10 or 20%, maybe 30%, maybe one day 40%, but it’s not talking about necessarily guaranteeing a 100% success rate if you start with a data-driven story.

LK: 

Right, and that’s one of the misconceptions about data in general. I’m sure you find that when people who aren’t necessarily in the industry talk to you, it’s what we refer to as,“Oh, you get these things called answers from the data and you have this thing called a guarantee of a success. How do you address that? How do you start talking to those people to guide them down the right path?

AL: 

We’ve taken a really creative approach to our own process. We have people with great TV, film, publishing backgrounds on the Wattpad Studios team, who help us look at the data and literally translate it. Translate it so that traditional players in entertainment, this group that’s running through this moment of disruption, can understand and better imbibe what we have to show them. This is never just about putting ones and zeros up on a screen, this isn’t that scene from The Matrix where all the numbers are just flowing down. That’s not what it means to use the data. It doesn’t mean we’re just going to send a producer who says, “I’m really interested in spaceships and aliens sci-fi,” a link with a bunch of numbers after it.

We do take a creative approach to our own data. We will look at a story and say, “Look, everyone loves this story, but we know when you turn this from a novel to a TV series, that this character loves inner monologue, you’re going to want to add a best friend.” We can take a view that, “Look, the data is showing us, and the ups and downs are showing great three acts, we want this to be a film,” or “The ups and downs in this one,” because all of our stories are serialized, they’re written chapter by chapter, “This one really lends itself to a long-running series and here’s the arc for season one, here’s the arc for season two. And by the way, if you want to do season three, focus on these four characters because the data really shows they’re the four characters that should be in your A, B, and C plots.”

It isn’t just about sending over the ones and zeros, spreadsheets, and just the raw data, it really is helping our partners work through that data, understand how it can be a useful tool, and helping them make use for it. For that matter, often our partners have totally different questions they want to ask the machine, as I often call it, that we haven’t thought of, which is why our great partnerships, like with eOne or with NBC Universal, or Bavaria Films in Germany. They’re just as important in this process that helps us understand our data even better.

They may ask, “Well, look, we know the networks are saying that, right now, nobody is interested in this type of main character. What does your data say?” And we can go and check it and confirm or deny it. It really is a two-way street.

LK: 

I’m curious to know how threatened Hollywood is by this scrappy Canadian company? Are you still getting invited to the good parties?

AL: 

We only go to the best parties, in fact, I’m pretty sure. I think because of the way we work, because we’re here to partner with the industry, and because we’re open with our data with our partners, it really sets us apart. And I’m sure you’ve heard this before, the streaming services, if you sell your show to the streaming services, they’re not going to tell you how many viewers you have. They’re not going to tell you if 100 people viewed it or if 10,000 people viewed it. The best you can hope for is someone goes in an article and mentions your story, or that you happen to turn on your streaming service every night and you still see it in the top left corner. But you get no data from it.

I think why Hollywood isn’t scared of us, as you said, is that we’re helping them. We’re the ones that are going to help them move through this disruption and then really be able to harness data that they have no access to otherwise. Otherwise, they’re reduced to using the data they’ve always used, which is we made a show, we invested 10 million, 50 million, 100 million into it. Was it good or not? And we’re going to help them use that data in an earlier stage, in a more predictive way, whether it is to create TV, film, digital series, AR, VR, it doesn’t matter. There’s a place for a Wattpad story literally everywhere in every language around the world. And the data is going to help those players that don’t have access to data make better decisions as they continue to grow their businesses.

Related Links

• The story of Anna Todd’s book After, which began as Harry Styles fan fiction on Wattpad, is being turned into a Hollywood movie
• An article by Variety on the partnership between eOne and Wattpad to Develop Fan Fiction and Other Stories for TV, Film, Virtual Reality
• Another article analyzing the Wattpad phenomenon and its success internationally as well as in Hollywood
• The details of a content deal with Universal Cable Productions and a development & production deal with Germany’s Bavaria Fiction

Note: This post originally appeared on Trends.