🎯 Weekly Recap: Should NBA NFTs Trade Like Stocks?

Happy Friday! Welcome to The Web3 Marketer, where I help brands and marketers stay ahead of the web3 curve. Every week, I bring you top stories on digital collectibles & metaverse across consumer & loyalty.

Today's write-up is 1,274 words, a 5-minute read.

This week’s TL;DR

1. Are 🏀 digital collectibles securities?

2. Where marketplaces battle, artists lose 💰…

3. … and need to rethink business models 🖼

Plus headlines this week: 5x🛍, 18x🤖, 15x💍, 11x🎬️, 10x🏈, 1x🛠️, 5x💰️, 4x📚️.

📅 Upcoming events: NFT Paris (Feb 24-26); ETH Denver (Feb 24-Mar 5)

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The Big One

🔝 Is Trading NBA NFTs Actually Like Trading Stocks?

A judge allowed a 2021 lawsuit accusing Dapper Labs - the creator of NBA “Top Shot Moments” NFTs - of selling unregistered securities to proceed, despite the arguments that NBA collectibles are just like traditional baseball cards.

Why it matters: If classified as securities, the company would have had to register with SEC, in which case it’s highly unlikely it would have ever launched. A precedent like this could send all brand NFT projects back to the drawing board.

Get smart: The judge applied the Howey Test used for determining whether certain transactions qualify as "investment contracts” and found it applicable for two criteria:

• Expectation of profit: public statements, including specific tweets promoting NFTs using 🚀💰📈 emojis)

• Derived from the effort of others: buyers of “Moments” must rely on the centralized Flow blockchain, and by extension Dapper Labs’ expertise and managerial efforts in order to trade at all

Dapper argues that in the past, “courts have repeatedly found that consumer goods – including art and collectibles like basketball cards – are not securities under federal law“ but is not addressing the buyers’ reliance on Dapper for trading.

Of note: the craze for the digital collectibles featuring short videos from NBA games peaked in early 2021, with biggest trades going as high as $200,000

• Collectors have spent more than $230M on primary sales to date

• However, since peak of Feb 2021, the average “Moment” resale price of $181 declined to just $10

Deep dive on the case details here.

By the Numbers

📊 Where Marketplaces Battle, Artists Lose (Royalties)

The intensifying competition in the NFT marketplaces space has led to an increase in zero-creator-royalty platforms. The chart above depicts the scale of forgegone creator revenue as almost no marketplaces require buyers to honor the royalty fees anymore.

More bad news? OpenSea, the largest NFT marketplace, has now also made the royalties optional (see below).

Crypto Twitter Explained

🐦 As OpenSea Shifts to Optional Royalties, Creators Are Forced to Rethink Business Model

Under pressure from its leading competitor Blur, OpenSea temporarily eliminated its 2.5% markeplace fee:

• A cliff daily users & unique sales

• Declining total market share

• Near wiped-out market share within the largest projects

Part of the battle also moved to the royalties enforcement, with OpenSea encouraging creators to block their collectibles from listings on marketplaces that don’t make creator fees mandatory.

• However, for those collections that have not gone onboard, the platform will only enforce a miniscule 0.5% royalty fee instead of in full (going as high as 5-7.5% of a trade)

Why this matters: Creators and brands have traditionally relied on the 'technically’ optional secondary trade royalty fees as a source of recurring revenue

• It is a common misconception that blockchain ‘forces’ collectors to pay royalty fees; it’s the marketplaces that have been making it mandatory

• Now, as the battle for users is intensifying, these marketplaces are less inclined to charge users any extra fees, putting artists at a loss

What’s next: Creators and NFT communities are at financial risk, and need to rethink the existing business models that rely on royalties as primary revenue source, for example:

• Increase the supply of paid artwork (which reduces scarcity and drags prices down)

• Shift to a subscription fee instead of a one-time purchase for NFT community or utility access

• Set side a share of inventory at launch and gradually sell on secondary market when prices are higher

Deep dive: The Royalty Wars

Top Headlines

🛍 Consumer & Mainstream

Starbucks Polygon NFTs Are Already Selling for Thousands(Decrypt)
💬 The company’s first-ever NFTs batch from December is attracting speclators due to somewhat ‘historical’ appeal ahead of the program’s public rollout

Titanic Artifacts to be Tokenized as NFTs in New Partnership (CoinTelegraph)
💬 NFTs will act as ‘tokenized instruments’ for accredited investors as “compliant capital raising” to fund research, preservation, exhibitions of Titanic

Retail Monster partners with Pudgy Penguins NFT collection to put its upcoming toy line on the retailer shelves (Twitter)
💬 The global brand extension and licensing company is helping transform the crypto-native IP into a household consumer brand with merchandising and licensing deals

🤖 Metaverse

How the Metaverse is Making Money (Statista)
💬 The ‘conservative’ forecast suggest a 10x growth by 2030, driven by eCommerce and Gaming

Tencent scraps plans for VR hardware as metaverse bet falters - sources (Reuters)
💬 A sobering economic outlook prompts the Chinese tech giant to cut costs and headcount at its metaverse unit

The Next Hot Housing Market Is Out of This World. It’s in the Metaverse.(Link)
💬 ‘Digital twin’ houses are driving the next boom in the metaverse. Check my extended coverage here

💍 Fashion & Luxury Goods

A 'Pharrell Future:' Could We See Doodles [NFT collection] and Louis Vuitton Come Together? (Link)
💬 Known for his understanding of today’s popular culture and multifaceted ability to reach mainstream audiences, the musician could intermix the creative direction of both household brands

AR Collections and NFT Runways: Digital Fashion Takes over New York Fashion Week (FashionUnited)
💬 For the first time, the concept of digital fashion really had place in the spotlight, both on the official schedule and at side events

Gmoney [fashion NFT pioneer] Introduces Personalised [Attendance Tokens] to his Web3 Luxury Brand (VogueBusiness - paywalled)
💬 The founder of 9dcc is using NFT chips integrated into his products to gamify the engagement of his community

🎬️ Entertainment & Media

New YouTube CEO Is Bullish on Web3 Tech Like NFTs and the Metaverse (Decrypt)
💬 YouTube ad revenue is down, and NFT tech could bring alternative monetization. Check my extended coverage here

Spotify is piloting a token-gated playlist feature with several NFT communities (TechCrunch)
💬 Only a matter of time before other media platforms follow with similar experiments targeting small high-density communities. Check my extended coverage here

Will 'Synthetic Influencers' Be Real Enough To Stick Around in 2023? (dot.LA)
💬 While fictional characters may be easier to ‘manage’, they tend to be designed by committee, with lots of ‘attitude’ but little real personality

🏈 Sports

DraftKings Tees Up PGA Tour NFT Fantasy Golf Game (Decrypt)
💬 The sports betting company is trailing its European counterpart, Sorare, in NFT fantasy sports games. It’s a natural extension of the betting business, as monetary rewards are based on real-world player performance

NBA Top Shot Will Let Users Buy NFTs via Apple, Android Mobile Apps (Decrypt)
💬 The pivot to mobile-first approach, mainly constrained by nascent tech & App Store in-app transaction fees, is necessary to onboard more fans to web3 sports platforms in the long run

Super Bowl and Web3—how Brands Are Using the Metaverse and Nfts Despite Lack of Crypto Ads (AdAge - paywalled)
💬 ”Web3 is no longer a mystery, nor a compelling buzzword—it is simply an expanded digital toolkit that brands are finally starting to incorporate in a meaningful way”

🛠️ Web3 MarTech

Matching Crypto Wallets to Twitter Accounts: Web3 Marketing (Blockworks)
💬 A new tool helps marketing pros in the crypto segment better understand and reach specific audiences over web2 channels, e.g., send a promoted tweet.

💰️ Deals

CUB3 raised $6.5M series A round to automate Web3 rewards (BeyondGames)
💬 Upload a TikTok dance video, and earn points and tokens, which can be traded for anything from exclusive content to discounted merchandise

Phi raised $2M seed round to build a “social gaming onboarding platform” for the web3 ecosystem (Medium)
💬 Borrowing from the NFT playbook, the company hopes to accelerate mass adoption of the entire web3 ecosystem by providing casual touchpoints like social, gaming, and art

TipLink raises $6m, co-led by Sequoia and Multicoin, to unlock the ultimate distribution mechanism to send crypto & NFTs (Medium)
💬 Being able to send digital assets to anyone on the planet with an internet connection, and not just within the crypto-enabled ecosystem, would massively accelerate adoption

📚️ For the Weekend

📃 Love in the Time of Replika. Why Crypto and AI are Perfect Bedfellows, Actually (NotBoring)

📃 NFT Godmode: Understanding the Attention Economy (Mirror)

📺 Loyalty3.0, the Game of Being a Fan, & BTS of Adidas’ NFT (YouTube; 1h38m)

🎙️ Every Brand Will Have A Web3 Strategy (Apple, Spotify; 1h8m)

Also Made The News:

Meme of the Week

Free resources: 2023 Brand Reports Repository

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