Meta’s plans to take a 47.5% cut of metaverse items sold in Horizon Worlds

Meta’s plans to take a 47.5% cut of metaverse items sold in Horizon Worlds

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It looks like creating metaverse items in Meta Platforms Inc.’s Horizon Worlds won’t be as lucrative as it seemed after the company revealed that it will be taking a 47.5% cut from digital asset sales.

Meta initially announced its intent to monetize items in its virtual world app in a blog post on Monday. That would allow users to earn a living creating digital goods and experiences in the company’s virtual reality platform. But it left out exactly how much it would be shaving off the top.

A Meta spokesperson told Reuters that the fees would be split into two parts — a 30% hardware platform fee for sales through the Meta Quest Store and 17.5% for the Horizon Worlds platform. These high fees come mere months after Meta Chief Executive Mark Zuckerberg himself criticized Apple for taking a 30% cut on App Store transactions.

Metaverses are virtual worlds focused on allowing people to connect socially by providing them spaces that look and feel like the real world and virtual bodies called avatars. They can be accessed using virtual reality headsets or computer screens, and while in those worlds, users can interact, shop, go to virtual movies and concerts and play games.

When Zuckerberg announced Meta’s rebranding and vision for the metaverse last October, he also spoke about potentially allowing users to create and sell nonfungible tokens, or NFTs, in the company’s virtual worlds. These are blockchain-enabled digital assets that can be provably owned by users and thus bought, sold and traded.

Two of the most prominent NFT-based metaverse apps are Decentraland and The Sandbox. Both encourage users to participate in the creation of virtual items as NFTs, including buildings, clothing, accessories, avatars and more by permitting them to buy and sell them.

That allows them to be bought, sold and traded on NFT marketplaces, such as the Decentraland or Opensea marketplaces where fees are only 2.5%. although some marketplaces can charge fees up to 15% depending on their specialty.

Unlike Meta’s metaverse, Decentraland and The Sandbox operate on open, democratized principles that allow users to “mint” and sell their own virtual objects as NFTs on or off the platform and engage in open markets. Proponents of these economies quickly saw Meta’s massive 47.5% cut as an example that creators would flock to their metaverse apps instead.

“Facebook charging 47.5% for every NFT sale is the best thing to [ever] happen to us,” Degentraland said on Twitter.

Another benefit of NFTs is that they can become investments for people who create and buy them since they can fluctuate in value. The creators of NFTs can also attach royalties so that a share of the eventual trades come back down the line. In 2021, the market for NFTs reached $41 billion, according to a report from blockchain analytics firm Chainalysis.

However, there’s no indication that Horizon Worlds will be using NFTs from the start. Most likely it will be allowing creators to produce clothing items, accessories, hairstyles, furniture and other virtual objects for use in the virtual world.

A better comparison would be Second Life, another virtual world developed by Linden Lab that has been on the scene since 2003. Second Life has had its own creator economy since day one and it’s possible to sell virtual items and earn money. Creators in Second Life can hawk their wares for a mere 10% commission.

Image: Meta Platforms

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