Lessons from the NFT Trenches

Even though the NFT market is down in general in terms of value, NFTs can still be an effective means of generating fan loyalty—if they are a good fit with the property and its consumer base, and if they provide those consumers with something they value at a fair price. Achieving the right balance is not so easy, though. A number of recent launches have not only underperformed in terms of sales and engagement in some cases, but also received blowback for a variety of reasons. These scenarios offer lessons to licensors and licensees thinking of entering the NFT sector:

• In January, Porsche announced a collection of 7,500 NFTs to celebrate its 911 sports car, with holders gaining access to events, merchandise, and interactive activities. The initial price of about $1,475 per NFT attracted immediate backlash among some collectors as being too steep, especially for such a large quantity. Sales were very slow, leading the company to stop the mint—the process of publishing the NFTs—while it created a better experience.

• A Game of Thrones NFT launch, announced in November and released in January, was mocked on social media for its low quality and poor design, as well as glitches and delays during the mint. The collection consisted of a pre-sale of 3,450 special Hero Boxes (each containing an avatar and digital collectibles to help the holder build their realm online), followed immediately by a public sale of 1,500 more Hero Boxes, all priced at $150. Fifty Hero Boxes were used for promotional purposes, such as giveaways. The problem with this collection was more about fan perception than sales; despite the backlash, it sold out in seven hours.

• National Geographic announced the launch of a branded NFT collection of digital art based on images by the magazine’s best-known photographers, called the Genesis Collection. The controversy in this case was about whether it was the right move for the brand to get into NFTs in the first place, with strong feelings clogging the magazine’s social media feeds even before the launch happened. (Properties such as Stranger Things and Marvel have faced similar reactions from their fans.) Later there were also some technical issues with the mint that caused another round of consternation.

• YouTuber and boxer Logan Paul issued a collection called CryptoZoo that was billed as part game, part investment. The first 10,000 NFTs sold out, but purchasers started to complain that promises about the project were not being kept. There were a number of problems behind the scenes, centering on lack of payment and partners with less than stellar reputations, that were circulated widely among fans and in the NFT press. Ultimately Paul admitted to some of the problems and repaid some of the fan losses that occurred because of the issues with the collection.

• U.K. football club Liverpool issued 171,072 Hero NFTs to the public early last year and reportedly sold only about 8,500 in the first week. There were also two dozen unique Legendary tokens offered through Sotheby’s. The announcement of the collection, which was billed as offering unique pieces of art, as well as unlocking benefits, community events, and activities, had generated controversy from the start, as many fans felt the initiative was just a grab for cash. (Some of the funds raised went to the club’s charitable LFC Foundation.) Fans also complained that the club was slow to contact them after the sale about how to access their benefits.

In addition to ventures like these that generated negative reviews from fans, there are many other NFT collections that simply do not sell well. According to Nansen Research, one in three collections as of early 2022 did not attract any significant trading activity at all and another third attracted customers but traded at a monetary level below the cost of minting the tokens. That leaves just a third of projects that are profitable for the issuers.

While the examples listed here have unique characteristics and issues, there are some commonalities and lessons to be learned. First, NFT collections need to follow the same development process as any other licensing deal. The concept itself must appeal to the fans of the property or product with which it is associated; some fans are against NFTs as a rule, perceiving them as being too commercial and without value no matter what, or as too anti-environmental to be associated with certain properties. Furthermore, the specifics of the collection must be such that the NFTs offer fans real value, whether that be rarity, an attractive visual look, access, community, and/or other perks.

NFT purchasers are a notoriously critical customer base that is hard to satisfy, and they tend to make their feelings widely known to the rest of the market. Licensors and licensees in this space must be prepared for a variety of negative scenarios that could come up unexpectedly and be ready to respond and address fans’ concerns in a timely manner.

While problem-plagued initiatives such as those listed here tend to attract a lot of attention, there are success stories as well. Nike has offered a number of successful NFT drops, including its CryptoKicks and CloneX collections, which have been praised for giving fans utility and community that they appreciate, retaining their monetary value on the secondary market, and possibly even spurring sales of physical Nike product.