NFTs remain one of the hottest areas of interest in licensing, with announcements of deals across property types coming out daily. This month, however, a number of more negative news stories have popped up about NFT programs, including several involving licensed properties. NFTs remain an enticing, brand-new sector for IP owners to explore in their quest for new revenue streams and marketing platforms. But these situations serve as a reminder that licensors must take the same care with NFTs as they do for any licensing deal when it comes to knowing their objectives for the agreement, ensuring a strategic fit, and vetting their partners.
While all of these recent happenings highlight that NFT partnerships, like other licensing initiatives, come with risks, it should also be noted that each involves a unique set of circumstances:
- Manchester City football club discontinued a sponsorship deal with NFT start-up 3Key Technologies just four days after announcing the deal, when observers raised flags about the digital partner’s viability due to its lack of presence online and elsewhere. The deal would have made 3Key’s DeFi platform an official regional partner.
- Microsoft’s head of gaming, Phil Spencer, said in an interview with Axios that the company was being cautious about pursuing NFT gaming, because some efforts seemed to him to be “more exploitative than about entertainment.” Microsoft’s Xbox business runs one of the major global online gaming marketplaces, making it a key player in the success of NFTs in the gaming space. (Last month, online gaming platform Steam banned NFT games.)
- HYBE, the parent company of K-pop group BTS, and its entertainment subsidiary Big Hit Music saw a backlash from fans when they announced that they would enter the NFT market, mining digital collectibles based on BTS and other K-pop stars such as Enhypen and Tomorrow X Together (TXT). The fans objected based on the fact that NFT mining has a reputation for being ecologically harmful, especially since the members of BTS have been vocal in their environmental activism.
- Miramax sued director Quentin Tarantino to stop the latter’s planned auction of NFTs tied to his film Pulp Fiction on the Secret Network. Tarantino believes his NFTs, which include digital editions of handwritten screenplay excerpts of famous scenes from the film, represent one way to publish his script, which his initial contract gave him the right to do. Miramax disagrees and thinks Tarantino retains rights for only print publication, not NFTs. The studio claims that Tarantino’s release would harm the property, for which it says it has a cohesive strategic promotion and brand-extension plan.
- Barcelona F.C. cancelled its NFT agreement with Ownix, announced earlier in November, after a consultant to the company was arrested for allegations of sexual assault, faking corporate documentation, and conspiracy to commit a crime. The cancellation occurred just two days before the first NFTs, consisting of digital versions of photos and videos of classic on-field moments, were set to be auctioned.
- Li’l Baby Ape Club, an offering that suggests it is a spin-off depicting baby versions of the characters in Bored Ape Yacht Club (currently one of the top-selling NFT programs, as measured by CryptoSlam, and with no connection to Li’l Baby Ape Club), first gained notoriety for its use of racist tropes and skinhead imagery. The property had sold more than 3,000 of the NFTs it released on November 12 when news came to light that it also was an illegal copy of the entirety of another creator’s 5,000-token collection that had been set for auction four days after Li’l Baby Ape Club’s debut. The people behind the latter managed to get a hold of the former’s avatars prior to their introduction and launched the same collection early, with a bigger marketing campaign. (This is a lesson that while the blockchain that powers NFTs promises authenticity from the initial upload throughout the life of a token, there is still room for infringement.)
These types of incidents serve as cautionary tales. That said, there has been no slowdown in NFT deals tied to licensed IP. Just this month, new ventures have focused on ViacomCBS and its portfolio of properties; athletes including MLB free agent Matt Carpenter, member of the NBA’s Detroit Pistons Jerami Grant, and MMA athlete and former wrestler Quinton “Rampage” Jackson; characters including Hello Kitty and Paddington; fashion labels Diesel and Cole Buxton; World Table Tennis; artists Riskie Forever and Chito (the latter with Givenchy); Martha Stewart (for a second collection, this one Thanksgiving-themed); Space Jam, in commemoration of its 25th anniversary; and retail brands including Toys ‘R’ Us, for its mascot Geoffrey the Giraffe, and Macy’s, for its Thanksgiving Parade balloons; among many others.
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