You did the music, she did the art and now you and your best bud are ready to roll with a banging new game-art concept, complete with spiffy avatars and a Twitter account. You’re all ready to mint a freshly baked NFT and release your geniuses to the world. But hold up. Are you forgetting something?
The subject of royalties might seem awkward when you’re in the creative flow with your best buddy. You hash over genesis concepts, roadmaps and even marketing. But when it comes down to splitting royalties, most people leave it until it is too late.
There’s a long history of bad deals in industries from music to comic books that has left artists and creators screwed over. Most comic book artists originally worked for hire and do not receive any compensation in terms of copyright or royalties beyond an initial paycheck.
Thankfully, NFTs are looking to disrupt legacy systems and cut out a lot of rent-seeking middle-people and their predatory contracts. Creators now have a direct line to their fans and are fully compensated through the power of smart contracts. But this power also means more responsibility on creators to know their rights and protect them from the start.
As you know, Mintbase on the NEAR protocol allows royalties to be split up to 20 ways. And we want you to make the most out of it.
In this article, we’ll break down what royalties are and why perpetual split royalties are changing the game for creators such as yourself.
What exactly are royalties?
Royalties are the payment(s) made for using something that does not belong to you (you do not own). For artists, royalties are due when someone uses something that belongs to you (you own).
Traditionally, there are different types of royalties including mechanical royalties and performance royalties, but we won’t go into that in this article.
For the specific purpose of NFTs, the royalties that everyone refers to is secondary sales or resale royalties.
For example, digital artist Beeple is getting 10% of all resales for his work, effectively granting him passive income for the rest of his life.
Why is this important?
Before on-chain split royalties were possible, an NFT could be flipped and resold (as they often are) on a secondary market with 100x more value, without the original creator getting any share of the price increase.
With split royalties as a standard on Mintbase, the original creator(s) will be automatically paid their share of any subsequent and secondary sales of an NFT, directly to their NEAR wallets.
Everything is automatic and most importantly, verifiable, using the NEAR explorer
How are royalties different from revenue?
Revenue is the one-time sale price of an NFT, for example, 100 NEAR.
Royalties are a percentage of that price, for example, 10% or 10 NEAR, which will be automatically credited to the original minter(s) when the NFT is re-sold to another buyer.
If the NFT is resold for example, 250 NEAR, the original minter(s) will be paid 25 NEAR in royalties.
Split and perpetual royalties
You can split royalties however you want, and Mintbase will provision for splits up to 20 NEAR wallets.
Perpetual simply means that these royalties will be paid out automatically forever without end as long as the blockchain exists.
Ways this could work out
Here are some interesting use cases of split royalties:
- A mass production effort such as a film, album or play where everyone in the crew gets an equal split
- A festival where performing artists get a split of NFT ticket sales instead of fees
- A project where a charity organization gets a portion of the split
- A remixed song where royalties are split between the original songwriter and the remixer
- A photograph where royalties are split between the celebrity model and the photographer
Some closing tips
Make split royalties a standard among creators with these workable suggestions:
- Ideally, the talk on split royalties should be discussed upfront and before the creative process begins. This sets expectations early and out of the way.
- It doesn’t always have to be equal. A producer who fronts the entire project may ask for 50% while splitting the rest of the 50% among contributors.
- Contributions can come down to a single line of lyrics, a conversation, inspiration or guidance provided in the creative process.
Ultimately, how you choose to split royalties boils down to how your team works—its chemistry makeup and diversity. It is also highly personal, so do what feels right and in agreement with everyone involved.
What split royalties do is to protect and honor the work that has gone into producing the NFT, and ensure that everyone who has contributed to its creation gets a proper and fair due, forever.