During his session on 10th June, Gary answered some of the community’s burning questions, and in case you weren’t able to make the event itself, we wanted to share his wise words with you all.
What are you most excited about in the NFT space?
“It’s just such a great time for innovation. We’re working with a completely blank canvas, there are no rules, so this time is all about exploring the opportunities and potential of NFTs. You can extend and build on what someone else has already done, or you can go off the wall and do something totally different. This is just the very beginning and that’s really exciting to me.”
There’s been a lot of talk about how expensive NFTs are, how do you respond to that?
“TopShots for example, are getting five figures for their trading cards, and that obviously propelled NFTs into the view of the mainstream. But maybe it wasn’t the greatest way to do it, because a lot of people felt it was too expensive for them, saying ‘I can’t afford thousands of dollars, nor would I pay thousands of dollars for a card like that.’
So the perception is wrong. The celebrity culture then saw what was happening, tapped into it and just flooded the market with photos and artwork of their own making, and expected to get tens of thousands or millions of dollars for them and of course, that failed spectacularly for most of them. But it also put a bit of a stain on the whole sector which is something we’re going to have to clean up, which I think we’re doing. But we can only do that by gaining trust and developing really good products and good value that people can engage with.”
Can you talk about the recent interoperability updates at Terra Virtua
“We’ve literally implemented it today [10th June 2021] so it’s very new. When we developed Terra Virtua and first launched the platform, we decided we wanted a closed system. That meant if you purchased a collectible within our ecosystem, you could use it within the Terra Virtua system and you could show your collectibles in the fan cave and everything else, but you couldn’t take them outside, you couldn’t sell them outside, you couldn’t put them on OpenSea for instance. We recognised a little later on that this wasn’t the best strategy, we wanted to be a little bit more open, so we’ve spent some time redeveloping the back end so we’re a more open system now and you can take your collectibles out and put them on OpeSea or other marketplaces if you wish.
As I said earlier, it’s a whole new sector and we’re all learning. There are no rules, you’ve got to try things out, see what works, what doesn’t. You’ll make mistakes, we’re making mistakes and that was a good example of one of them. So just experiment and see what works.”
Are NFTs sold with copyright options?
“No. Much like buying an action figure in a store, you’re buying that figure. You’re not buying any rights that go along with that figure, so you wouldn’t be able to reproduce them yourself, you’re just buying that single item. That’s a good question and the issue of copyright is something that should be clarified.”
What’s your view on the evolution of NFT royalty schemes?
“For the royalty schemes I don’t know if you’re talking about logistics or the actual amount, but again, people are still finding their feet. I’m very involved, myself in the licensing side, and the license fees and royalties we pay for the NFTs we sell are very much higher than those we used to pay for video games. But as for the reporting and everything else, it’s a much more automated system now, and of course the license holders love the potential of this sector because they get the opportunity to get residual (we call it secondary) revenues from onward trading which you can’t get in the real world. That’s affected the demand a little bit and given us more credibility.”
Which big partnerships do you plan on utilising to pass your product to the normal consumer and non-crypto people?
“This is the big challenge. Our mission was to bring NFTs to the mainstream and normally when you release the product, the challenge is awareness – making people aware you exist and what products you have. But we’re having to double down on marketing in this particular sector because people just don’t understand what NFts are, and a lot of people view them with distrust because they’ve got a very negative perception of blockchain and crypto generally and therefore look at NFTs with distrust.
The gold rush that happened a couple of months ago, when everyone flooded the market with expensive NFTs, didn’t help the credibility at all. So what we have to do is explain to the users what an NFT is and why people have them and this is the question I always get asked when I explain to people what I do, they ask ‘why should I pay $100 for a virtual/digital item when I can buy the real thing for the same amount of money or even less?’ And we confronted ourselves with that question when we first started and it was all about trying to deliver value.
For instance, when we released Godzilla vs Kong, and they’re all 3D and animated, and there’s audio and they look great. But where we add value is in our AR app, you can also put yourself in the environment, so essentially we’re selling a full size King Kong or Godzilla – you can put them in our Terradome – and that’s something you can’t do in the real world; you can’t buy a full sized Kong or Godzilla in the real world. And that’s where you need to be more innovative and think outside the box to deliver that value, because we figure that there’s two core audiences – the collectors or the completionists, the people who want to build up the set or who want something that’s really rare, or the investors who want to buy something for $1000 today and sell it for $10,000 next week. Those are the people with the deep pockets who want to collect the sets.
But then there are the fans, and I think a lot of people are missing out on this. The fans don’t typically care if you’ve made 10 or 10 million of an item, they just want this thing you’ve made because they’re a fan of Kong and they just want a Kong model, and they’re prepared to pay $20/$25 for a virtual Kong that bangs its chest and roars and looks great and they can put it in their fan cave or Terradome. They don’t care about the rarity, it’s just something they want, like the old bobbleheads you had on your desk.
And we need to cater more to that mainstream audience, the fans. The interesting thing is that the $25 Kong that we made will be as high fidelity as the $10,000 it’s just that the $10,000 version may just be 1 of 1, and will have more elaborate animations, but the model will be the same quality and the experience will be just as good.
It’s very, very important to treat the fan with respect and treat the IP with respect. As long as you follow those two rules, you’re not going too far wrong, and you won’t upset too many people.”
Where do you see NFTs and Terra Virtua in Five years?
“We’ve got a long term plan, I mean the original vision of Terra Virtua was quite different to what we’ve achieved to date. But we do have a long term plan, and it’s more like Ready Player One than what it is at the moment, and it will continue to evolve. Technology will evolve, techniques will evolve and the world will evolve.
I would like to think that VR will play a role in the future digital world which opens up a whole new immersive potential and opportunity. Terra Virtua will be there, we’ve got a pretty big and very, very ambitious roadmap and we do want to make changes, we don’t don’t want to make better versions of what’s gone before. We want to be different, we want to pioneer, we want to keep evolving and it’s not easy to do. I would like to think we’ll be there in the mix delivering interesting and immersive entertainment in a whole new way. Five years is a long, long time in technology so it’s difficult to predict exactly where we’ll be but I would like to think we’ll be there and hopefully a brand name that people recognise in the mass market.”
What are your feelings on luxury brands’ move to link NFTs to the authenticity of their product?
“I think it’s a great idea. We call it twinning, internally, and in case you’re not aware, this is if someone purchases a real Rolex watch, they automatically acquire an NFT version of that watch which can act as their digital certificate of authenticity. So if and when they sell that watch then the NFT goes with it, the transaction takes place over the blockchain, the transfer of ownership will happen and the new buyer will be an authentic owner of the Rolex watch. I think it’s a great idea. Someone’s going to do it really well and create a mechanism to do it well. We did look at it ourselves, because obviously there’s a lot of counterfeiting in the luxury goods sector and we felt this was an opportunity, and it was something we investigated for a little while. But then we realised it was a little bit too far removed from our core business, so we put it on the backburner. There were also logistical issues, which meant that if you’re involved with a physical product, are you then responsible for the shipping of that product and if so you’re then responsible for customs, taxes and everything else and we actually didn’t want the hassle as well. There’s certainly a massive business potential there, but it’s not something we’re looking at right now, but good luck to you if you’re looking at it yourself.”
How do you handle the copyright infringement in artwork on Terra Virtua. E.g. if someone submits a Hello Kitty artwork without permission from Sanrio what would you do?
“Good question. I’d like to think we’d recognise trademarked and copyrighted work. The problem really, is if someone submits a picture or painting that they claim to have done themselves which they haven’t.
We recognised this from the very beginning as we were aware people were doing this. Not just taking pictures from the web and putting it on sale as their own work, but also people taking images, photographs, and compiling them into a bigger image, and selling those when they didn’t own the rights to the components of that image. So, we took a very, very strict step to actually ensure that every artist we bring onboard signs a contract and one of the things in that contract states that specifically that they own all the rights to every component of their painting, that they are the creator of the picture, and that they own all the rights.
We’re doing as much as we can to ensure that copyright infringement doesn’t happen, that the bad stuff doesn’t happen, and we do curate everything so we try and make sure there’s nothing offensive or anything else of concern. Something might slip through the cracks, but we are at least putting our best effort into trying and I think we were the first ones to implement such a system.
There was a bit of resistance at first because contracts ‘weren’t done’ in crypto but we wanted to do it properly. And we also wanted to protect the user, because if someone poports to have been the creator of a particular painting that’s a fantastic work of art and someone spends $10k on it as a 1 of 1, and then later they find out that it’s a fraudulent piece, then you’ve actually ripped off an innocent person. OK, other people make money from it, but there’s someone at the end of that chain that’s spent $10k on what’s essentially a forgery and that’s not on. Again, with a new industry, you’re still learning, but there have to be some sort of rules in place to protect the innocent.”
How do we bring the older generation 50-60+ to be aware of NFTs?
“That’s a good one. I’m actually in that demographic and I must admit when I first discovered NFTs, I scratched my head a little bit and I didn’t quite get it. We know that millenials and Gen Z and everyone else are very comfortable with digital products, but then you start thinking a bit deeper. I was very involved with mobile games a few years ago and the most popular game was Candy Crush. We did a bit of research into that and the largest audience for Candy Crush was middle aged females, that was the predominant demographic, and of course these are people who have bought virtual currency to buy lives, or whatever, so there is an understanding of that virtual value already. And I don’t think it’s a huge leap, there is an education, and the message has to be very, very clear, it has to be concise, we have to explain what an NFT is and show them that you can actually deliver value, that ‘we’ as an industry, can actually delivery value. That’s a big challenge, but as long as we are aware of that and we are conscious of it, then hopefully we can change minds and hearts and bring them on board. I think it’s inevitable that it will happen, it’s more a question of time.”
How can we get in touch if we have more questions?
“I’m on Telegram and Terra Virtua has a group on Telegram so throw questions over there and I’ll try and answer them there.”
Great insights from our very own Gary Bracey on the future of NFTs, and huge thanks to CGC for inviting Terra Virtua to be part of their brilliant event. If you missed the conference, you can catch up with some of the talks on CGC’s YouTube channel and view the playlist of talks from the event (here’s the link for Gary’s full talk, if you just want to head there).