Resale Royalties in the Creator Economy: Evidence from Non-Fungible Tokens

Resale Royalties in the Creator Economy: Evidence from Non-Fungible Tokens

Resale royalty rights endow creators with a percentage of the resale price each time their work is resold in the secondary market. The goal of these royalties is to increase creators’ income. However, enforcing resale royalty rights has long been a challenge, particularly in the traditional creator economy, where transparency is often limited. The recent emergence of blockchain technology and blockchain-native digital assets, such as Non-Fungible Tokens (NFTs), has improved the enforceability of resale royalties by providing transparent and traceable transaction records. Despite these advancements, the extent to which resale royalties actually benefit creators remains an open question. To investigate this, we leverage a quasi-experimental setting based on a major NFT platform’s shift to an optional royalty enforcement policy. Our analysis examines how this policy change affected creators’ income across both the primary and secondary markets. Our findings indicate that creators benefited from higher primary market sales prices, but this shift was also associated with a decline in income from the secondary market. These results suggest that creators should carefully consider the specific enforcement mechanisms of resale royalty policies when choosing platforms for their creations.