Aug 21, 2023

NFT marketplace OpenSea plans to "sunset the OpenSea operator filter" and "move to optional creator fees on all secondary sales for new collections," according to a recent post on X (formerly Twitter).

Video transcript

Open Sea, the one of the bigger NFT marketplaces out there in the world of Web three announced that they were sunsetting royalties paid to creators for their NFT creations when they sell on secondary markets. Now, this has been sort of an evolving story around norms involving royalties. A lot of other marketplaces had done this previously undercutting open sea eating significantly into open seas. Once dominant market share now blur and others out there are eating open cake and now open C is also capitulating on the royalty issue and that has people upset including investor Mark Cuban and others. So let's talk about the whole royalty thing and the whole nature of this dynamic as markets evolve, seek efficiencies and ultimately get rid of something that was an initial selling point and value proposition for why creators should launch in the first place. I'm very curious for people's thoughts on this. They obviously differ, but I'm gonna put Jen on the spot for her initial thoughts. Yeah, I think you know, when NFTS first made their big boom on the scene in 2021 1 of the selling factors like you alluded to there, Zach was the fact that creators were finally going to be able to get paid for their art, right? We're eliminating middlemen royalties are now going to go to the creator and the creator would continue to make royalties on that art as it's sold again and again on secondary markets, eliminating the need for middlemen like galleries and Netflix. And now we're seeing that users maybe don't want to pay royalties as much as maybe some in the industry were vocalizing. And, and I think this is really interesting, right? We have like we have the writers and actors on strike right now because of streaming platforms like Netflix. And now we're saying, OK, we're getting rid of the middle men. If you want to participate in this art, you can pay the royalty and people are opting out of that. And so I think there's this like broader discussion that has to be had here. What I think is also interesting about this story is that open tea is also so on setting their operator filter which was a filter that would prevent other marketplaces from selling um NFTS if people opted out of these royalties. And so what this tells me is that open C went did some market research and found that people maybe don't want to pay royalties, they need to compete. There's a bunch of other NFT marketplaces that have come onto the scene that have made royalties optional. And so I don't know, I think that this is, I think more names like Mark Cuban need to speak out because this is just like not a good sign for creators. People need to get paid and the more names that come out and educate people on why this is important on why if we get rid of the middle men, you know, us who are consuming our need to take over these fees. I think that is good Wendy. What do you think? Um maybe their target audience that they did the survey to is the same audience that was ok with illegally pirating music off of the internet so that the original creators wouldn't get compensated. The whole purpose of NFTS is so that real creators that real artists, I'm not talking about people like myself, I'm talking about people that have put their blood sweat chairs. Well, I've done that too, but I'm not a musician, I'm not really a writer, any of those things so that they have complete control and access to their creation, just like Bitcoin gives people complete control and access to their money. So I think it's very upsetting that they did this. I think it's absolutely ridiculous. I'm happy that um Mark Cuba did speak out. I spoke out about it too because I mean, let's face it when you see a platform offer free services, how are they making revenue? And in addition to that, what about the creators, like the whole purpose that you make in NFT is for, to, to earn royalties and whatnot. So, I think it's absolutely ridiculous. I don't think the NFT market is where we need to be right now. I feel like there's gonna be a lot more utility coming in but there's no value proposition for like musicians or for, you know, people in the entertainment industry to actually merge over and get rid of those third party predators when they, when they would be treated the same using like open sea or, or what not. Well, I had a different opinion. I think this was like going to happen, no matter what this is going to happen, we saw race to the bottom blur really changed the game and a few other NFT platforms launched. And the fact of the matter is that these royalties are not programmed into the smart contracts, you have to opt into it on the marketplace. And so once the marketplace has started to change, that meant these royalties were going to go away. Like if it was baked into the smart contract layer from the nfts now was programmable. Sure, like maybe that would be a better solution. But the fact is like you're relying on a middle man no matter what here, like that 2.5% royalty that we typically saw that was baked in because people were nice about it at some point when there became too many marketplaces that was definitely going to go away. So I think to think otherwise is a little naive. I also think that the people who made a lot of money on this were not creators like Hugo Labs made about $2.2 million on their initial distribution of their NFT stack. Over the subsequent year, they made 100 and $47 million on the royalties alone. OK. So like this was just someone who created something on fiber and then went around and then got 2.5%. Every time this was flipped, very difficult to like argue that this was good for the ecosystem. If every time someone was trading this, the money went right back into the lab's pockets. I mean, they made a lot of money on this whole thing and this was like taking money away from people trading it, the buyers themselves in the market who actually wanted to own or sell the artwork itself. I think there is an argument for Royal and NFTS and digital assets and for online art. But I don't think the way it's been done has actually been working, the money's been going to the wrong people and that's just how it is. So this is just going to be a change in the NFT landscape. These marketplaces are gonna keep whittling down and try competing against each other. And hopefully in the future, we see some other way, unlike the Blockchain level, on the programmatic level to have royalties baked into the artwork itself. Zach. Yeah, I think that, you know, let's ease up the conversation perfectly. Right. You have two competing camps who are incentivized very differently, right? You have traders and collectors who don't want to pay those fees. You have creators who very much are relying on those fees. And there is a huge dis alignment there and various marketplaces exploited that dis alignment to uh achieve market share. Right? And so I think we're seeing this kind of reach its inevitable conclusion where you're right, that social consensus, that social norm around enforcing this at the marketplace level is gone. It's like it's just gone. So I think it is interesting to see what that next value proposition is and the next wave of creators in terms of NFT creation. Um because certainly, as Jen mentioned, it was a big selling point with the last uh NFT mania. And now it just isn't part of the conversation gonna be interesting to see how it affects next uh next NF thing.

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