For our Tuesday episode where we chat with a web3 expert, we talked to James Zhang, founder and CEO of Concept Art House, a consultancy that creates and advises on art for web3 video games and NFT collections. The company raised $25 million in funding last October from investors including Animoca Brands and Dapper Labs but faces a slumping NFT market today.
Welcome to Chain Reaction, where we unpack and explain the latest in crypto news, drama and trends, breaking things down block by block for the crypto curious.
For our Tuesday episode where we chat with a web3 expert, we talked to James Zhang, founder and CEO of Concept Art House, a consultancy that creates and advises on art for web3 video games and NFT collections. The company raised $25 million in funding last October from investors including Animoca Brands and Dapper Labs but faces a slumping NFT market today. We talked to Zhang about:
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Lucas Matney 0:00
Hey everyone, it's Lucas and Anita, welcome to chain reaction where we unpack and explain the latest in crypto news, drama and trends, breaking things down block by block for the crypto curious.
Anita Ramaswamy 0:17
Hey, James, it's great to chat with you again. How's everything going?
James Zhang 0:19
Hi, Anita. It's going well, thank you. Glad to be here.
Anita Ramaswamy 0:22
Awesome. Yeah. So let's get right into it. I think we've spoken before but for the audience, and for everyone else who's listening, I know that you're an artist by training, and you kind of got your start making art for Star Wars video games. So can you just share a little bit about how you gotten into NF T's and Web3?
James Zhang 0:38
Oh, my gosh, well, I've been drawing my whole life. I started working at LucasArts in the late 90s. So I've been in the video game industry for 24 years. I've been in crypto for about five years as an investor and as which felt longer. Oh my gosh, gaming for sure. It's tough. You guys. Yeah, I started. I started my company concept art house the 14 years ago now. Gosh, and then an NF t really since the beginning of 2021. End of 2020. So that's a little bit of timelines for you guys.
Anita Ramaswamy 1:10
Yeah. And so concept art house. Can you share a little bit more about what you do through that? I know you work with a bunch of different video game providers. So yeah, what kind of services do you provide?
James Zhang 1:19
Absolutely. Well, we've been around for 14 years, and we've helped ship over 1000 games. So I have a great team. We we start off working with things for Blizzard Hearthstone, we did early concept art for fortnight, we do really high end graphics concept, our 3d modeling for 12 out of our 14 year history. Now the last two years, we would have total pivot into web three. And there's kind of no looking back. So on the web three space, we've helped ship over 20 different web three projects. And if T projects, including the famous artists, Frank Miller on his sin city drop, we do NFT work with dapper labs on NFL on an upcoming UFC game and a bunch of other game five projects. Yeah.
Lucas Matney 2:04
Well, I'm very curious about that. So you know, you're a veteran of the games industry, it sounds like but I guess like when you make a web three pivot, is it basically customers coming to you with the idea? Like, we know we have this community, we have this vision to make money, but like, yes, we don't have a game actually, like, are you coming up with a gameplay and the graphics and like everything? Or like, what does that look like?
James Zhang 2:22
Great question. So different people coming into web three come in with different reasons. Our sweet spot has been creative companies or brands that want against a web three, because it's so exciting. And we help them do that. Or crypto natives who lack gaming experience, or let's say digital art pipelines, zero like three crypto natives, you just raised $5 million. But now you've promised the game. Well, how do you make a game? How do you make a drop? So we help two different ways. Crypto natives build real products or real products and helping them pivot more into web three
Lucas Matney 2:58
world? Gotcha. And I mean, I guess like, broadly, when you're looking at what the crypto market looks like, today, how has your customer base kind of changed? Because I'm imagining that it's a lot more crypto clients maybe specifically or people who have kind of already made that big jump?
James Zhang 3:12
Yeah, guys, the winter is rough. It's real. It's real. That's what I'm wondering. Yeah. So I want to start by saying that, for me, personally, having been a digital art space, I'm extremely long term bullish on it. Because I really believe in the concept of digital ownership. As a digital artist myself, you just as a physical artists, like I'm old enough that I did work like painting pencils, etc. You could sell that art after you actually did the concept. There is no way of doing that digital art until blockchain came around. So I really long term believe in digital property and digital rights ownership. However, in the interim, the winter has pinched people in three different ways. One, and it's cheap prices have dropped. People are being really careful about what NF T's they buy second, the VCs, right? If you had a $500 million fund, in a good times, you're getting that replenished every year. Now you got to make that last three years. So investments is it's pretty hard. And three is token launches. That was such a powerful vehicle over the past three, four years for the right projects that has come to a dramatic slowing down in this environment. So between lack of token Launch Projects, dropping NFT prices, and hardware investment dollars, people are really careful in this space. And it's understandable.
Anita Ramaswamy 4:27
So you mentioned the sensity drop that you worked on with the comics by Frank Miller and yeah, I was reading about this and I saw that a physical piece from the collection was sold for like 800k I guess I'm curious how this all came together. Like what components of the art did concept art house actually provide? Oh, yeah. How did you sort of handle questions around like IP when it came to the original comics versus what you were working on?
James Zhang 4:48
Got it. So So I have 160 people at customer house many of us are fans of comic books, myself included. Frank Miller is a legend in the space. We met Frank in early 2021 And we're like Frank, what do you want to do? Um, you've already rich already famous, you already have these great IPs. And he wanted a chance to connect more with new collectors, new audiences, and the NFT blockchain space gave him a chance to do that. So we paired Frank up with our partners at gala games. They're the protocol. Frank is the IP, and we're the ones that helped figure out what that drop should be. How do we honor Frank's legacy, that piece that sold for 840k. That was a seminal moment. I don't want to give it away. But there's a little story moment that's really climactic in both the movies and the comics, and it's a special moment owned by one person. So we thought it was a very historical piece. There were total 10 pieces and the physical art. We also had a crystal that was created by Jason Brinks. All right, gala games. So it's a really collective teamwork around the drop that drops sold out at about a $4 million or so. But Frank, I would like to think we accomplish that we introduce him into this great new wave of digital art collectors that were also fans of his work.
Lucas Matney 5:58
It's very interesting, like IP in NF T's right now. I mean, you're obviously like, you don't have the same freedoms when you're working with existing IP. But as we look at like the Hugo's of the world and stuff like that, yeah, like people are doing CCO. And like, they're all these things about copyrights that are really interesting. I guess you guys are mostly working with existing IP holders at the moment, it sounds like but I guess like as you kind of look towards different things like what unique opportunities do open copyrights for NF T's kind of present? Yeah, it's a broad question. I
James Zhang 6:30
know. Oh, yeah. What are some of the biggest brands who work on Absolutely, I mean, you your your TechCrunch you see everything I mean, their biggest brands, of course, are excited about the NFT space, but it also does create opportunity for a lot of new creators and new IP. For example, we're working with great developers called Fashion league to try to bring up whole phygital tend to fashion into the metaverse, we work with the auto chess planet. Mojo has a really cool auto chess game. These are new original IPs and whole thesis is the change because if you building from the foundation, it aligns the players with the developers. So we get a chance to work on those new original IPs. And you know, skate x is one of those Gino pets are great projects, kind of Pokemon Go for web three. But unlike Pokemon Go, you actually get to own truly own these digital assets.
Anita Ramaswamy 7:19
Yeah, I'm curious about like your history of concept art house as it relates to IP two. I mean, correct me if I'm wrong, but I do remember reading that your original thought was to have concept art house, create your own IP, like in house, but that you ended up going in a different direction. And I'm just curious why you thought to make that pivot, we
James Zhang 7:34
are still interested in our own original IPs. Cool, there was just Yeah, very much. So the next big move we want to do, we're kind of already in the nexus between brands, large and small that want to get into web three. And then artists who want to come into the space, there's still even though it's winter, there's more people coming into the space and leaving. So we want to create a really powerful artists network that can credential and identify who an artist is what they've worked on in web two, and a web three. So instead of creating one IP, we want to create a platform that's really friendly for artists in web three. I'm happy to talk more about that maybe later on.
Lucas Matney 8:13
This is kind of like this is a broader question. But I'm like noticing right now, especially as the bear market kind of deepens and like volume shrink a bit. They're all these like awesome technologists and creatives who are in the web 3d space, who are like, still super excited about it, but a lot of the consumer interest is kind of like, been some space in some capacity. So I guess like, how do you as a creator, like build stuff for the big audience and web three, which might be insiders at the moment, but also kind of trying to like push on the walls and expand the total addressable audience at the same time? Like that's a question that I've kind of like struggled with myself in some ways,
James Zhang 8:47
because it's a big question. I'm gonna answer that in two parts. One is with the artists motivation in mind and one's with brands in mind. I think with brands, you know, I'm an NFL fan and we do work on the NFL NF T's with dapper if you watch this season, you're gonna see like commercials for NFL all day. They're not talking about NF T's but they're talking about digital ownership. That's really exciting. If you like me believe that humans I society, we are becoming more digital, whether you like it or not, then we should be able to own things in this digital world. And a lot of people are using the buzzword metaverse. If you believe in that core concept, that's why the brands are in there. So it's almost like whether you make money today or not. If you have a long view that eventually people are going to own more digital assets. That's where the money is going into the space. And if you listen to Marc Andreessen and Andreessen Horowitz, they talk about that the the smartest builders are going into the space. That's the bullish part. Now for artists what you're talking about, I have a question for a friend of mine, who's a very talented storyboard artist just last night and I said, Do you think professional artists today are underpaid, overpaid or paid about right? And he said, I think they're underpaid. And I said why? And he specifically cited to certain decisions like for example, Pixar made that made it a lot agreement. Have other companies that to keep certain salaries of professional artists low? That's a heavy statement. When I look at the statement, I think they're both underpaid, and they're paid what they're currently worth. That's a really tough statement. I think if you put 10,000 hours into engineering and 10,000 hours into art right now, as an engineer, you make more money,
Anita Ramaswamy 10:18
right? It's market value.
James Zhang 10:20
Yeah, exactly. You as an artist should you build to make more money now to artists equal amount of time put into art one is more financially savvy builds up a community has a way to exercise the community, but just the same skill set as another artist should those two artists make the same amount of money? So my thesis is in the future? The artists who are more financially savvy, who understand community have more power, they need less agents, less middlemen, that's kind of the promise of blockchain. So I think in the future, you will see this fork for most professional artists, do you want to try to understand finances more your role in it your role in the community your role in technology and contribute as a highly skilled artists? Or do you want to just paint and draw really well, you're gonna see a different power dichotomy between those two types of artists, even if the skill sets are the same, I guess,
Lucas Matney 11:07
in talking about approaching the broader audience, are you saying that that fork will come down the road, but for now, people are gonna more focus on kind of crypto inside or, you know, you have to kind of pick the financial route in order to tap some of those profits?
James Zhang 11:21
Correct. I think that focus artists started happening, but it's not mass market yet. Most of your artists and art station DVR, they're conflicted NF T's might burn the earth. I hate NF T's it's all a scam versus Hey, this is a new way to look at digital assets. There's a small group that have embraced and digital assets. You see them in alpha channels, asked what Twitter those the ones I've really changed the dynamic for themselves. Many of us were myself included, like starving artists for 10 years, we took advantage of the technology, because it's a different way of thinking about digital ownership.
Anita Ramaswamy 11:52
Yeah, I guess it's clear that there's a lot of artists who have benefited from some opportunities in the space. But when it comes to compensation, I know there's also been a lot of controversy, right with some of the higher profile projects. I remember reading about what the board APR club and the artists behind that making a comment about how she wasn't fairly compensated or felt that she wasn't paid a lot of money. I don't think she gave a lot of color on that statement. But I'm just curious about like, what role do you think the companies and the actual creators behind these projects have in terms of paying the artists fairly like, I guess just because you get into the space, and just because you're knowledgeable and aware doesn't necessarily mean you have agency right to actually get compensated fairly?
James Zhang 12:29
Yeah, that's also super hard. So there's different ways lens, so I came from, for 12 of those 14 years concept Roadhouse, we've really tried to preserve our rates. And we were always stuck in the middle between AAA raise, if you went to Hollywood, you know, artists are making 100 200 bucks an hour, but you can always go to India or China for like, 15 $20 an hour. So the way that art services overall settled into a certain groove, and it's not exciting, guys, it's a race to the bottom, there's always somebody new trying to undercut and that's part of the market by design. Right? That's a tough way to get into. And then for you to be a really talented artists, it's only half the battle, can you really develop the right IP and protect IP in appropriate ways? The artists like Frank Miller that did that. I mean, they're the ones that really kind of like won this race of discovery. But even so it's the brands that benefited from that.
Lucas Matney 13:19
I don't know, there's something fundamentally funny about the fact that like, the wide proliferation of you know, this was more like around like, 10k PFPs. But so many of these artists that were building, these were being found on Fiverr. And like, that's as web two as it gets in terms of compensation models, like that's like, there's no, they're not being tied to the success of the project whatsoever. So I just, I guess there's just like some, like underlying irony in that where it's like, yeah, right. Like, you know, all these startups are promising to change how creators quote, unquote, across the board, more like casual creators are paid. But fundamentally, artists who are kind of being like sucked into some of these machines still have to kind of deal with the same contracts, the same kind of structure. They're not being paid necessarily. Some might be not being paid in NF Ts.
James Zhang 14:05
I'm so glad you said that. Exactly. What if there is a better fiber, there's a better way to work in the future. What if artists knew they could get royalties behind the projects they worked on? Guys, this wasn't possible in the web to space. So to your earlier point, Anita and Lucas about new IPs, what if IPs are created with fan participation, community engagement involved that if you bought a piece of art in my game, you participate in the upsides. That's how it should be. That's why the space is so exciting. So cost abroad house for 12 years, we almost got no royalties, no revenue share, it was just art for cash. And that model is probably always going to be around the wheat. We took a chance at the future of different types of different deal terms and ownership. So I want to pass that knowledge and that transition to other artists that artists who participate through our platform hopefully can participate in upsides
Anita Ramaswamy 14:59
when you're talking with them. Artists, how do you advise them on, you know, just thinking through whether a project is actually going to take off? Because I guess there's two separate parties here, right? Like they're sort of the group that actually does the drawings, like artists in the most literal sense. And then sometimes that they'll also be the ones coming up with the whole, like storyline behind it and the business pitch and the marketing, but sometimes they're also not. So I guess, when you're kind of encouraging artists to take it to that level and come up with a holistic story and launch a new NFT project, like how do they even go about thinking through? Like, is this going to be popular? are enough people going to buy it? Is this going to be sustainable for me?
James Zhang 15:31
Yeah. Another really great question for concept art house, you can think of our studios business as an agency consultancy model for web three. And we have an art studio of kickass artists by the time so if you needed a drop design, you might talk to the strategist and know art really well. And then by the time the strategy is fleshed out, you need some really cool NF T's that people are gonna want to own. And that goes to the artists. So we have that internally at concept art house. If you look at West three as a whole, you have that in a decentralized way. You have promoters of projects, you have people that strategize projects, crypto natives design project, but they often outsource the art just like what Yeah, right. Yeah, you're gonna have those two different groups right now. It's, it's a little wild wild west in that there's not a set formula for this, like if you're a strategist, but you don't have draw for Well, where do you go gonna get your art? Are you going to art station, Deviant Art, Instagram, it's all over the place. Fiber. You know, if you're an artist, you'll have a good idea for an FTA idea. Where do you go to partner with a great NFT strategist, there's not really a set place that because the space is so early, so like a platform, trying to show you but that's, we see the same things you guys see. And that's why I'm like, okay, there needs to be some place to go to, to kind of find each other. Right now. It's Twitter, but it's unguided. It's everybody's up to their on their own. Yeah.
Lucas Matney 16:51
Being being someone who's you know, the success of your business is based around right now, the success of NF T's in gaming in the future, it seems like but I guess, as you look at studios interested in getting into this, there isn't really like a shining star for them at the moment in terms of like, I want my game to be just like this, you can be like, I want my game to be just like XC infinity for this seven fiscal week period. But there's a lot of success, and there's a lot of momentary profitability. But I guess when you're talking about like, the hallmarks of a top game, it's just it's hard to define in crypto right now, because the audience is just working at a different scale. So I guess like, when you're trying to judge a success, what does success look like?
James Zhang 17:33
I have to go back to early days of free to play and how many people were against free to play until Free to Play became a thing well, so success today, if you look at the patterns of what a16z Invest in into Animoca is invested into the teams that are getting the most investment are crypto natives with actual gaming experience, that should give us an indicator as to where things are coming. And of course, I'm a big proponent of triple A graphics stylus has that phantom galaxies has that. But yeah, you're right. There's no glaring, great examples. There's good example of teams that believe they're doing the right things that cut their teeth on web two games. So I look at a lot of precedent, a lot of experience with the team, the understand the crypto natives, that's what we have to measure from right now. And there are a few games that are trying to distance themselves and being IMV game. So rare is a great example of a I don't know fantasy sports management type of game that's kind of works. Xe worked until they invented a lot of issues. Hopefully that's something to build on. In terms of AAA graphics. Like I said their star Atlas was ton of games look really good. So I think the next year and a half or so can really hopefully distance some winners and some winners in the space.
Lucas Matney 18:41
Yeah, I think one of the may be long lasting. I don't know if anxieties is the right word, but for like NFT games or for gamers in general. Yeah, is that just this isn't going to look how the crypto idealist think it will and that in fact, it's going to be a lot of proprietary blockchains, a blizzard blockchain, insert your Mega studio and these things, there's not going to be any cross utility. It's just going to be market pegged economies built into every game that are siloed Hey, maybe you can transact off chain but you're gonna have to pay like a different percentage fee to sell something on open see than you would on the publisher. It's like that's a doomsday view. But I'm not sure that the major publishers have earned their right to not be seen through a doomsday lens. So I guess like, why should some of the gamers who are on Reddit right now like lambasted whenever their favorite game integrates NF T's in a minor way? Why should they like be a little bit more chill? Do they have anything to fear? Another broad question and a hard one. But curious, your thoughts?
James Zhang 19:41
I think what you're alluding to is we're not quite ready for the full web three game fi experience that may be the success the next evolution of the success is more like web 2.5 D. So can we get a really fun game out there where by nature some assets are scarce, and though As assets through somewhat design become valuable. And so there is a way there's more like a play and earn or collect earn mechanic rather than purely play to earn. That seems like a sensible pass for. I think that whole. I don't know if that makes sense. That's what I see, can we create a fun game that's engaging enough, just like Magic, the Gathering designed certain cards, like the black lotus or whatever, to be worth a crap ton of money, but there will became a secondary economy, because the game was fun, because it was collectible. And because certain key assets were really valuable. That seems like a winning formula that we're doubling down on that I see others that I believe in doubling down on.
Anita Ramaswamy 20:38
I know, ideally, everyone wants this sort of interoperable gaming universe. And that's, you know, the end goal for a lot of people. But in the meantime, I guess when you're helping artists create these assets for gaming uses? Are you thinking about, like, how are you thinking through which specific blockchains to support? Like, I know, there's a lot of sort of talk about like high fees and like expensive transaction costs for gamers. So how do you approach that?
James Zhang 21:01
Yeah, that's a great question. So I look at the origin story of the protocol. And what they really want to do. There's several protocols that say the big winning metric they go for as 100 million wallet conversions, we're building UFC with flow, because their thesis was move slow. Get it? Right, go for the crypto curious. So if you want it to go, let's say Whale Hunting most your biggest whales on Aetherium. Right? So there's a decision there? Do you want to go mass market? Or do you want to go whale hunting? That question should send you to different protocols near just did a kind of a historic deal with Sweatcoin. Because Sweatcoin is already proven web to plotter with 70 million users that's near as big play. But you know, what's the biggest artists marketplace on near versus eath versus Solana versus Flo? They all do slightly different things. Yeah. So polygon, for example, they have done some really killer deals really fleshed out a lot of extra tools. Because they've been around they raise the right money. Avalanche is super friendly for gaming, because there was some network. And then there's a couple of new ones. And I don't think the days of layer one and gaming is over yet you have some giants that are kind of waiting in the space.
Lucas Matney 22:11
You know, it's fascinating because like, I think flow, there's some controversy involved with flow is just like blockchain amongst purists. But you know, personally, like, I think that the idea of obfuscating as much of the kind of like technical lift away from consumers as possible, you know, that's the only way things are gonna work in the end. But that's a little bit harder sell in the depths of a bear market where like the mainstream audience might not be as easy to come by. So I guess like for you, when it comes to making a bet on blockchains, that might be a few years out from kind of realizing their potential versus something like East where you said there were whales aplenty, I guess, does it matter for you? Like how much does it matter how successful these games are in the long run? Versus like, initially? Obviously, you want your clients to be successful? Yeah. But I guess like, I'm assuming, are you like getting like paid and tokens or anything for any of these deals? Like,
James Zhang 23:03
yeah, so whenever we do, it's best for our studio model that we're platform protocol agnostic. So you know, which we try to be like Switzerland, in that in that case, we do hold tokens to several of our projects, that just shows alignment. It's a whole different way of commercially engaged with our clients. So we have projects on gala on flow on Solana on several eath and eath layer twos, and they do slightly different things. I'm also like a game advisor to Neeraj, they all do slightly different things. I know I'm kind of punting the question a little bit. But without naming specific names, some are a little bit more Stable, some more little faster, right, some are willing to pay for your attention. The new chains have raised a ton of money, they'll pay for you to be on the network. And that's really valuable in this bear market. You know. So I think it's, I think that piece is that push and pull is really important. So if I were to give advice to like new developers, if you're a huge brand, you need to go with a really established protocol. If you're starting off, you need to get really great support financially and resource support, because you're out there on your own. You know, and the more you identify yourself with one protocol, the harder potentially until we go to a more multi chain future.
Anita Ramaswamy 24:07
Right. Yeah, I guess the considerations are different for every every type of project. Yeah, but no, thanks so much, James. This was a really fascinating conversation. And there's definitely a lot to talk about when it comes to art and NFT. So thanks for spending your time with us.
James Zhang 24:19
Okay, thank you, Lucas. Andy had a really appreciate it. It's been a pleasure to be here. Thanks, James. Okay, thanks, guys.
Lucas Matney 24:28
We'll be back every week with interviews with the experts in the web three space. Catch Anita, Jackie and myself every Thursday for the latest in crypto news. You can keep up with us on Spotify, Apple Music or your favorite pod platform and subscribe to our companion newsletter also called chain reaction. Links to the newsletter and more from our guests can be found in our show notes and be sure to follow us on Twitter at chain underscore reaction. Chain Reaction is hosted by myself. Lucas Matney along with my co host and Anita Ramaswamy. We are produced by Yashad Kulkarni and our associate producer is Maggie Stamets with editing by Cal Keller Bryce Durbin is our Illustrator Alyssa stringer leads audience development and Henry pic of it manages TechCrunch his audio products. Thanks for listening