Yuga Labs' revenue has been hit by the erosion of NFT royalties, among a deep decline in prices across the NFT space.
Crypto winter put the NFT market into a deep freeze, causing sales and royalties to plummet. But the impact of Blur taking over the marketplace arena by doling out generous incentives and introducing a radically reduced royalty structure has made it even harder for other companies in the space.
As traders flocked to Blur amid NFT prices sinking across the board, Yuga Labs' already declining royalty revenue fell off a cliff. It dropped to $2.5 million for the third quarter ending in September versus $8.7 million during the first quarter of this year. "Blur's calculated entry into the NFT space with a minimum 0.5% royalty fee, coupled with attractive airdrops and bidding incentives, struck a compelling economic chord with traders," said Brad Kay, analyst at The Block Research. "By slashing transaction costs, it boosted trader profits and siphoned off significant user activity from higher-fee platforms like OpenSea, where Yuga Labs had previously thrived.
Then Blur both offered traders generous bonuses to use its platform instead of others — handing out tokens based on activity — and introduced a somewhat irresistible royalty fee of 0.5%. This was possible because creator royalties are very hard to enforce on-chain. This led to an initial backlash against the idea of lowering royalty payments, which ended in a race to the bottom as other marketplaces followed suit.
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