Creator Royalties

This post is by Fred Wilson from AVC

One of my favorite things about NFTs is that they contain a mechanism for the artist/creator to collect royalties on all of the sales that happen after the initial sale/mint. The creator specifies the royalty percentage when they initially mint the NFT and the NFT marketplaces/smart contracts collect the royalties on future sales and pay them to the creator.

Some forms of creativity have had ongoing economic participation by the creator for many years. In the music industry, there are publishing rights and recorded music rights that are paid to the creator and/or the creator’s financial partners (ie record labels and publishing houses). In the television industry, there are syndication rights. Many of the most successful musicians and television talent have made significant sums of money on these rights.

But for many forms of creativity, the ability to participate in the future value of the work has been absent.

So when I saw the NFT standard emerge, I was really excited about the potential for artists to participate as the value of their work escalates over time.

However, there are clouds on the horizon right now. Some NFT marketplaces have chosen not to enforce NFT creator royalties. There are some valid reasons for this and some not-so-valid reasons.

One valid reason is that “market makers” need very low transaction fees to provide liquidity to a market. A market maker is a participant that trades assets and does not hold them for long-term appreciation. They make money on the spread between (Read more...)