I worked for a direct competitor to
@RecurForever and watched how they scored deals with Fortune 500 brands, gained over $70M in NFT sales volume, and raised $50M at a $333M valuation
So how did this NFT behemoth collapse?
Let's take a look ๐
The Run-Up
Recur was a massive beneficiary of traditional brands like Paramount, the Pac-12, and Hello Kitty looking to enter web3 through licensing their IP. During web3's speculative mania, anything that resembled mainstream brands entering web3 drove insane NFT sales volume regardless of substance.
The team recognized this so they got to work. They presented these brands with sky-high minimum guarantees royalties to license their IP and did all of the work in creating, releasing, and maintaining the collections, so the brands didn't have to do anything. These deals that Recur was presenting were impossible to refuse because they enabled these brands to experiment with a new, innovative technology and make a quick buck without taking much direct brand risk. Recur built a Flywheel of Demand with these deals that ensured ongoing success.
The Flywheel of Demand
1. Recur builds anticipation over time through hyping their partnerships and contributions to the space
2. Recur sells passes that ensure holders have a vested interest in the success of the ecosystem with over 64,000 passes sold for ~$20MM profit (full disclosure, I bought 3 passes during the primary sale and still have 1)
3. Recur hypes an upcoming NFT collection from a big IP
4. Recur drops the collection
5. Collection sells out in seconds
6. Secondary market prices rise dramatically
7. Hype and profit potential is generated for Recur's next drop
8. Repeat steps 3-7
Recur was successful with this speculative cycle for
@nickelodeon_nft,
@_NFTU,
@StarTrek, and more. I remember participating in the
@carebears_nfts and
@hellokitty drops hoping I could get my hands on 1 or 2 NFTs from the portion allocated to pass holders because there was no chance I'd get one from the public sale. Demand was so high.
Long-term plan? No need.
Utility wen? Earn more NFTs or transform the art on your existing ones
Everything Recur touched turned into cold hard cash. All of this worked impeccably as long as the hype was there.
The Collapse
Speculation is a bubble that is guaranteed to pop. Companies often then pivot to respond to the demands of the market and if done properly, they can gain long-term success. However, Recur was trapped once speculation died.
They couldn't pivot or really do much of anything with the IP they had because they were at the whims of the brands they had licensed from. Those licensors likely didn't see much point in pursuing this small, speculative market any further, so Recur couldn't influence them to add to the utility/value of these collections. The only option was to mint more NFT collections.
As most of us web3-natives know, minting more NFTs dilutes the value of all NFTs associated with a brand. Recur's Flywheel of Demand soon broke and dried up any demand that was left. They had no money coming in from primary or secondary market sales, and despite trying to pivot to a white-label platform completely outside of the licensing model, their fate was set.
Conclusion
At
@XooaNFT, I watched Recur score deal after deal with massive brands. They built an empire that took hige risks with nostalgic IP that paid off early, but trapped them once the speculative hype died down. They were a beneficiary of traditional enterprises looking to enter web3 and profit through licensing. But they were also a victim of their own success and the speculative mania of NFTs.
Recur was the most successful (or risky) company to win IP licensing deals, but it wasn't just Recur that did business this way. It was the vast majority of NFT platforms that were trying to score these IP licensing deals through taking all of the risk.
I have no doubt that NFTs as a technology will succeed in the long-term. But the era of licensing IP for NFTs is over.
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