The latest approach to incentivizing people into buying NFTs is via zero royalties. In other words, NFT traders save a decent amount of money when buying NFTs since they don’t have to pay a percentage of the purchase price to the NFT’s original creator. However, the flipside of this is that creators lose a viable source of passive income, thus removing much of the motivation for creating an NFT in the first place. Despite the obvious downsides, it’s clear that, with the bear market still in full swing, platforms are looking to improve their bottom lines and are all moving towards zero royalties (even if they are only “optional” for now). Is this really the way forward? And is this just something creators will have to deal with from now on? Let’s find out!
Power to the (Creative) People
Being a creative can be extremely tough, especially when it comes to making money. If you don’t get paid for a gig or make some kind of money off of your art, you may not be able to afford rent or eat properly for a little while. As an artist or musician, making money is really, really difficult at the best of times. It goes without saying that the COVID-19 pandemic devastated the world of art and theater, and many creatives were forced to find new avenues in order to make ends meet.
For a fortunate few, NFTs have provided a way for them to reach a massive international audience and earn a comfortable (or even very comfortable) living from the sales of their NFTs. Moreover, historically speaking, each time one of their NFTs was sold or ownership transferred, they earned royalties from the sale, thus ensuring they receive some much-needed passive income from time to time.
But now this is all set to change as more and more NFT marketplaces seem to be instituting zero royalties for creators. For example, early on in October, popular Solana NFT marketplace Magic Eden made the bold move to make NFT royalties optional. Now LooksRare , an NFT marketplace on Ethereum , has also decided to make creator royalties optional…
However, LooksRare haven’t completely forgotten about or abandoned creators and have decided to set one quarter of their protocol fee towards creators, meaning that creators should receive about 0.5% of the sale price every time their NFT is sold. While this is a noble gesture, 0.5% is a far cry from the 5% or 10% royalty fees some creators were earning each time one of their NFTs is sold. As one user also points out on Twitter, it’s a little unfair to call the income creators earn from the resale of their NFTs “passive” since many of them put in a tremendous amount of time and hard work into providing audiences with unique NFTs that are truly extraordinary in almost every regard.
Caving in to Peer Pressure?
In order to remain competitive and match the moves of other marketplaces, more and more NFT platforms seem to be shifting towards optional royalties for creators. Interestingly enough, the largest NFT marketplace, OpenSea , hasn’t budged (yet) on royalty fees and still includes them on every NFT sale. But will this continue to remain the case? Or will OpenSea have a change of heart in the near future?
OpenSea changing their tune could really spell the end for creator royalties, and while it may benefits sellers and buyers, artists and creators take a pretty substantial financial knock. And as long as people continue to use these platforms, it seems that many creators will simply have to accept this new paradigm or be forced out of the NFT space. Neither of these realities is particularly desirable, and the fact of the matter is, as long as there’s some kind of intermediary facilitating the transaction and calling the shots, both traders and creators alike will be beholden to every whim of these platforms.
I’m not suggesting NFT marketplaces don’t serve a purpose, but as long as there’s some party deciding how the relationship between a creator and a buyer/seller works, there’s not a tremendous amount the parties on the outside can really do about it. Yes, they can certainly turn to other platforms and look for other revenue models, but as it stands, most NFT marketplaces are going the zero royalties route.
Putting Profits Before People?
The reality is that NFT marketplaces are business concerns and are doing their best to attract users and turn a profit. One way to attract users is to cut down on fees, but in this case, it’s royalties for creators. I really don’t think this is the route to go as ultimately you want to creator good creators with a strong grasp of their craft who deserve to be duly rewarded. Removing royalties kinda turns things into a free-for-all and doesn’t really bring in top talent. If you aren’t prepared to reward creators, then don’t expect to be able to sell your NFTs for a decent profit (or any profit at all).
I for one hope that OpenSea stands by their approach to always include royalties for creators, but whether they will continue to maintain this stance or not is a matter of debate. To my mind, this demonstrates that the NFT space is still immature in many important respects and that platforms aren’t really evolving in the right directions. These kinds of problems do require solutions, but not ones that harm any one party or put them at a disadvantage. I know there are several people who believe zero royalties is a great solution, but there are just as many (if not more) that think this is a step backwards in the world of NFTs.
So what do you think of zero royalties? Is this a great way to get more people involved in the space? Or is it counter-intuitive and ultimately harmful to all involved? Let us know your thoughts!