As virtual worlds like Fortnite and Roblox become increasingly popular, they have emerged as new frontiers for brand marketing. However, the recent trend of IP licensing deals on these platforms has raised questions about the future of UGC and IP within these virtual spaces.
This week, we explore the paradoxical model that is emerging and its potential implications for platforms, IP holders, and creators.
Roblox’s launch of its official IP licensing platform, following Fortnite’s strategic partnerships, represents a pivotal moment in the evolution of virtual worlds. Both platforms are pioneering different approaches to IP integration, with distinct frameworks for creator access.
Fortnite has established partnerships with major brands like Lego, Netflix, Paramount, Skybound, and Disney, providing developers with pre-existing templates and assets for IP usage. In contrast, Roblox’s model requires creators to first develop an experience and then apply for IP licensing, seeking permission from rights holders like Lionsgate, Netflix, Sega, and Kodansha. Both platforms follow a revenue-sharing model where monetization generated by experiences or islands is split between the creators, and IP owners. On Roblox, this revenue share can be particularly significant, with some IP holders taking up to 50% of the generated revenue, adding a complex financial dimension to the creative process.
So the appeal of these partnerships is clear for both platforms and IP holders. Platforms benefit from bringing new IPs to their ecosystem, potentially reaching new audiences and unlocking new revenue streams. IP holders, on the other hand, gain more control over their digital presence and the potential for monetization, in addition to the earned media they already receive from UGC platforms.
While the benefits for platforms and IP holders are evident, the question remains: what’s in it for the creators?
On the positive side, using official IP may lower the risk of an experience being removed in the future, as seen with the Squid Game experience on Fortnite, with developers seeing their creations being taken down due to DMCA strikes. Additionally, the revenue share agreements might reduce competition around specific IPs, as not all developers will be willing to agree to the terms. This could be beneficial, as it may prevent the dilution of the IP and opportunity for the developer to capture a larger share of visits associated with the IP.
On the other hand, users on these platforms often don’t care whether the IP is official or not, as evidenced by the popularity of non-official experiences. Moreover, the revenue share agreements, which can be as high as 50% on Roblox, may not provide a sufficient return on investment for developers, considering the resources, time, and upfront investment involved in building an experience. The revenue share agreements may not justify the effort and resources required to create high-quality experiences, especially for smaller developers. Furthermore, the increased control exerted by IP holders could limit the creative freedom that has been a hallmark of UGC platforms.
One of the primary concerns with the increasing prevalence of IP licensing deals in virtual worlds is the potential to stifle innovation and creativity. UGC platforms have thrived on the ability of creators to freely express themselves and build unique experiences. By imposing strict controls and revenue sharing agreements, IP holders may inadvertently discourage creators from engaging with their properties altogether.
This could lead to a situation where creators either skirt the boundaries of IP infringement or avoid using licensed IP entirely. In either case, the result would be a reduction in the amount of engaging content featuring these IPs, ultimately diminishing the earned media value that IP holders previously enjoyed.
To navigate this paradox successfully, platforms, IP holders, and creators must work together to find a balance that benefits all parties. IP holders should consider offering more than just the right to use their IP; they could provide value-added services such as promotion, marketing support, or access to exclusive assets. This would help justify the revenue share for creators and encourage them to build high-quality experiences around the licensed IP.
Platforms, in turn, must ensure that their IP licensing frameworks do not become so restrictive that they discourage innovation. They should work to create a system that protects IP rights while still allowing for creative freedom and experimentation.
Brands must recognize that their opportunity in virtual worlds lies in engaging with the creator economy and fuelling creativity. This is what drives earned media and it’s where the true value of these platforms extends beyond just reach.
Key takeaways
As IP licensing becomes more prevalent in virtual worlds, the challenge lies in balancing brand control with creator freedom. While platforms and IP holders stand to gain new revenue and visibility, the model risks alienating the very creators who fuel these ecosystems. To truly unlock the value of virtual platforms, brands must think beyond reach, supporting the creator economy and fostering innovation will be key to sustaining long-term earned media and cultural relevance.
