The Sunday Drip #2 | The Disney Vacation Club is a perfect example of an NFT business
The Disney Vacation Club is a major driver to success for the Disney theme park business and it works exactly like an NFT business could.
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I promise this isn’t a clickbait title. Hear me out, the Disney Vacation Club is a perfect example of how NFT business models work, and more so, how a token based business can work. Below, I’m going to take an in depth look at the Disney Vacation Club (DVC) and Bored Ape Yacht Club (BAYC) NFTs and why they’re cut from the same cloth.
Some background if you aren’t familiar with DVC or BAYC.
Disney Vacation Club
The Disney Vacation Club (from here on out referred to as DVC) is Disney’s version of a timeshare program (IT’S VERY DIFFERENT, JUST GIVE ME SOME TIME TO EXPLAIN). Disney fanatics buy into the DVC for a large up front cost and are given annual points that they can use on hotels around the US, vacation accommodations, and dining. It was started in 1991 and currently has 220,000 members. Wow.
Disney Vacation Club business model info (Link)
Investment: $40k-ish upfront investment ($200 per point) for annual Vacation Points plus a small closing cost fee. Disney uses this upfront cost to fund their future business plans.
Utility: Club members can exchange their annual points on Disney hotel stays, Disney dining, and discounts on extras like tickets, events, merch, and more. You can also borrow or bank points from prior/future years to ensure you have enough each trip.
Resale: Your Club membership is yours to own and you can sell it on secondary markets at any time (but there are fees!).
Expansion: There are new equal Club membership spots made available every year. The memberships are different in the “Home Base” hotel you book out of.
Bored Ape Yacht Club
The Bored Ape Yacht Club (now BAYC, thank you) is arguably the most successful and famous NFT project (Sorry Punks..). The BAYC was created in April 2021 and has ~5,900 members (10k total membership slots). So far, members of BAYC have had exclusive access to a variety of perks including online games/treasure hunts, parties in NYC, exclusive merch, and there are rumors of a physical club opening in Miami. Members include Jimmy Fallon, Steph Curry, Post Malone, and more.
Bored Ape Yacht Club business model info (Link)
Investment: Variable upfront investment (Currently ~$235k, Minted for ~$220) for membership in the BAYC. BAYC uses this upfront cost to fund their future business plans.
Utility: Club members have received Airdropped NFTs (Dogs worth ~$13k, Mutants ~$28k), access to exclusive merch, treasure hunts, video games, Discord, an Ape Fest event in NYC, and more (they launched only 6 months ago). Upcoming benefits include competitions and games (for prizes) and a real life Clubhouse in Miami. More upcoming, but you get it…
Resale: Your BAYC NFT is yours to own and you can sell it on secondary markets at anytime (but there are fees!)
Expansion: There are NO new equal Club Membership spots made available, only new collections with lesser benefits (Mutant Ape Yacht Club and Bored Ape Kennel Club).
Okay, I get these are kind of different, but you can see the similarities. You buy something with an upfront cost to help fund their business, you get to use the benefits created with that money, and you can sell it to someone else, whenever. I know I just described timeshares but these ARE different…
How is DVC different from a timeshare?
The major difference is that Disney issues the members of the DVC points (not time) every year based on their up front investment. Members can use these points on “vacation accommodations” and the points expire if they don’t use them. The points can be banked/borrowed so members can fund big trips. Members also get other benefits like park discounts, special events, early movie screenings, lounge/pool access, and more.
I don’t want to argue when I say this, but the DVC is unlike any other membership club in existence. With 220,000 members, it is a massive loyalty, advocacy, and most importantly to Disney, a revenue driver. You get points, benefits, and it’s flexible. It’s honestly amazing*.
*If you love Disney.
Are you following me? Are you catching on to my point? Let
Russ me cook.
It’s the Disney
tokens points that tie it back to web3!
What’s unique about the Disney program is their use of points. The DVC essentially takes a large upfront investment ($40k right now) and in exchange, it gives its members annual points, benefits and membership into a club. I don’t need to say it but I will, THAT’S EXACTLY LIKE AN NFT TOKEN-BASED PROJECT! Disney has made a killing from the DVC for the last 30 years. Disney has unmatched loyalty. I don’t want to hear it. Also, could you imagine how attached the DVC members would be to their own unique PFP (profile picture) character (that they own the IP for) that acts as their membership ID?
Disney also charges about $1200 a year in “maintenance fees”, which is not insignificant.
Let’s go back to BAYC.
The BAYC team doesn’t have a token yet, so they are different. But they can easily issue one to their holders and with the right smart contracts, can likely have these tokens expire whenever they’d like. What BAYC does have is $100M in cash* that they raised off their Mutant Ape Yacht Club expansion that they can very easily use to build their own member benefits and other goods/experiences you can use points/tokens on.
Also the smart contract trading fees.
Also, BAYC makes 2.5% off of every resale of their NFTs. By my rough math and the current ETH price, that is about an additional $40M in cash* that they can also use to build their business.
Also the brand loyalty.
I’ve never seen brand loyalty so strong, created so quickly. Their pieces are selling for millions of dollars in art auctions. I would argue that this is the most impressive aspect of the BAYC.
There are, of course, core differences that highlight the evolution from the best web2 model (DVC) to the first major web3 model (BAYC). For one, most tokens are designed to be limited in quantity. That gives an inherent scarcity to tokens that points simply don’t have. Imagine if the DVC existed in it’s current form, but there were only a limited number of spots and no more could ever be created?
Secondly, BAYC went so far as to give their holders the rights to their IP, meaning that any owner can start a business, media brand or license their ape to be used in movies and commercials. Disney’s character IP is the reason they have a business and they could never give it away.
The two models are obviously not exactly the same, but they’re more similar than different. DVC laid the breadcrumbs for what could work in the future…
What’s the point of this?
I wanted to highlight two things, (1) the NFT business model isn’t new, it’s just an adaptation of an upfront cost membership business model with extra components like Disney, and (2) the token-based economy can be used in interesting ways that haven’t been imagined yet (like Disney’s “points”).
I would argue too that NFTs and tokens are easier to transfer on Ethereum and L2 networks and the level of friction to get in and out is much lower. People could belong to several DVCs with varying benefits.
There’s also something to be said about brand loyalty.
I believe that NFT projects are able to unlock a deeper level of loyalty faster than traditional brand loyalty programs, and that is essential to success. Just look at Disney. The DVC is a perfect example of how maximum brand affinity can drive a business.
Finally, NFT projects will be able to unlock a stronger brand affinity because the financial interests are aligned (your DCV membership doesn’t get more valuable overtime whereas your NFT asset might). It is in your best interest to grow the brand because you own the brand’s assets.
Agree? Disagree? Comments? Questions? Let me know!