S-NFTs Make Their Debut: Lil Pump on Republic

Opulous is changing the music industry by linking creators with fans. They are just getting started. Here we review Lil Pump's first S-NFT.

S-NFTs Make Their Debut: Lil Pump on Republic

The first S-NFT through Opulous dropped last Friday on Republic. Lil Pump raised $500,000 by selling 50% of the equity in his new track, Mona Lisa. The sale values the rights to Mona Lisa at $1 million.

Source: Republic.co

Owners of the S-NFTs will receive royalties in stablecoins to their wallets quarterly. Additionally, some buyers of the S-NFT received art NFTs if they invested at certain levels. We believe that the pairing of music and art as an investment bundle on the blockchain is revolutionary.

So, what do royalties look like for a song like this?

To look at potential returns, we need to examine Lil Pumps previous song revenues. According to Republic, some of his top hits are shown below.

Source: Republic.co

The total revenue from the above tracks was $19.58 million, with an average revenue per song of $3.26 million. To understand return over time, we calculated the average return per quarter per song based upon total revenue and time since song release. We also calculated the number of quarters required to return 100% of the principal invested at the average quarterly return rate. These estimates are skewed as we know that most of a song's revenue comes in the first several quarters from release. We can use them as an upper bound and a conservative number to work with.

Average Outcome: If Mona Lisa earns the average return, we expect S-NFT holders to 3.26x their initial investment. This estimate does not include the art S-NFT that investors may have received.

Worst-Case Outcome: If the song matches the poorest return, investors will lose 10% of their investment in a worst-case scenario.

Best-Case Outcome: If the song becomes the fall's hit track and earns the top revenue, investors could 5.37x their initial investment.

The Risk:

These numbers show limited downside and relatively high upside if the song earns revenue in line with Republic's examples.

We are uncertain, however, if this will occur. Looking at the returns over time, Lil Pump's revenue, as shown in the chart, decreased from 2018 to 2020. Only one song from the last two years is highlighted in Republic's graphic, and it's the worst overall return.

For some, the risk may be worth it. It is the first S-NFT ever. And the accompanying NFT art is top-notch. The offering sold out in hours, and we were unable to buy equity before it was too late. In general, we like the idea of royalties as a method to diversify our portfolio and transition more capital onto the blockchain and Web 3.0. Few royalties, however, continue to provide value over time. Investors should not expect much revenue after the first several years unless the song they invested in becomes embedded in culture for the long run. Royalties for songs like Journey's "Don't Stop Believing" or Michael Jackson's "Thriller" continue to have significant value.

The Future:

We are bullish on Opulous and the future of S-NFTs. We believe that more and more artists will decide to go on-chain through their or other services. To invest in the total success of the system, we began investing in $OPUL, Opulous native token. As more offerings are available, we intend to invest in our favorite artists. We think that price discovery will take place for the initial offerings, and outcomes could be volatile. Over time as more data is available to investors, security pricing should become more evident.

If you are bullish on S-NFTs, be on the lookout for future offerings through Republic.

If you are bearish, you can save your hard-earned money for something else.

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I am not a financial advisor. This article is for educational purposes only. You should do your own independent research before making any investment decisions.

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