Welcome to the second edition of our newsletter! There are 2 stories this week: one delves into Hollywood’s fast-moving relationship with NFTs & the other explores how art auction houses are jumping onto the NFT trend in creative ways. Enjoy and thanks for joining the conversation.
HOLLYWOOD STUDIOS VS. TALENT: THE NFT CASH GRAB
The viability of non-fungible tokens (NFTs) is still up in the air, but they’re going mainstream fast, and when they land, Hollywood will be flying the plane.
Presently, all the major Hollywood studios are feverishly strategizing how they’ll use NFTs. Meanwhile fans wait patiently while many talent agents and stars play catch-up.
In a nutshell, NFTs can transform all types of audio-visual files into digital assets that can be bought, sold, and tracked through an online ledger called a blockchain.
This year, NFTs have become increasingly popular due to recent high-profile sales such as Beeple’s NFT Artwork which sold through Christie’s for $69.3MM (on March 11). “Digital is growing really fast. It’s instant gratification” said Michael Eisner, former Disney CEO and co-owner of Topps (a $1.3B sports card company) that announced last week on CNBC TV it’s going public, with plans to capitalize on the NFTs collectibles market.
But it’s not just high-profile sales creating the NFT buzz. NBC’s “Saturday Night Live” also helped spread the word with an Eminem-style rap-parody called "What the hell's an NFT?" Later, on April 5th SNL sold the skit as a NFT on OpenSea for 171.99ETH (that’s approx. $350,000).
According to Forbes: Within three years the business of selling crypto assets has skyrocketed from about $40MM to $300MM. In March 2021 alone, NFT sales exceeded $220MM.
For Hollywood this all represents big business. Studios are eyeing conceivably billions of dollars by converting clips of movie classics into NFTs. Just imagine a huge Sci-Fi fan with one of 20 authorized clips of the Star Wars (1977) scene “May the Force be with you”! It’s a no-brainer! And there’s an endless supply of content to choose from.
Director and Producer Peter Berg (known for Patriots Day) also weighed in on the topic predicting that very soon we’ll be seeing our favorite stars in exclusive, never before seen, NFTs clips. “We’ll be seeing totally new original scenes” he said “You’ll see Jack Nicholson doing a scene that only exists in that space, and somebody will pay $50MM for it.” He speculated (March 29) on toofab.
But when we’re talking about millions of dollars, how do regular investors get in on the game? Today many smaller investors are now forming groups, called DAOs (Decentralized Autonomous Organizations), to pool their funds and invest in NFTs through fractionalization.
Essentially NFT fractions (aka shards) are derivatives of the asset, that are created upon acquisition. These shards can be traded on decentralized exchanges (DEXs,) such as Uniswap and Sushiswap.
For example: FlamingoDAO comprised of 40 members have acquired over 600 NFTs including a series of NBA Top Shot “moments”. “Collector DAOs are going to be a game changer for the NFT Space” said digital artist pplpleaser, who’s NFT of an animated Uniswap promo-video was collectively purchased for $525,000.
But Investor’s Beware: Some legal experts warn these NFT fractions may represent securities: “the whole concept of an NFT is meant to be non-fungible” – meaning that “in general it is less likely to be a security” warned SEC Commissioner, Hester Peirce at Draper Goren Holm’s Security Token Summit on March 25.
So, what if you buy a Star Wars NFT, what ownership rights do you have? Basically, owning an NFT is no different to owning a DVD, CD or any other type of art or memorabilia.
The growing value of NFTs is quickly redefining the film industry. For example: Indy Film director, and Emmy winner Trevor Hawkins created two types of NFTs to promote and fund his independent feature “Lotawana”, the first movie-ever to be sold to multiple film fans as an NFT.
For film makers globally Hollywood is known for its centralization of capital, production and distribution. It helps keep the new talent out, and the old patriarchy in. NFTs stand to decentralize the Hollywood system so that new talent can emerge to create more inclusive, globally conscious material.
On March 30, Film firm The Forest Road Company closed a $20MM fund to make pre-production investments in exchange for sales rights to be The NFT investor, manufacturer, minter, and auctioneer, creating “IndieNFTs” collectibles for its 1,500+ film producers and associates.
"NFTs represent a new way to leverage IP and connect with fans,” said Saw creator and FRC board member Mark Berg.
Streaming and distribution company Cinedigm is also developing a premium film label dedicated to selling film NFTs. Many smaller NFT start-ups are also emerging, such as Mogul Productions. And the ideas keep coming.
Venture Capital fund Sound Ventures, founded by Guy Oseary and Ashton Kutcher, has teamed up with Mark Cuban and Snoop Dog to create “NFTs: The Pitch” a Shark-tank like show set to launch on April 21. The goal is to expand upon and diversify the NFT space with new people, and ideas.
“NFTs are a groundbreaking chapter for talent to continually protect and monetize their IP via smart contracts” said Oseary (to Variety.com).
The blockchain allows for “smart contracts” to be embedded into NFTs.
Investors should read and check these contracts. And talent should look to unions, not studio executives, if they want to ensure fair and equitable control over their Intellectual Property rights.
Remember: “When we invented non-fungible tokens we were trying to protect and empower artists” said co-creator Anil Dash.
Major Hollywood talent agencies are strategizing to educate and advise their clients on NFTs. As of March 2021, UTA was among the first agencies to form a dedicated NFT department.
“Sometimes that means advising clients on whether they should do an NFT drop and, if so how to do it in the most successful way”. Said Brent Weinstein UTA Chief Innovation officer.
The NFT & Digital Assets team covers all areas of talent including Music, Film, Art, Sports, Comedy and Influencers. The NFT department draws its expertise from the Fine Arts division, which was initiated by CHMN Jim Berkus and CEO Jeremy Zimmer, an avid art collector.
With 135 agents, UTA’s clients includes actors Johnny Depp, Angelina Jolie, and Harrison Ford; Soprano’s creator David Chase; writer/directors M. Night Shyamalan, Wes Anderson, and the Coen Bros. UTA is planning on several drops featuring their talent over the next few months.
But despite all the hype Hollywood seems divided between the Believers and Non-believers. Those that see the opportunity and those that believe NFTs are just another way to steal creative work.
On April 15 ABC news announced that globally artists are reporting their work has been stolen and sold as NFTs. Ultimately there’s nothing to stop scammers from minting another artist’s work and trying to sell the NFT. Recently actor William Shatner spoke out on Twitter warning talent:
“I’m very concerned about “tokenizedtweets” stealing content, images and tweets I upload. Authors, actors, models, photographers, etc. should all be concerned.” he tweeted.
When it comes to NFT scammers two major NFT platforms, OpenSea and Rarible, are under fire. On both platforms creators aren’t required to verify ownership before creating and dropping their NFTs. Rarible’s verification process involves submitting social handles for verification, but it doesn’t seem to check them. In contrast, last month, OpenSea completely removed its verification process! Basically “it’s up to the buyers to do their own research.”
NFTs are certainly moneymakers for lawyers, with seemingly endless details to resolve. For example: Who owns the rights to the NFT clip, and who gets paid? Director Peter Berg speculated “It’s whomever the most powerful influence is…”
But when it comes to real power in Hollywood what are the studios planning?
On March 12, Bleeding Cool leaked a letter by Jay Kogan, Senior VP of Legal Affairs at DC Comics. Essentially the letter warned their creative talent that: “DC Comics and Warner Bros have our own NTF plans, so if you start selling NFTs of our characters we may come after you!”
So, what does it mean for talent (and fans) if the Hollywood Studio exec’s take control of the NFT landscape? Will a studio enforce clip rights from the start when negotiating a film deal? What if the NFT rights have already been licensed to fans to raise capital?
According to Forbes: The Screen Actors Guild (SAG) will require actors to give express consent to grant NFT clip rights, including a minimum reuse fee. But what if actors are asked to pre-sign (in their agreements) consents waiving these rights?
In addition, directors and writers will also be owed minimum reuse fees under DGA and WGA Basic Agreements. If the clip includes music, unless synch rights were previously granted for NFTs, further consents under AFM will be required for both the written and recorded music.
Another concern is enforcement of these royalties. Is there an end date? For primary sales having NFT buyers agree to binding smart contracts, by clicking “accept”, seems pretty straightforward. But how NFT smart contracts in the secondary market will be treated is yet to be seen.
Despite all the turbulence one thing is for sure, this whole NFT trip is going to be one interesting ride. And when it comes to the believers and non-believers, as the saying goes: In life you are either a passenger or a pilot, it's your choice.
By F. M. Mason
RELATED LINKS:
The next big thing in NFTs: Breaking them apart
https://decrypt.co/66046/the-next-big-thing-in-nfts-breaking-them-apart
The biggest Celebrities who have launched NFTs
https://decrypt.co/63694/biggest-celebrities-who-launched-nfts-snoop-dogg-lohan-hirst-grimes
It’s not a movie it’s an NFT
https://www.yahoo.com/entertainment/not-movie-nft-hollywood-flirting-160012942.html
WILL THE ART WORLD EMBRACE NFTs? (Gasp!)
When I saw NFTs being skewered in an SNL skit a few weeks ago, I thought, WOW. This is a real thing. This is a big thing. This thing is going to be around for a while. And there have been many signs since that confirm my thinking.
Everyone seems to be interested in NFTs right now, from the mildly curious to the positively obsessed. How are the traditional institutions dealing with this new and complex digital space? Are they embracing the new tech art frenzy?
Yes - to one degree or another. The art world is keenly interested - and that interest is growing every day.
Several traditional fine art auction houses have made distinct and aggressive steps to embrace the NFT. They have and spent real money on developing, supporting and marketing these NFT digital art projects. As you surely have read, Christie’s sold its first purely digital art work by crypto artist Beeple (aka Mike Winkelmann) for a little over $69MM in March.
And Christie’s is not stopping there: the venerable auction house just announced that they will be offering a CryptoPunks NFT in its 21st century Evening Sale on May 13 in New York (estimate $7-$9MM). The lot will be a unique group of nine CryptoPunks, one of the original “old school” NFT digi art projects with a devoted following.
This is the first time a NFT will be sold directly alongside traditional art, such as works by Gerhard Richter, Jordan Casteel and Christopher Wool, in the same sale. Apparently the buyer will be able to use cryptocurrency or US dollars to bid and purchase. Christie’s says they are "reflecting the shift between 20th and 21st centuries as a pivotal time in the history of art, lifestyle, and collecting” in this "landmark moment that will define the future of collecting."
Sotheby’s has followed suit with their own first-ever NFT digital art sale in partnership with the platform Nifty Gateway, a marketplace specializing in the sale and auction of NFTs. "The Fungible Collection" by the digital artist Pak is comprised of "Open Editions", a set of NFTs that can be bought infinitely by collectors during the run of the sale. It dropped yesterday and will continue through tomorrow, April 14.
And Phillips, the third of the ‘big three’ is also launching their own premier NFT offering, a project (Phillips calls it a “NFT experience") by digital artist Mad Dog Jones (Michah Dowbak), a well-known artist in the crypto art scene, which will run from April 12–23. According to ArtNews, "The NFT is designed to self-produce 7 unique NFT “generations” in a 28-day cycle. The original NFT set to be auctioned is an image of an urban night scene.”.
The smaller auction houses, Swann Auction Galleries and Bonhams to name a couple, are starting to dip their toes in as well. No solid moves but a lot of forethought and examination. CoinDesk quoted Nicholas Lowry, principal auctioneer of Swann, (New York’s oldest auction house), and a star appraiser on PBS’s “Antiques Roadshow”, who said that he had received a tsunami of questions and information in general about NFTs all at once: "I thought, holy s**t, the whole world is talking about this.” When asked if he was going to plunge into the NFT auction market imminently he said “We are not a cutting-edge technological company, I don’t want to be the first one to do it, but I also don’t want to be the last one to do it.”
Christie’s, who got there first with the Beeple sale, received massive fanfare and loads of attention, both in the “traditional” art world press and in the tech/crypto space. The mainstream news outlets like the New York Times, FT and Time Magazine covered the story as well.
The Christie’s sale alone gave the NFT market a massive boost, both in terms of legitimacy and general buzz. It also rewarded the 250 year old auction house with what is crucial to its business: new clients. According to Bloomberg, "it also led to at least one major NFT collector “crossing over” from crypto to buy a $20 million Picasso.”
So here is what I believe will be a huge and lasting plus: cross-polination. All concerned parties stand to gain. The digital artists will enter a market space that has been illusory until now. They will likely make more money and will be able to retain and protect their creator rights. Big NFT collectors will be able to chose if they want to enter the velvet ropes of the fancy auction houses and will be wined and dined in return.
The auction houses will get new clients they never would have had access to. They will also make commissions from each NFT sale. And we can see the kind of press coverage they will receive. Max Moore, Head of Contemporary Afternoon Sales at Sotheby’s, and who is organizing the Pak NFT sale, told CoinDesk TV that "We are reaching a completely new audience that may not have ever interacted with Sotheby's previously, but are completely enamored by this new medium and new collecting style.”
There is a lot on the table here, and auction houses are being savvy to embrace a medium that they may have sniffed at or dismissed entirely in the past. None of them want to miss out on these exciting and lucrative possibilities.
Digital art will never replace traditional art objects - but we really don’t have to think about it that way. They can (and will) run on parallel tracks, as they always have, and I think comparing the two in a one-to-one argument is fruitless.
Artists working in “new media” know this. They have been making digital art for years, it's only now that it's getting spotlighted. There is room for all of it—especially in a space that is seemingly endless in its possibilities and transmutations.
And collectors will win, too. Collecting can often be compulsive and competitive and can give one a huge rush. Collectors who have the bug will not limit themselves to where and how they source the things that interest, or obsess, them.
-L. Cohan
RELATED LINKS:
How NFTs Became Art & Everything Became an NFT
https://www.coindesk.com/nfts-became-art-everything-nft
Christie’s CryptoPunk Auction
Christie’s Beeple Auction
Sotheby’s The Fungible by Pak
MDJ x Phillips
NFTs Are Shaking up the Art World-But They Could Change So Much More