In the midst of the crypto winter, values for non-fungible tokens have fallen considerably, although VIP+ keeps pointing out that this is to be expected for a commodity pegged to a currency (or cryptocurrency, in this case) that is decreasing in value and has noted how the number of transactions has not fallen by anywhere the same rate.
Apple’s decision to allow NFT sales shows it has faith in the long-term nature of NFTs, which is important as many entertainment companies gear up their own NFT strategies.
By specifying that purchases can only be made with fiat currency, versus cryptocurrency, Apple also is removing one of the big barriers to mass NFT adoption. As noted in VIP+’s “Demographic Divide” report, the majority of adults in the U.S. consider cryptocurrency too difficult for the average person to get their head around.
This has stymied mass adoption of NFTs. Whilst some marketplaces allow for purchases to be made in fiat currencies like the U.S. dollar, many remain using crypto. Moving away from that, in partnership with offerings from major entertainment companies such as Disney, Warner Music Group and Paramount, will help seed NFTs among the general populace.
Yet Apple, just like Meta before it, has made a bad assumption.
Big Tech companies are betting that by providing wide access to over a billion devices and servicing users worldwide, entertainment companies will cheerfully hand over much greater shares of their NFT revenues than they would on their own platforms.
By setting fees so high, the decision for anyone to sell NFTs on Apple or Meta comes down to economics and complex calculations for consultants to consider. The economic complexity centers around how many more purchasers the Apple App Store will yield and if this is enough to make up for the much greater amount of revenue being handed over to the Big Tech platforms.
Should many opt not to sell via Apple or Meta, essentially voting to keep more of their money to themselves, it puts Apple in particular in a difficult position. Apple takes a 30% cut of any revenue generated from the App Store, yet the highest amount in the NFT world is 15%. If Apple were to cut its NFT fee to 20% of the total, maintaining a price premium for the convenience of bringing NFTs to a wider market for creators, this could erode its positioning on App Store fees.
By setting such high NFT transaction fees, Big Tech is putting itself in a tough position that appears unabashedly greedy. There is no positive way to spin Meta’s fees being over 3x the highest of popular NFT marketplaces, or Apple’s being 6x that of marketplaces for collections including NBA Top Shot or Axie Infinity.
The hope is that many will swallow the bitter pill to potentially make more sales and easily access the masses. It will also make NFTs in mobile gaming theoretically much easier. But the decision has already met wide disdain, with several platforms either withdrawing from the App Store or limiting NFT sales in reaction.
It’s clear Apple has work to do convincing platforms to work with its NFT transaction fee policy. Don’t bet on it remaining at 30% for long. With it surely only a matter of time before other platforms, like TikTok and YouTube, begin to integrate NFT sales, it’s safe to assume these may work to undercut their Big Tech rivals by offering much lower transaction fees of 2.5%-5%.