A picture with a string of codes becomes a digital collection. In addition to the direct economic benefits brought by selling in the primary market of digital collectibles, the market size associated with digital collectibles in China is expected to reach RMB 92.63 billion in 2026, bringing an incremental increase of nearly 100 billion to the economy. With such a huge market, who are the players? Who is consuming digital collectibles? Why is it so hot? What are the "pitfalls"?

A picture with a string of codes becomes a digital collectible, and users are so eager that tens of thousands of copies of the collection are snapped up in a minute. A painting, a book, a poster, a book collection ticket, a piece of music, a card, a ticket, or even an emoji, can be turned into a digital collectible.

In the "Opinions on Promoting the Implementation of the National Strategy of Culture Digitalization" issued by the General Office of the CPC Central Committee and the General Office of the State Council, it is proposed that "Chinese culture will be presented in a panoramic view, and the digitalized achievements of Chinese culture will be shared by all people". In this context, the digital collection has become a hot concept in the past two years: low investment, high profit, and fast money!

Beijing Changjiang New Century Culture and Media Co., Ltd. launched a digital collectible "20 Years: The Story of Time" earlier this year, selecting nearly 700 book covers from more than 2,000 books published by the company in the past 20 years and making a digital collectible priced at 19.9 yuan and limited to 8,888 copies, which sold out in only 20 seconds. People's Literature Publishing House puts on sale a limited digital collection of Masako Koya's "The History of the Three Kingdoms" for 19.9 yuan, with sales breaking 995,000 yuan in 60 seconds ......

According to the report of the third-party organization Moon Fox, in addition to the direct economic benefits brought by selling in the primary market of digital collectibles, the domestic market size driven by association with digital collectibles is expected to reach RMB 92.63 billion in 2026, bringing an increment of nearly 100 billion scale to the economy.

Digital collection platforms exceed 700, internet giants dominate the market

According to the report released by Moon Fox in August this year, in the past two years, state-owned units and listed companies have entered the digital collection platform, and as of July 2022, China has over 700 digital collection platforms, mainly in form of Wechat Mini Programs, web pages, and other Applications. After two years of development, the number of mainstream digital collections on mobile applications has jumped from 12 to 58 and has gradually penetrated into the fields of art, culture, music, entertainment, leisure, catering, shopping, tourism, sports, ticketing, and so on.

China's digital collectibles are mainly divided into three categories: traditional culture, content-based original, and physical industries oriented.

The penetration rate of the digital collectible market was only 1.5‰ in July last year, but by July this year it had reached 9.2‰, an increase of 7.6‰ over the same period last year, and the overall penetration rate has been on a positive growth trend from July 2021.

In the market penetration rate list of digital collectibles of mobile applications in July 2022, Topnod, a digital collection platform of Ant Group, topped the list with a penetration rate of 2.4 ‰, while Qiankun Digital Collection, which focuses on the digital collection of "allowing excellent IP to spread Chinese culture", ranked second with a penetration rate of 1.7 ‰; the third-ranked application is ArtPro, which is dedicated to building the world's most complete art market information database, with a penetration rate of 1.5 ‰.

In terms of user scale, in July 2022, Topnod, which launched its mobile application in December last year, ranked first in the DAU ranking list of digital collection apps with a monthly average DAU of 126,000; ArtPro became second with a monthly average DAU of 124,000; Onedaoone ranked third with a monthly average DAU of 79,000.

In the MAU ranking list in July 2022, TheOne.art, dedicated to exploring new approaches in Chinese fashion trends, ranked first, with an MAU of 564,000; Topnod became second with 403,000; and in third place was Onedaoone, with an MAU of 389,000.

In the daily usage time per capita ranking list in July 2022, ArtPro ranked first, with an average daily usage time of 11.2 minutes; Qiankun Digital Collection became second with an average daily usage time of 10.6 minutes; and in third place was Guzhidui, a national tide new cultural and creative social e-commerce platform, with an average daily usage time of 8.8 minutes.

For male-dominated consumer groups, the appreciation of collections is the main motivation

Currently, a real-name system is in place to manage digital collections in China, and transactions are restricted to users under the age of 18.

Among the existing users, digital collection users are predominantly male and inclined to be younger and highly educated. Mainstream digital collection apps account for about 70% of males and 30% of females, which shows that males have a higher interest in digital collection; users under 35 years old account for as much as 70.6% and users with college or above are as high as 47.6%, showing a trend of youthfulness and high education; users account for nearly 60% in medium and large size cities.

In addition, for the number of digital collections held by users, it also shows the "80/20 rule", that is, 80% of digital collections are held in the hands of 20% of users, and there is a certain stickiness of users' collecting behavior for digital collections. The biggest purchase motive of digital collectibles mainly lies in the collection, and consumption and transaction are yet to come. Therefore, the consumer group can also be roughly divided into: physical product enthusiasts, including people who are fond of digital IP, such as audiences of movies, operas, and books; secondly, technology enthusiasts, collectors who think a digital product has value.

The pursuit of "new concepts" has become the main purchase motive, and the compliance and security of the offering platform is the core consideration of users when purchasing digital collectibles.

According to the report of iResearch Consulting, the main motives of users in purchasing digital collections aretheirinterestsin "new concepts"; strong demand for collecting specific IP; and the belief that digital collections are a future trend and can be laid out in advance. Blockchain, metaverse, NFT, and other concepts are emerging in China and are in the development stage as a whole, so this area is naturally attractive to young people who love to follow emerging trends. When users are buying collections, the main consideration is still the compliance and security of the trading platform, also the quality of the collection, the limited release of collections, etc. are of users’ interests.

2021 is the opening year of the digital collection, from this year onwards, major domestic platforms began to lay out the digital collection track, and more and more users began to pay attention to this market. The vast majority of users' knowledge of digital collections is through official information channels of platforms, such as official websites, Wechat Official Accounts, and Wechat Mini Programs (accounting for 77.6%). In addition, the display forms of collections that users are most interested in include AR/VR, game/virtual props, and 3D, which are in contrast to the mainstream image picture forms in the current market, and the above three display forms will become the core development direction of digital collections in the future.

According to the research, the types of digital collectibles with the highest market popularity are the designer toy trend/Chinese fashion trend category (58.6%) and the art collectibles category (58.0%). The high value, scarcity, and strong emotional value of designer toys fit with the attributes of digital collectibles and gain the recognition of users, and the union of designer toys and digital collectibles is bound to be the future trend.

Digital collections give more possibilities to art collectibles. In addition to the collection value of the artworks themselves, digital collections bring the role of confirmation of rights protection and anti-counterfeiting, making art collectibles one of the scenarios that users love. With the further development of digital collections, the property right confirmation and knowledge protection of blockchain technology will be applied in more scenarios in the future. At present, users are most interested in digital finance (64.6%) the application field derived from digital collections, and in the future, the application field derived from digital collections will continue to expand and promote the further enhancement of the value of collections.

The insufficient secondary market, currently remains a marketing tool

At present, the sales and profits of digital collections are still dominated in the primary market. Digital collection platforms, lacking liquidity due to insufficient secondary market, and transfer and other functions, serve more like funneling fans into private domains and therefore function more like marketing tools.

Therefore, the collection becomes the main reason for users to buy digital collectibles, and the proportion of social interests is rising.

The report from Sootoo.com also shows the main use of digital collections, 55.57% of users collect the latest digital collections to meet their own collection needs as virtual assets. 23.29% of buyers believe that digital collections can bring more economic value over time based on scarcity through selling or transferring.

Entering 2022, the domestic digital collection market is still in the exploration stage. Through wild west growth for most of the year, false propaganda and other speculative behaviors inevitably exist in the digital collection platform of the emerging field, the state authorities are also cracking down on these illegal and criminal activities.

The State Administration of Cultural Heritage, in response to the current situation of the development of digital collections, held a symposium on the situation related to digital collections around the public welfare attributes of cultural and museum institutions, data security, consumer rights, and other issues; the "Initiative on Preventing Financial Risks Related to NFT" jointly issued by industry associations, called for joint efforts to curb the tendency of financial securitization of NFT and strictly prevent the risk of illegal financial activities.

For creators and rights holders, they need to follow the relevant legal provisions, and may not cast the same work in other brands; for distribution platforms, they need to obtain a license, and may not use words such as virtual assets and virtual currency in their registered names and business scope; for consumers, copyright is for non-commercial use, and ownership includes possession, use, gain, and disposal, and transactions are prohibited for speculation and money laundering.