How Museums Can Monetize NFTs
Part 1
NFTs are ownable digital assets registered on the Ethereum blockchain. There is a huge buzz around them, and the excitement is no mere passing craze. It is the thrilling realization that something new has arrived in the word: NFTs are here to stay.
Unlike most crypto assets such as currency, each non-fungible token has its own unique identification code that refers to a corresponding digital item. Every NFT is one of a kind — that’s what the ‘non-fungible’ part means. It follows that an NFT can be almost anything, so long as it can be digitized. The possibilities are literally endless: an NFT can represent a digital artwork, a piece of writing or music, a string of computer code, [shorturl.at/jpxO9], or something like a ticket to an event.
Businesses around the world are taking notice, looking to leverage NFTs’ wide range of uses so as to get closer to their audiences. There are many ways to do this. By offering ownership of a digital asset, companies can create exclusive events or new levels of membership for their clients, or give limited access to products. An NFT item could even be used as collateral in a decentralized loan.
It’s not only businesses that can benefit from NFTs. Charities, too, can make use of them to solicit donations. So, for example, when Beeple sold a carbon-neutral digital piece entitled Ocean Front — a depiction of a tree growing from the top of a junkyard oil rig — the image raised $6 million for the Open Earth Foundation. Auctions of desirable objects have always been a way for charities to raise money: NFTs allow them to do it more efficiently, and to access a far wider audience.
In the first half of 2021 alone, sales of NFTs exceeded $2.5 billion. Those are 2.5 billion good reasons to take NFTs seriously, to see them as the new standard format for owning digital goods. The implications for public institutions are profound. Museums, galleries, and cultural hubs can leverage their authority as centers of information and resources to produce verified digital items.
This new capability has come at the right time. The pandemic has left many museums struggling because no-one cannot come through the doors. In the absence of that turnstile income, NFTs provide a new revenue stream, one that allows a museum to say: we are still here, doing what we do best.
So how should museums go about monetizing the digitization of their collections . There are dozens of possibilities, and many museums are already exploring them. Here are some of the ways:
Create an NFT-based Work
This is perhaps the most obvious route to take. Museums looking to raise some fast money can upload pieces in their collection as NFTs, and sell them as official digital copies. In September the Russian State Hermitage Museum, the largest museum in the world, minted five of its best-known works — among them Leonardo’s Madonna Litta (the most valuable purchase) and Claude Monet’s A Corner of the Garden at Montgeron. The auction was a massive success, generating revenue that amounted to almost $450,000.
Some people find this baffling. Why would a collector spend hundreds of thousands of dollars on a work that is in the public domain? The answer lies, at least in part, in the inherent value of the imprimatur of a world-renowned museum.
Museums are the authoritative entity that surrounds, and to an extent, defines a work’s prestige, its world ranking, so to speak. (It is in the Hermitage, therefore it is a great work — that’s how the logic goes.) Since it is impossible for collectors to have the physical copy of a public work, the officially sanctioned digitized version is perhaps the closest they can get to owning renowned cultural treasures.
Design a Royalty Process
But museums can and should think beyond merely uploading NFTs. There are other, more nuanced ways that they can put their stamp on the NFT sphere, strategies that can generate insight as well as ongoing revenue.
For example, museums could utilize smart contract technology to generate resale royalties each time their NFT is resold. This would function very much like the droit de suite that artists enjoy when works change hands at auction — except that here it is the museum that gets a cut, because it created the NFT.
And there are side-benefits for museums. Sales figures for NFTs would provide insight into what works are popular — and so guide curatorial decisions and planning both online and within the bricks-and-mortar building. And, as already noted, those sales are a way of making money even when the museum doors are closed.
Pair Existing Works with Digital Artists
There is a way for museums to sell a work of art — or an idea of a work — without the original leaving their possession — and that is through a digital re-imagining of the piece by another artist. Museums could commission an artist to design a new digital artwork inspired by masterpieces in their possession. With the right pairing of artist and museum, the digital interpretations of museums’ classic pieces would create endless opportunities for investors.
There is a recent example of a well-executed collaboration — and it belongs not to a museum but to an auction house. In July, in conjunction with the sale of a rare Leonardo sketch of the head of a bear, Christie’s struck up a partnership with Italian crypto-art duo, Hackatao.
They created a series of NFTs inspired by the original drawing and made it available to buyers at the auction alongside Leonardo’s drawing. The new Hackatao work was light-heartedly entitled Hack of a Bear. Christie’s made hundreds of thousands of dollars from the collaboration without having to digitize the original work.
A huge factor in the success of this collaboration was Christie’s shrewd choice of partner. Hackatao have been central players in the development of internet-led art. They are held in high esteem for the way their work interprets societal issues. Some of their more effusive fans have even asserted that Hackatao’s questioning of the definition of art parallels Leonardo’s oeuvre, with its blurring of boundaries between art and technology.
Be that as it may, Hackatao are sure to be at the forefront of partnerships between museums and digital creators. And museums that embrace the NFT scene early, who are willing to get involved in mash-ups between traditional art and the evolving creative mediums, are likely to have the pick of digital artists.
And this is only the start
Museums that upload NFTs of the pictures on their walls are leading the way, but that is just the beginning. The NFT boom is not a fad or a flash in the pan, it is a total revolution. The present generation of digital artists are its vanguard, using their creativity to foster a whole new world of art.
