How the NFT goes Hollywood
And how NFT's work from creation to sale
NFT’s are definitely having a week. The big money thus far in NFT’s has mainly been around sports collectibles and digital art - this ESQUIRE profile on digital artist Beeple detailing how he sold $3.5 Million worth of NFT’s in one December weekend is fascinating. Fun fact: multi-Millionaire Beeple is actually a dude named Mike from Wisconsin who still drives a Toyota. Well at least I now have one thing in common with a multi-Millionaire artist.
But This Week in NFT’s kicked off with SNL deeming them worthy enough for a parody song on Saturday that’s… basically a “Schoolhouse Rock” for NFT’s:
Then on Tuesday AXIOS explained how NFT’s are about to take on (or take over) the sports trading card world. THE VERGE dove even deeper on the topic, introducing us to the growing sub-culture created by the leader in the Sports NFT collectables category, NBA TOP SHOT.
They also had a big week - Michael Jordan, Kevin Durant and Will Smith were just some of the boldface names taking part in a $305 Million dollar investment in the parent company of NBA TOP SHOT, a company that creates and sells NFT’s of NBA video highlight clips (think “digital trading cards”) so you can tell people that you “own” a clip of a monster dunk. If that doesn’t get you laid at a sports bar this Fall, well that’s probably because you spent all of your money buying that NFT dunk clip. The investment deal gave NBA TOP SHOT a valuation of $2.6 Billion according to the WSJ. See - now those folks will have no problem getting laid.
Also this week, Entertainment Financier FOREST ROAD GROUP announced that they’re spending $20 Million to set up a new NFT auction exchange site geared specifically to work with Studios to monetize their IP in NFT’s (former DISNEY execs Kevin Mayer & Tom Staggs are FOREST ROAD directors).
With all of the money flying around NFT’s, it’s only a matter of time before NFT’s really go Hollywood, perhaps via that FOREST ROAD venue. But what are the opportunities? And by opportunities of course, I mean how do people get rich. Or - use NFT’s to market something else and also get rich. LEGENDARY PICTURES took one of the first shots at that, partnering with an artist to release “Godzilla vs Kong” NFT images for sale on an auction site called MakersPlace this week. Here is its… uh, trailer?
Some agencies such as UTA and A3 have also made moves over the past 2 months to dedicate internal resources to NFT’s, and ENDEAVOR recently made an investment in the NFT space, all outlined well in this THR read from Rebecca Keegan.
So this is all great… but - if you’re nodding your head right now like you know what NFT’s are and how they work, but really saying to yourself uh WTF is a NFT? This next part is for you.
(if you already know all about NFT’s and the marketplace for them, and are more curious about the Hollywood potential, scroll down to right below the MONA LISA gif). Everyone else:
BRIEF REFRESHER:
NFT = Non-Fungible Token.
Non-Fungible = can’t be changed, aka something a hacker can’t fuck with, without people being able to tell that they did.
Essentially a unique code or ‘invisible watermark’ attached / “baked into” to a digital asset that serves as an irremovable certificate of authenticity. Any kind of digital asset can have an NFT attached to it (a PNG image, MP3 Audio file, PDF, etc). The NFT can’t be secretly removed or altered because it exists on a blockchain… which is the technology that all cryptocurrency is built on. Essentially… no one can fuck with it either.
But digital assets with NFT’s (just referred to as NFT’s) can be transferred or sold in perpetuity via online auction sites using cryptocurrency. The blockchain records all these activities and documents a history, so any buyer of say… a digitally signed trading card of Rob Gronkowski that they just paid $26,000 for, can verify that it was originally from Gronk himself, and not a digital copy created by Peyton Manning as a joke. Yes… using that money to send an underprivileged kid to college for a year would be great. But I mean, Gronk’s signature is really impressive.
WHAT DOES IT MEAN TO ‘OWN’ AN NFT?
Jack Dorsey recently sold his original first Tweet ever as an NFT for $2.9 Million. But, anyone in the world can still go on Jack’s TWITTER timeline right now and see the tweet, retweet it, snapshot it, print it out, etc. The one thing the elementary school teacher who bought it now has, that no one else does… is the bragging rights to say “I own Jack Dorsey’s first tweet”. Oh wait my mistake - it was bought by a Malaysian hedge fund CEO.
But both the teacher and the CEO can do the same amount of things with the tweet itself: one of them is just $2.9 Million poorer… but - can now be “that guy” at a party. The other is unfortunately just poor, but probably laughing at the hedge fund CEO. And definitely not invited to that party.
Analogy 1: Baseball cards. Anyone can re-print a Derek Jeter rookie season baseball card today, or look at it online etc. But ones released in the original 1993 Upper Deck set (esp in mint condition) are rare and worth crazy money cuz you can’t go back to 1993 and make more. Uh well at least yet.
Analogy 2: Art. You can see the original Mona Lisa in the Louvre, or you can buy a reproduction to hang above your toilet. They’re valued slightly differently (all due respect to your toilet). Also consider a painter’s signature on a painting its NFT - the thing that makes it the original.
WHAT IS THE NFT MARKETPLACE?
Essentially it’s a collectors market, mostly consisting of people that own a lotta cryptocurrency who value owning an “original” of a digital file. Though as more money flows into the space… a good deal of pure speculators are entering, buying things solely because they think they’ll be able to resell it for more. NFT flippers if you will. Either way, it’s based entirely on perceived worth, and speculation.
However, NFT’s do have a beneficial advantage for artists/creators vs IRL art: they can keep making a cut of revenue from subsequent re-sales of their work through a clause (for lack of a better term) attached to the NFT, giving them a certain percentage of all future sales (10% is customary) in perpetuity. In the case of NBA TOP SHOT, the NBA, the NBA Players Assoc and TOP SHOT’s parent company keep 5% of re-sales from every clip. The site did about $100 Million in sales transactions in February. So now that $2.6 Billion valuation may make a bit more sense.
Whereas the MLB makes nothing off the re-sale of baseball cards, and Banksy makes zilch when his IRL art is re-sold over time.
HOW DOES ONE ACTUALLY CREATE + SELL A NFT:
Kevin Roose at the NY TIMES outlined the process really well in an article he wrote with the expressed intent for it to be the first NYT article ever sold as an NFT. He set a base price of $850. It sold for $560,000 (Money is now going to the NYT’s Neediest Causes charity. Kevin is now going to think twice about committing all proceeds to a charity before an auction).
But I created a step by step HOW TO NFT in layman’s terms, aka a Cliff’s Notes version:
1. CUT A HOLE IN A BOX. sorry wrong list - Ya know what just click here for a SNL reference-free checklist if that’s helpful for you to have.
HOW CAN HOLLYWOOD MAKE MONEY FROM THIS:
Obviously, Studios & Music Labels can do tons of things here with NFT-ing their IP: for starters things like LEGENDARY is doing with the “Godzilla vs Kong” images.
Studios could always get together and make a series of TOP SHOT-like “digital trading cards” of moments from movies & tv shows - and I’m sure Kevin Mayer and the FOREST ROAD folks would be happy to help them. Even BONNAROO figured out a way in - they’re doing an NFT with their poster for this September’s music festival.
For creative talent, especially those with large fanbases… there’s probably a sizable market to make money themselves. And technically… talent doesn’t need an agency to facilitate it: if Aaron Sorkin wants to sell a digitally signed PDF of the original “Social Network” script, or Chris Hemsworth wants to draw a picture of himself as “Thor” in Photoshop and sell it as an NFT, they could just create their own (using my easy-to-use checklist) and tweet it out. Social media should take things from there to payday.
However it’s a lot easier for Aaron or Chris to just call CAA and say “Hey can you do this for me?” and be OK with giving them a cut of the sales (in addition to the 10% cut that goes to the NFT Auction site).
The Weeknd is already trailblazing a path in music. He’s auctioning a new song with digital artwork exclusively as a NFT this Saturday April 3. But just one file, which the highest bidder will own, and can then choose to release or… never let anyone hear. Ok yeah it’ll be on YouTube in 48 hours. But presumably, The Weeknd is working with his reps to make all of this happen (although in all accounts I’ve seen on this, I’ve yet to see a mention of his record label. Which I’m sure they’re thrilled about).
So for the representation business - some thoughts:
Idea #1 - Capitalize on talent’s penchant to choose the “Pay someone to do it for me” approach, and set up a small group at your agency dedicated to it. Especially working with the upper echelons of the talent food chain where there is bigger $$ to be made.
Idea #2 - Get to know and possibly represent big name NFT collectors, and connect them to artists/clients for exclusive item sales that don’t go thru public bidding auction. Possibly using the service FOREST ROAD is building.
Idea #3 - Create hype around public NFT auction sales for clients, both publicly and amongst wealthy NFT collectors, thus raising the $$ cut the agency gets in a sale (like selling a spec script with studios & streamers).
Idea #4 - There are several NFT auction sites/marketplaces out there: Agencies could also come to either represent, partner or invest in them, or broker exclusive deals for their A-List clients and with a certain auction site for a better cut of revenue.
Idea #5 - As the NFT market matures to having a large re-sale marketplace, agents could also help handle or promote those re-sales for clients: even though someone else is re-selling their client’s digital work, their clients still get a cut of those sales (the 10% thing).
Basically, there is money out there to be made: but exactly how is still being developed, and how much is an open question.
RED FLAGS:
Copyright issues may rear their head soon, some of which don’t have easy answers, or at least not easy solutions. The NBA is a partner in TOP SHOT. The NFL has nothing to do with the “Gronk Cards” featuring team logos that Gronk made $1.8 Million from. Or musicians selling NFT’s of their music may not be giving the songwriters of their music their due cut, etc. So could be a buzzkill, but overall definitely a grey area.
Environmental issues - creating NFT files and cryptocurrency apparently takes up extraordinary amounts of computing power/electricity needs. So for a town that always loves to point out how green they are…. #carbonFootprint.
Scalability - outside of this small digital crypto community… does this have larger appeal? Either in the traditional art world or pop-culture “collectibles” culture? 🤷♂️. Also there are a few stories surfacing of people making NFT purchases… then checking their Wallets where it’s stored… and the item is no longer there (warning: it’s a long, tech jargon-driven answer why). So that’s not gonna help.
Extreme fluctuation - NFT’s are a business entirely built on the perception of how valuable something is to own… that you can’t even touch, or visually discern from an exact copy by looking at it. Jack Dorsey’s first tweet displayed on a monitor in my house looks the same as it would in the house of the person who paid $2.9 Million for it. Except that he likely doesn’t live in Queens.
Once the novelty goes away - a good chance price volatility will not be pretty. Not to mention - if a mocking or even shaming societal backlash begins about extravagant spending on things like Gronk cards, it’s very possible the heat goes away, and the bottom falls out of the market. Not to mention ‘paying taxes’ on NFT sales doesn’t seem to widespread in the culture at the moment, so that could also be fun at some point.
REDEEMING FACTOR - NFT’s are creating a new way for artists, including designers, writers, musicians, perhaps even actors and directors to make $$ not just once, but over the sales lifespan for their work, at a time when the digital world has devalued their work to a degree (even A-List artists get just $0.008 cents per play on SPOTIFY). One anecdote in the THR piece I mentioned earlier, features a digital artist who worked in post-production on movies for years, and just sold 12 pieces/files of original digital artwork for a total of $2 Million… in one day. And presumably he’ll make 10% of any subsequent sales going forward.
FUTURE PROSPECTS:
The Jersey in me is a bit 😏 about the legs on this. Seems like it’s built on people with $$ to burn, spending it just for bragging rights worthy of an SNL parody: “Do you wanna see my Dorsey Tweet” doesn’t quite have the same cache as “Do you wanna see my original Van Gough”.
Regardless - the iron is scorching hot right now for some folks to make some real $$ this year. If/when The Weeknd makes a killing from this song thing… expect to see a lot more of it just for starters. More athletes are now also getting in on the action as well - Patrick Mahomes just made $3.4 Million from selling digital paintings of himself. A 25 year-old guy who couldn’t even beat a 43 year-old in a football game.
As more people enter the marketplace, “discoverability issues” for people to discover your item on these auction sites will peek their head out here too. So these stories of “ordinary joes” becoming overnight Millionaires may begin to dissipate. But even if they can sell stuff for a few thousand bucks, that can mean a lot. For already famous people, especially with cult followings (ie the ComicCon crowd), it’s yet another lever to pull for more cash… without actually having to go to all the Cons.
To use a Hollywood analogy, NFT activity is still in the “just had a standing ovation screening at Sundance” stage in it’s lifespan, so I’d expect this market to only get hotter for the rest of 2021. And you know Trump is gonna get into this as soon as he… or uh someone around him grasps the cash grab opportunity. And then figures out a way to explain a NFT to Judge Jeanine’s audience. And to Judge Jeanine.
As for NFT long term prospects… an inevitable correction/reckoning of some sort will come about as with any spending mania craze. To me… this does have a bit of 2006 housing market feel at the moment. But as long as you can always “find another sucker” - sky’s the limit. Something that Hollywood also knows how to do very well.
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