Apple is the latest major tech company to get NFTs wrong
Apple’s recent announcement that apps in the App Store can now sell NFTs is the boost the beleaguered medium needed.
In the middle of the crypto winter, the values of non-fungible tokens have dropped significantly, although VIP+ constantly points out that this is to be expected for a commodity linked to a currency (or cryptocurrency, in this case) that is declining in value and has noted how the number of transactions does not has fallen by some place at 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 removes one of the major barriers to mass NFT adoption. As noted in VIP+’s “Demographic Divide” report, the majority of US adults consider cryptocurrency too difficult for the average person to wrap their heads around.
This has hindered mass adoption of NFTs. While some marketplaces allow purchases in fiat currencies such as US dollars, many still use crypto. Moving away from that, in partnership with offerings from major entertainment companies like Disney, Warner Music Group and Paramount, will help see NFTs among the general population.
Yet Apple, just like Meta before with the NFT policy for sales made at Horizon Worlds on Meta Quest, has made a bad assumption.
Big Tech companies are betting that by providing broad access to over a billion devices and serving users worldwide, entertainment companies will happily hand over much larger shares of their NFT revenue than they would on their own platforms.
By setting such high fees, 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 revolves around how many more buyers the Apple App Store will bring, and whether this is enough to offset the much larger income handed over to the Big Tech platforms.
Should many choose not to sell through Apple or Meta, and essentially vote to keep more of their money for themselves, that puts Apple in a particularly difficult position. Apple takes a 30% cut of all revenue generated from the App Store, but the highest amount in the NFT world is 15%. If Apple were to cut the NFT fee to 20% of the total, and maintain 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 comes across as unashamedly greedy. There is no positive way to spin Meta’s fees that are over 3x the highest of popular NFT marketplaces, or Apple is 6x higher than collection marketplaces including NBA Top Shot or Axie Infinity.
The hope is that many will swallow the bitter pill to potentially make more sales and easily gain access to the masses. It will also theoretically make NFTs in mobile gaming much easier. But the decision has already met with widespread disdain, with several platforms either pulling out of the App Store or limiting NFT sales in response.
It is clear that Apple has worked to make convincing platforms to work with the NFT transaction fee policy. Don’t bet on it staying 30% for long. With it surely only a matter of time before other platforms, such as TikTok and YouTube, start integrating NFT sales, it is safe to assume that these could work to undercut their Big Tech rivals by offering much lower transaction fees of 2, 5% -5%.
