Those of a certain age remember the rallying cry when MTV launched. The cable channel would go on to change the music business. Only time will tell whether NFTs will change the art world; but it is worth examining at least one misconception that some people may have about NFT ownership.
What is an NFT?
As we discussed in a previous blog, NFTs are nonfungible tokens which means that each token is unique, unlike grains of sand or dollar bills.
NFT Ownership
The idea of owning an NFT differs in various ways from owning other pieces of art, such as a painting or sculpture. For example, an original painting or sculpture can only be viewed in person, in a live setting. NFTs, on the other hand, are digital pieces of art which can be viewed electronically. Also, NFTs enable the artist to share in subsequent sales proceeds; whereas, in the case of traditional art, artists have only been only sporadically successful in capitalizing on the resale of their work.
Limits of NFT Ownership
A common misconception about NFT ownership is the belief that ownership confers upon the owner the right to make an analog copy of the NFT, such as a lithograph print or even a T-shirt. This is definitely not the case. While there have been examples of analog versions of NFTs accompanying the initial sale of the NFT, that scenario is unique. Some intrepid artists have even attempted to blend the perpetual revenue share aspect of NFTs into a physical piece of art. For now, this has been unsuccessful. One idea floated by a clever artist is to embed a QR code into the physical art piece, thereby attempting to alert subsequent purchasers of their obligation to pay the artist a stated amount of each resale price.
Bottom line: if you are considering an NFT transaction, keep in mind that NFTs comes with the right to resell, but not the right to reproduce derivative versions thereof. If you would like to discuss NFTs or a potential NFT transaction from any side of the table, please feel free to contact Brad Auerbach at bauerbach@outsidegc.com or 310-382-0019.
Brad Auerbach is a Partner with our California-based team, bringing over three decades of senior in-house counsel experience in the media, gaming and technology industries. Brad has been involved in structuring many groundbreaking deals with a diverse range of rights holders, including NFL, NBA, NHL, HBO, MTV, ESPN, Sesame Workshop, Nickelodeon, Live Nation, Marvel Entertainment, International Olympic Committee, English Premier League, Screen Actors Guild, every significant Hollywood studio, each of the major record labels, many major book and news publishers, several world class photographers and Getty Images, among numerous others.