The digital transformation of watchmaking


Is the NFT hype over?

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October 2022


Is the NFT hype over?

First a frenzy, then a collapse: the world of NFTs and cryptos has had a tumultuous year. Since then, there has been little news from watch brands on this subject. To understand whether the early hype was just a fad, we need to delve a little deeper into what NFTs mean for the watch industry and the extent of its interests.

T

he term ‘NFT’ – the abbreviation for ‘non-fungible token’ – entered the mainstream during the Covid-19 pandemic. Such was its meteoric rise it was named “Word of the Year” for 2021 by Collins Dictionary. Dictionary definitions of the buzzword define it as a unique record of data that is registered – or minted – on a decentralised digital ledger called a blockchain. It is this guarantee of authenticity and traceability of ownership that drove the massive increase in NFTs, fuelled in no small part by the boom in cryptocurrencies.

In 2021, the Financial Times, quoting blockchain analytics firm Chainanalysis, reported global crypto trade volume in NFTs reached nearly $41 billion. To put that into perspective, in the same year, figures published by the Federation of the Swiss Watch Industry (FH), showed Swiss watch exports – a proxy for the watchmaking industry as a whole – reached an all-time high of around $24.1 billion (CHF22.3 billion).

With the Swiss city of Zug known as ‘Crypto Valley’ and playing host to over a thousand blockchain companies, the watch industry had a front-row seat to observe the NFT craze. It is no surprise then that a legion of players quickly started to take an interest and began to launch their own NFTs.

With the Swiss city of Zug known as ‘Crypto Valley’ and playing host to over a thousand blockchain companies, the watch industry had a front-row seat to observe the NFT craze.

The frenzy

Early movers include the oldest watch retailer Beyer Chronometrie (click here to read our dedicated article), and independent brand Louis Erard (click here). Other high-profile attempts from Jean-Claude Biver’s ‘digital twin’ of his personal Hublot Big Bang prototype, and Jacob & Co.’s SF24 Tourbillion digital piece-unique NFT, to Ressence’s Spymaster watch and computer-generated video NFT, were unsurprisingly touted as collectibles for sales.

Louis Erard used NFTs for its collaboration with Alain Silberstein and has set up a loyalty programme in collaboration with Swiss blockchain start-up qiibee.
Louis Erard used NFTs for its collaboration with Alain Silberstein and has set up a loyalty programme in collaboration with Swiss blockchain start-up qiibee.

Other examples include the likes of Vacheron Constantin, Bulgari (read here), Panerai, Hublot, Franck Muller, Frederique Constant (read here), as well as independent brands such as Chronoswiss, SevenFriday, Louis Moinet, and Hanhart. These initiatives often go beyond token sales to establish a wider range of consumer-utility NFT applications.

At the last edition of Watches and Wonders, Hublot and Japanese artist Takashi Murakami presented two NFT digital works, inspired by the Hublot Classic Fusion Takashi Murakami watches.
At the last edition of Watches and Wonders, Hublot and Japanese artist Takashi Murakami presented two NFT digital works, inspired by the Hublot Classic Fusion Takashi Murakami watches.

Auctioneers got in on the game too. In April 2022, Sotheby’s ‘Gérald Genta: Icon of Time’ sale offered prototype drawings of the late designer’s iconic watches, consigned by his widow Evelyne. All original artworks were accompanied with their digital twins and certification of origin in the form of NFTs. The highest grossing lot fetched a little under CHF 700,000 from a private collector in Asia.

In April 2022, Sotheby’s ‘Gérald Genta: Icon of Time’ sale offered prototype drawings of the late designer’s iconic watches, accompanied with their digital twins and certification of origin in the form of NFTs.

After the storm

Then came the collapse of crypto. Spooked by inflation fears and the threat of recession, the downturn was dubbed ‘crypto winter’. Major NFT offerings thus dwindled along with a decline in NFT trading.

At the time of writing, sales values in US dollar on the biggest NFT marketplace OpenSea have plunged 98% from their peak in May this year to a new low, according to live tracking data on DappRadar.

NFT-related news from watch brands have since become scarce. To understand if the early hype was merely a fad, we need to dive a little deeper into what NFTs mean to the watch industry and the scope of its vested interests.

Then came the collapse of crypto. Spooked by inflation fears and the threat of recession, the downturn was dubbed ‘crypto winter’. Major NFT offerings thus dwindled. NFT-related news from watch brands have since become scarce.

Are NFTs dead?

“What is over, which I think is good news, is the NFT hype,” said Vincent Perriard, Chairman of the relaunched independent brand HYT and co-founder of Origyn, in a video interview. “My point is, there was some rubbish and that will never come back. It was a bubble. But the market is cyclical, and it will go up again. So now the need for serious projects is critical.”

For an industry famously bent on upholding traditions, watch companies are now treading carefully. By and large, established brands are keen to communicate that their efforts are not clout-driven gimmicks. Hublot, which has launched its own dedicated page on OpenSea, highlights that prior to selling watch NFTs, the brand had already been using blockchain technology to certify the authenticity of all its watches.

Last March, 1,000 NFTs of Louis Moinet's Space Revolution were sold in just seven minutes.
Last March, 1,000 NFTs of Louis Moinet’s Space Revolution were sold in just seven minutes.

Chief Executive Ricardo Guadalupe wrote in an email: “Our primary purpose isn’t motivated by a monetary ROI (return-on-investment). The purpose of the page is to start building a Hublot crypto community and promote our partnership with [renowned artist] Murakami and Hublot.eth. We also wanted to prove that high value transactions are possible. This is just the beginning and projects motivated by ROIs will potentially follow with time.”

Manuel Emch, Head of Louis Erard, shared the same views during our follow-up interview. “There’s typical logic in this evolution. It is normal in an early-mover stage where things get speculative. Once you have taken out the peaks and troughs, in the long run the trend is still there. We believe in it. Of course it has impacted our planning. We have postponed a few NFT projects to adapt to the reality, but they are still in the pipeline. We don’t see any reason why we should change our plan over time. It is a long-term strategy, not a short-term opportunity. We are also building this community to better serve our clients. At the end of the day, what is most important is to give added value.”

“What is over, which I think is good news, is the NFT hype. My point is, there was some rubbish and that will never come back. It was a bubble. But the market is cyclical, and it will go up again. So now the need for serious projects is critical.”

Back to serious matters

No one understands ‘long-term’ better than Beyer Chronometrie, the prestigious Zurich retailer now in its eighth generation of family management since its founding in 1760. “There has to be substance,” said Head of Marketing, Philippe Meyer, in a telephone interview. “For a heritage watch store like us, it was a bold move to do something so way-out. And we are happy that we got it right. Most importantly, we can use our NFT project to connect with customers and offer benefits to a special community. It was interesting, even surprising, to find that some of our traditional customers, unrelated to crypto, got involved.”

When innovation meets tradition: Zurich-based René Beyer, owner of the oldest watch retail store in the world, has invested in NFTs.
When innovation meets tradition: Zurich-based René Beyer, owner of the oldest watch retail store in the world, has invested in NFTs.

One common thread observed among most watchmaking industry NFT pursuits is that they are not necessarily linked to crypto speculation. From the outset, brands have quietly been working towards what are known as ‘utility NFTs’. As the name suggests, these are NFTs that can be minted to offer inherent rights to owners, thereby facilitate privileges or rewards such as holders-only events, priority access to new collection launches, and loyalty programmes.

“Once you have taken out the peaks and troughs, in the long run the trend is still there. We believe in it. Of course it has impacted our planning. We have postponed a few NFT projects to adapt to the reality, but they are still in the pipeline.”

The community will decide

The key is community building. Brands can nurture relationships and community support through their NFT projects even if market conditions are volatile. Hublot is doing just that. As Guadalupe says, “It’s helped us create new offers on our e-commerce and interact with our clients in a new way.” IWC is also going all in. The brand claims its IWC Diamond Hand Club is the first NFT-based membership program ever created in the luxury and watchmaking industry.

It is fair to say every entrant in this nascent business is still figuring out the true value of NFTs and how to make them a sustainable part of their overall strategy. However, the format would appear to be definitely not dead. First movers see NFTs as a value-add for customers and remain confident in their potential. It is perhaps more a question of when, not if, they will have mass consumer appeal. It is quite conceivable to envision a day when new acquaintances will want to scroll through their phone and show you their NFT collection in the same way they might show you their photographs.

It’s a vision being embraced by TAG Heuer. The company has ventured into the NFT space from an entirely different angle. The latest update in the TAG Heuer Connected Calibre E4 smartwatch has an added Lens viewer for wearers to display their NFT artworks on their wrists.

The latest update in the TAG Heuer Connected Calibre E4 smartwatch has an added Lens viewer for wearers to display their NFT artworks on their wrists.
The latest update in the TAG Heuer Connected Calibre E4 smartwatch has an added Lens viewer for wearers to display their NFT artworks on their wrists.

“Our connected watch has a unique product fit to create a bridge between the digital and physical worlds, and our traditional customers and the NFT community share the same aspirations,” explains Teddy Florent, Managing Director of Connected Watch Business. “The current macro-economic dynamics are temporary. NFTs are bringing [proof of authenticity] to the Web that didn’t exist before. It’s absolutely a revolution. I strongly believe it is key in our data [ownership]. From there, NFTs can create an avenue of possibilities that is enormous. And it’s just a start.”

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