Under the wave of NFT project shutdowns, can blue-chip NFTs like Fat Penguins and Doodles save themselves by selling apparel?

Written by: Mia, flowie, Chaincatcher

The super IP "Pokémon" generated over $10 billion in revenue through IP derivatives retail in 2022. In the Web3 space, two blue-chip NFTs that once faced near-death crises are also attempting to save themselves by trying IP derivatives retail, aiming to transition from "virtual to real."

On Monday, the chubby penguin Pudgy Penguins announced the launch of its clothing brand Igloo's debut collection. This follows the successful launch of the Pudgy Toys toy brand, marking another attempt by Pudgy Penguins to establish a physical brand.

Recently, Doodles also announced a collaboration with global innovative casual shoe brand Crocs, planning to release shoes, wearable devices, and more. The limited edition "Croc Shoes" co-branded with Crocs will be released this week, priced at $120.

In the current bleak NFT market, can Pudgy Penguins and Doodles achieve a counter-trend self-rescue by monetizing through selling toys and clothing?

From Virtual to Real: The Self-Rescue Path of Two Blue-Chip NFTs

During the NFT Summer of 2021, Pudgy Penguins was at its peak, at one point surpassing Punks and BAYC in weekly trading volume. However, the good times didn't last long. At the end of 2021, conflicts arose within the Pudgy Penguins community and founding team. After major holders questioned the founder's integrity, accusing him of absconding with funds, the angry community voted to remove Pudgy Penguins founder @ColeThereum, causing the floor price of Pudgy Penguins to plummet to around 0.5 ETH.

However, the struggling Pudgy Penguins found new life with a change in ownership. In April 2022, Luca Netz purchased Pudgy Penguins for 750 ETH and initiated a series of actions to save the brand.
In addition to significantly increasing brand exposure and community growth, it is worth mentioning that Pudgy Penguins is contemplating how to break free from the Ponzi scheme and create genuine consumer products.

Amid the bear market, Pudgy Penguins did not limit itself to the liquidity-stricken Web3 but looked towards the monetization strategies of Web2 IP derivatives sales. It is important to note that the revenue sources of Web2 IP giants like Marvel and Pokémon mainly come from three categories: derivative sales, games, and box office revenue. Among these, derivatives and games can be considered the two main engines of IP monetization. Compared to the substantial investment required for game development, the development of derivatives appears to be more cost-effective. In 2022, "Pokémon" generated over $10 billion in revenue through IP derivatives retail.

Pudgy Penguins has also achieved impressive results in IP derivatives sales. In May of this year, Pudgy Penguins announced on social media the official launch of its first community-licensed mass-market product, Pudgy Toys, which combines NFTs and blockchain technology with physical toys, as well as the NFT digital platform Pudgy Worlds. It is reported that Pudgy Toys is its first community-supported market product, with each toy offering a digital experience on its website.

According to official information, Pudgy Toys are priced between $8.99 and $24.99, and buyers will receive a "birth certificate" to unlock trait boxes in Season 1 of Pudgy World, along with soul-bound tokens and NFTs. All minting processes will occur on the Polygon blockchain, and users only need an email to register a blockchain wallet, allowing them to customize their favorite penguin on the website.

The integration of "physical" products with virtual crypto technology sparked significant interest upon the launch of Pudgy Toys. According to data from Amazon, over 20,000 Pudgy Toys were sold within two days of their launch, generating over $500,000 in sales. The already adorable penguin image quickly topped the new product sales chart, surpassing Barbie, LEGO, and Pokémon.

Currently, according to Amazon's official website, Pudgy Toys have received overwhelmingly positive reviews, with over 90% five-star ratings, marking a successful initial attempt and taking the first step towards transitioning the IP from virtual to real. After this initial success, Pudgy Penguins recently began to launch its clothing brand Igloo. According to the official website, the product range includes T-shirts, hoodies, sweatpants, and accessories, with the debut collection priced between $45 and $120. Specific sales data has not yet been released, and the official details remain sparse. From the clothing perspective, this is merely an IP licensing collaboration and will not be linked to the blockchain.

Coincidentally, another blue-chip NFT, Doodles, which has also experienced a significant decline, is exploring IP development and physical product retail in an attempt to self-rescue amid liquidity shortages. This year, Doodles co-founder Poopie stated in the community: "We are working hard to evolve from a startup into a leading media brand company. We are no longer an 'NFT project.'"

In June of this year, the NFT project Doodles announced a partnership with CAMP to launch an interactive retail experience this summer, aiming to further connect the Doodles community's digital and physical realms. The related services will initially cover CAMP physical stores in major cities like New York, Los Angeles, and Dallas. Doodles NFT holders will have the opportunity to gain special access and benefits, including free entry, merchandise points, concierge services, and opportunities for custom creations.

The collaboration with CAMP marks Doodles' attempt to enter the mainstream IP arena, and Doodles has long been planning its expansion into the physical realm. As early as January of this year, Doodles announced the acquisition of the animation studio Golden Wolf, known for producing "Rick and Morty," to explore fields beyond animation, such as experience design, fashion, and music, thereby driving the creation of the next wave of the Doodles brand.

Recently, Doodles again collaborated with the international casual shoe IP Crocs, set to release a limited edition Crocs shoe on August 29, priced at $120. Buyers will receive a unique Crocs Box digital collectible, which can be destroyed to unlock two Crocs wearable devices and a Stoodio Beta Pass for use in Doodles 2. This physical product release adopts a model similar to Pudgy Toys, integrating physical and virtual elements, empowering the physical release with on-chain rights, allowing users to enjoy both physical and corresponding digital experiences.

In the Wake of NFT Project Shutdowns, Is Expanding Web2 IP Monetization the Right Solution?

The bleak state of NFTs hardly needs further elaboration. The Nansen NFT-500 index has fallen 40% this year, while the Blue Chip 10 index has dropped 33%. Mid-tier projects like Recur, Cardinal, Rentable, and Tessera have also failed to survive the bear market and have chosen to shut down.

However, Pudgy Penguins has achieved counter-trend growth. According to data from Coingecko, while the floor prices of leading blue-chip NFTs like BAYC, MAYC, and Moonbirds have collectively plummeted by 20%-90% over the past year, Pudgy Penguins' floor price has risen by 35%.

Doodles has just launched its IP derivatives, and there is currently insufficient data to reflect the impact of this initiative. However, amid the deep bear market and shutdown wave, many NFT projects are beginning to shift their focus towards Web2 business models. For example, the domestic NFT project Weirdo Ghost Gang mentioned in an interview titled "NFT's First Long Bear Market, Projects Dying One After Another, Where Do We Go?" that in the current bear market environment, they have further reduced their focus on Web3 development and shifted their emphasis to Web2 business models, including the IP and trendy brand industry. Recently, Weirdo Ghost Gang announced a collaboration with DQ to launch limited edition ice cream and exclusive offers for their image store, as well as a partnership with the French apartment hotel brand Citadines to provide exclusive room booking benefits for event participants.

Through the practices of Web2 super IPs like Marvel and Pokémon, solid brands indeed offer limitless monetization opportunities, capable of deriving games, clothing, and even food brands, almost anything can be an IP derivative. But is it the right solution for NFTs to expand into Web2 IP monetization?

On one hand, many users in the crypto community believe that technically, these blue-chip NFTs are focusing on Web2 business while drifting away from innovative explorations in Web3. NFT researcher @huntersolaire asserts that most NFT projects attempting this approach are doomed to fail from the start, while Pudgy Penguins and Doodles, with their community base of thousands of holders, are in a relatively better position. "The biggest NFTs in 2024 or 2025 will be those that figure out how to scale their brand and then distribute some of the value to their holders."

However, for NFT projects currently facing the risk of going to zero, surviving may be more important while the Web3 environment has not yet warmed up.