OpenSea decided to reduce fees and royalties for creators
The largest NFT marketplace in the world, OpenSea, made significant waves across Web3 on February 17, 2023. Unannounced changes to their creator royalty and fee structure have a significant impact on the platform’s users as well as both collectors and creators.
In other words, buyers are now free to choose whether or not to respect a creator’s preferred method of royalties. Since sales royalties are the primary source of income for most projects after their initial token sale, this is a significant issue for many project developers.
Finally, OpenSea announced that the operator filter on the platform would not prohibit marketplaces with comparable policies.
The business announced on Twitter that the 2.5 percent fee that is added to every transaction on OpenSea would be eliminated for a brief period of time. However, the announcements continued after that. The marketplace announced that it will transition projects that don’t use on-chain enforcement tools — which is essentially every project created before 2023 — to optional royalties as part of a contentious plan that the company unveiled back in November.
We’re making some big changes today:— OpenSea (@opensea) February 17, 2023
1) OpenSea fee → 0% for a limited time
2) Moving to optional creator earnings (0.5% min) for all collections without on-chain enforcement (old & new)
3) Marketplaces with the same policies will not be blocked by the operator filter
Marketplaces, collectors, and creators: who wins?
These announcements might catch you off guard. This change, though, is a part of a larger trend on Web3 that favors NFT collectors over creators.
However, why have markets changed in this way? The statistics, in the opinion of OpenSea, reveal a clear story. The company claimed in their thread that data from Dune Analytics shows that zero-fee platforms account for 80% of all NFT trading volume. Markets want buyers, but buyers don’t want to pay royalties. The marketplaces will decide to stop paying creator royalties if one must go.
In the end, the announcement was made just days after one of OpenSea’s main rivals in the NFT market, Blur, wrote a blog post advising users to block OpenSea.
However, according to some accounts, this war was actually started by OpenSea. The way that OpenSea’s policies were constructed prevented creators from receiving their full royalties on both Blur and OpenSea at the same time. Users had to pick just one platform in order to receive full royalties. As soon as trading is detected on royalty-optional marketplaces like Blur, OpenSea automatically changes royalties to optional.
But it appears that Blur discovered a way to get around that blocklist back in January, which aided the marketplace in luring more users away from OpenSea.
OpenSea openly acknowledged the influence Blur had on their choice in their thread. “The NFT ecosystem has undergone a significant change. Users started to migrate to NFT marketplaces that don’t strictly enforce creator earnings in October, and we began to see significant volume. Despite our best efforts, that shift has now dramatically accelerated. Recent occurrences, such as Blur’s decision to roll back creator earnings (even on filtered collections), and the erroneous choice they are forcing creators to make between liquidity on Blur or OpenSea, demonstrate the futility of their efforts, they claimed.
Creators responded fast and sharp
Creators responded immediately and harshly. Nyan Cat’s 36-year-old digital artist Chris Torres implied in a tweet that OpenSea was taking advantage of artists for their own gain. NessGraphics, a digital artist and 3D animator, referred to the decision to introduce optional creator royalties as “pathetic.”
Deadfellaz co-creator Betty claimed that the decision undermines creators’ rights to control how their work is distributed and made available for purchase. The author decides on royalties for their creations. Market determines whether or not it wants to purchase from that creator after being informed of the limitations imposed by that creator. Marketplaces shouldn’t be able to step in and sabotage that by taking control away from creators. “But some people don’t want to pay royalties,” you may respond. In that case, those customers may choose to purchase from creators who do not set royalties. Understanding that each of us has the freedom to choose how to participate is essential to participating in this ecosystem, she wrote.
Creator sets royalties for their work. Market decides whether or not they want to buy from that creator, understanding those are the parameters set by that creator. Marketplaces should not have the authority to intervene and disrupt that by shifting power away from creators.— BETTY (@betty_nft) February 18, 2023
Frank, a well-known figure in the Web3 community and the DeGods team, seemed to concur. The best way to gain marketshare is to have the lowest fees for high frequency trading, he wrote. “Harsh reality: NFT marketplaces are all trying to maximize marketshare so they can raise bigger vc rounds.”
So, while it’s still unclear which NFT marketplace will prevail, it’s becoming more and more obvious that creators will lose the battle for royalties.