Creators in various industries have been collecting royalties on their work for many years. In the music industry there are publishing rights that are paid to the creator and/or their business partners, in the television industry syndication rights allow Jerry Seinfeld to continue collecting royalties each year for his hit show.
For artists in the fine art sector the ability to earn ongoing income from their art ends at the first sale.
Enter NFT creator royalties, which allow the NFT creators to collect fees from resales in the aftermarket that happen after the initial sale of the NFT. This is achieved by a smart contract that governs the NFT. Whenever the NFT is resold, a portion of the sale price is set aside as a royalty payment for the creator. These royalty payments can be distributed automatically through the use of smart contracts on the blockchain.
The problem is, these contracts are not enforceable at a technical level, and it’s up to the marketplace that is selling the art piece to honor them or not. One of the basic problems is how you know precisely when an owner is transferring an asset between his/her wallet or selling an NFT to a buyer. The simplest way to override the contract is to gift the NFT and in return receive the payment as a gift.
New marketplaces that are fighting for share have eliminated royalty payments to attract as much liquidity as possible. And since the fee is paid by the seller many of them are moving to the new marketplaces where the royalty fee is not enforced.
At the end of the day, as of now, there is no technical solution to enforce these royalty fees. It’s mainly up to the artists to cultivate a sense of fairness in their fan base so that they honor the royalty.
P.S. For now, OpenSea updated that they will continue to enforce creator fees on all existing collections.