Say what you like about NFTs, but at least one of the strong plus points around this technology is that the people who create them can earn royalties from secondary sales of their work. Can’t they? CAN’T THEY?!

Here’s part of the answer to that question. “The last few months have proven that off-chain enforcement is too brittle…” That’s an early line from a blog post by one of the biggest NFT marketplaces, OpenSea. “The business model used by the vast majority of creators in this industry is now subject to enforcement discretion of marketplaces rather than code.”

In other words, someone selling an NFT (say, on OpenSea) can specify what percentage they’d like of any future secondary sales, but if those sales happen on “marketplaces where these fees are optional” then those royalties can’t be enforced. And as for the ‘optional aspect: “We’ve watched the voluntary creator fee payment rate dwindle to less than 20%”.

OpenSea’s blog post is sparking a lot of discussion online around the nuances of what happens next. It is launching a tool for ‘on-chain enforcement of creator fees for new collections’ – a snippet of code that people can choose to add to their NFT contracts that block them from being sold on marketplaces that “do not enforce creator fees”.

(Due to the fact that these marketplaces are also competitors for OpenSea, this move may also cause – and forgive us the use of some very technical language here – a right old hoo-ha within a community for whom concepts like decentralisation are key.)

For the music industry, it’s a reminder that this is emerging technology, with implications best described as fluid. You can’t assume that any NFTs you sell will automatically generate royalties for you on the secondary market, if those transactions are taken ‘off chain’.

A reason to run screaming from NFTs and anyone who pitches them to musicians and music companies? Perhaps the opposite. Leaning in to this debate about creator royalties so we can understand the nuances is important.

Meanwhile, if the topic of how those royalties can work (and be enforced) is up for debate, it may be even more important for musicians and rightsholders to step up with a strong voice.

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Music Ally's Head of Insight

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