"Rihanna released NFTs!" Well, no...

"Rihanna Releases her song as NFT before Superbowl!"

"Rihanna has joined the list of NFT creators..."

"Rihanna, famous pop and R&B singer, is soon to launch her limited Non-Fungible Token (NFT) collection..."

And so on.

Sounds great, doesn't it?

THIS is the adoption we've been waiting for.

The second best-selling female artist ever, twice named in Time's100 most influential people in the world list, she's the leader for NFT's to go mainstream we were all crying out for.

Well, certainly sounds good.

But, it's not what's happened here.

To begin with, Rihanna hasn't released NFTs, despite what influencers on social would have you believe.

It's not even that her music has been released as NFTs.

The truth is more complex, and a damn sight more legally risky than that.

A producer who owns the master rights to one of her songs has partnered with a web3 startup to fractionalise the rights to his streaming revenue for a particular song, and link that to the NFT.

So, when you buy one of the "Bitch Better Have My Money - Rihanna" NFTs you aren't buying the rights to use the song or even listen to it. The NFT gives you 0.0033% of the payments he receives from licensed digital streams.

300 NFTs, so in total they earn <1% of the amount he earns from digital streaming of that single track.

It's an interesting business model.

He sends the NFT company the royalties, they distribute them to holders.

As a business model, it likely works well for him & the NFT provider, anotherblock.io.

The song is due to be used during the Superbowl so it's as high profile as they come and the drop sold out immediately.

How much will holders earn in royalties? Well, that's open for debate but DSP's are notorious for not paying well, and 0.0033% of his royalties seems... not great for an item trading at $1.5k+.

As a solution architect though, we've seen this model a lot being scoped over the past few years, and they always raise a lot of red flags.

The general consensus is that they are well inside the remit of the SEC as it's fairly clearly a security. (NB NOT A LAWYER, so take my opinion, and that of other non-lawyers, about the law with a pinch of salt).

Regulators rarely care about the tech stack, so this being an NFT doesn't matter, just that it fits the operating model for a regulated product, such as the Howey Test for securities.

The SEC have the bit between their teeth recently on crypto projects launching unlicensed securities (just ask Kraken or Lbry).

The high-profile nature of the drop itself, while working in their favour for sales, also paints a large target on them for regulators.

To me, this seems very high risk, both from the consumer PoV as an investment, and from the company behind the project. As we see MiCA regulations going live in the next 12-18 months, these projects may find themselves in hot water even closer to home.

It also, again, shines a light on the lack of business experience and understanding of the wider ecosystem among NFT "influencers" and "experts" operating in the ecosystem.

The desperation to see some form of mainstream adoption seems to often kill their ability to even read a contract (kudos to AnotherBlock for putting that out on IPFS, something I've pushed projects to do for a while).

Rumours and half-truths get shared, sometimes deliberately to spread hype, sometimes just in ignorance.

Regardless, the result is the same.

With this project, AnotherBlock is doing a lot of things right. They are very careful with their language and are very explicit about what you are getting both on their website and in the IPFS contract linked to the NFT.

But, there are still a lot of red flags.

How will the lifetime royalties work if they go bust?

How will it be handled if the producer changes his mind?

How are the calculations for the royalties proved and handled?

How will they handle the SEC and other regulations?

These are things that can cause major issues down the line if they aren't dealt with and dealt with early and, in the global NFT world things like regulations can affect a company based anywhere.

Maybe they've been taken into account and mitigated.

Even if not, it's certainly an interesting project to see go live and watch how it plays out and, if successful, could open the floodgate for similar models across a range of industries.