Yuga Labs is the latest NFT brand speak out against OpenSea’s extremely controversial decision last week to (once again) do away with enforcing “mandatory” creator royalty fees – by blocking all support for any new or upgradable NFT collections on OpenSea’s SeaPort by February 2024.
Yuga Labs, the parent company of both Bored Ape Yacht Club and CryptoPunks announced via “X” (formerly Twitter) that it was committed to helping “foster an ecosystem where…creators are rewarded for their work.”
— Yuga Labs (@yugalabs) August 18, 2023
Emily Kitts, a Yuga Labs spokesperson, told The Verge that the company would be working toward “disallowing OpenSea’s marketplace to trade [its] collections as they phase out royalties,” but didn’t expand upon which NFT collections would be affected.
The Irony of NFTs and Digital Art
The biggest selling point of digital art, especially digital collectibles (NFTs) was that these artists were put front-and-center on these canvases and rewarded each time their artwork was resold on a secondary market.
For companies like Yuga, who first made a name for itself after debuting its industry-leading Bored Ape collection, the royalty fees added up to around $35 million for those collectibles alone – all through OpenSea as of November 2022.
Turning to last week’s shocking announcement from OpenSea, the NFT marketplace clarified that creator royalty fees wouldn’t be going away, and instead, it’s simply doing away with “the ineffective unilateral enforcement of them.
We launched our Operator Filter so creators could restrict secondary sales to web3 marketplaces that enforce creator fees.
But we relied on opt-in by the entire ecosystem, which didn't happen. So we’re making a few changes to our approach to creator fees. 🧵⬇️
— OpenSea (@opensea) August 17, 2023
By nature, this sent a nasty shockwave throughout the digital art community and to artists who have all vocalized their disbelief and anger as they have begun taking a stand against OpenSea’s lack of respect and appreciation for the creators it has continued to profit off of over the years.
The irony here, of course, is that the promises by companies integrating Web3 infrastructures who wanted to enhance productivity and accessibility, as well as create new revenue streams for creators with digital art, didn’t really mean much given that the revenue streams were essentially in the hands of NFT marketplaces like OpenSea.
And this doesn’t help the overall sentiment towards Web3 and NFTs, especially in the current market decline where the average person understandably has no reason to trust in these infrastructures or promises by big tech and Web3-native brands in wanting to enrich the lives of the masses.
With Major IP Gone, What’s Next for OpenSea?
While NFT marketplaces like OpenSea may have the royalties card within their control, it’s certainly not sustainable, especially since intellectual property (IP) like Yuga’s BAYC and CryptoPunks heavily contribute to and fuel their success. In other words, without these IP franchises, what would these marketplaces do?
According to data collected from Ninjalerts, Yuga’s 30-day volume is approximately 80% the size of OpenSeas, resting at $52.8 million and $66.7 million, respectively.
Yuga's 30d volume is 80% the size of OpenSea's
This is the leverage that IP has over NFT Marketplaces
The NFT Marketplaces are dead without the most important IP
Will this lead to walled garden marketplaces by IP owners? That's much more complicated, so I'm not sure.… pic.twitter.com/FHdWG99q07
— trevor.btc (@TO) August 19, 2023
Just keep seeing bad data floating around. Yuga is extremely important to OpenSea. But to say that 80% of OS revenue is from Yuga misses the fact that the vast majority of Yuga volume isn't on OpenSea. Actual data below, number is closer to 15% recently. https://t.co/mqzYwWTWux pic.twitter.com/ZDwsK6HUl0
— NFTstats.eth (@punk9059) August 19, 2023
Blur, which recently surpassed OpenSea as the leading NFT marketplace by trading volume, enforces a 0.5 percent fee, which, unfortunately, is below the average 5 to 10 percent royalty fees paid to that NFT artist.
Beginning August 31, OpenSea will implement its “optional” royalties mechanism for all new NFT collections, giving collectors the option on whether or not they want to show their appreciation for the artist whose work they are paying to purchase.