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At the start of last year someone paid $200,000 for a video highlight of a LeBron James dunk.
Here comes LBJ.
The sale sparked a wave of headlines about digital collectibles and the NFTs that make them possible. This year NFTs for sports media are expected to generate over $2bn in transactions, about double last year’s total. And some of the sport world’s biggest teams, leagues, and stars are getting in on the action.
So, will early adopters see their digital collections balloon in value, just like more traditional memorabilia? Or are NFTs an asset bubble just waiting to burst?
To answer these questions it’s important to understand where digital collectibles are like their physical forerunners and where they’re not. Here’s what you need to know.
First up, I wanted to talk to the man behind NBA Top Shot, the platform where the LeBron dunk was bought and sold.
So in the beginning of 2021 – February, March – we were seeing sales of Top Shot moments well over $200m per month. We’re speaking now in the latter half of 2021, and that revenue was closer to $20m per month. What accounts for that dramatic gap?
The key thing is this season we haven’t actually dropped any of the rare and legendary content yet. So you have moments that are relatively common, things that are up to 60,000 or more. And then you have these ultra, ultra rare moments, so legendary moments. They’re about 0.1 per cent of the total quantity of NFTs on the platform.
And these are… some of these moments are out of 32. They’re out of 49. And so they’re rarely available on the marketplace.
The LeBron NFT was one out of a collection of 49, each with its own serial number to represent when it was minted on the blockchain. Just like with limited-edition trading cards, the fewer NFTs there are of the same moment the more valuable they are on the resale market. But there’s more to it than that.
Should people think of moments as digital trading cards?
I would say they’re more than just trading cards. Because they’re digital and because they’re NFTs they can actually be used in other experiences. So we think of these products as a new class of products that give their customers different benefits and powers that they never really had before.
To learn more about the kind of added benefits sports collectors might expect from their NFTs, I spoke to Rich Kleiman.
What’s up? My name is Rich Kleiman, co-founder of Thirty Five Ventures. Oh, you want more?
Yes.
Rich is a longtime manager of and business partner with NBA superstar Kevin Durant. Together, they’ve teamed up with Dapper Labs to produce a range of NFT-enabled content. For them it’s about giving fans more direct access to KD than ever before.
Ultimately, NFTs will, you know, become a complementary piece and another form of an athlete speaking directly to their fans, whether it’s something built around the NFT or if it’s a signature shoe business that’s complemented by an NFT that now we have another element to be added to the way an athlete promotes and markets something, to the way they monetise their IP, to the way they generate revenue for any of their other businesses, or just complementary to something that may be happening in their life, period.
These deals are happening across the sports world. Rob Gronkowski, the first professional athlete to launch his own range of NFTs, made over a million dollars auctioning digital trading cards online. The buyer of the rarest card was also given the chance to meet Gronk in person, come to one of his games, and even claim VIP access at one of his other franchises.
I am letting my fans be able to get a piece of the action.
And it’s not just the players who are alive to this opportunity.
You see more and more innovative owners taking a shot at ways to incorporate it into their arena, into their organisation in general. And more and more leagues are engaging the way the NBA did with Top Shot. And you see that it’s a whole world of revenue that could be generated and a whole world of extending the brand that could be generated.
And I think that’s the crazy, amazing part of it is that it’s constantly being unlocked.
One of the latest leagues to engage with NFTs is the NFL, which kind of surprised me, actually. As the biggest and wealthiest league in the United States, the National Football League really doesn’t need to rush into an unproven market for the sake of new revenue. So what are they in it for?
We’re coming at it from the perspective, how can I best engage my fans? And we really do believe that younger demographics will engage with digital objects, digital activities almost on a primary basis.
This might mean that the latest generation of fans interact with the sport through collectibles, video games, and social media first and real-life game experiences second. But NFTs could act as a gateway from one to the other.
Today, someone may spend hours and hours of time in a given year to craft their franchise, craft their team in Madden. Blockchain will enable a player of a video game to spend time, earn against that, and then take all of those earnings and bring that to another game, to a social experience, to show those as a trophy somewhere.
The idea of digital earnings that can be taken from one platform to another could help to unlock the metaverse, a fully immersive digital realm where fans can build their own avatar, buy and sell merchandise, and even attend games, all online.
No one knows what the metaverse is going to be, but we all know it’s going to be something, and it’s going to be something that’s transformative. And in the early days those will probably look like things that are, how do I outfit my avatar or my digital self to show my fandom? In the future you could very easily see this become: what’s my game-day experience in the metaverse? Am I going to some sort of digital stadium to interact with other fans of my team and cheer on in that digital environment?
There’s really the true potential for this technology to impact almost every element of the broader fan experience.
If NFTs are here to stay they could usher in an entirely new form of fandom, generating value for fans, creators, and leagues along the way. But that doesn’t necessarily mean financial returns. Whether they’re a smart investment for you right now really comes down to what you want to get out of them.
It’s what the value is to you. You know? You’re the one that’s got to spend the money to own it. And I think that’s where it’s going to get a bit tricky is the people that have to make a decision on whether they’re buying NFTs for the true love of collecting it, if they’re buying it with the idea that they want to make money on it.
What’s the true fandom for this category? Is it really.. is it primarily full of speculators, or is it primarily full of people that actually care about the community that is created around the asset? That’s, I think, the number one way to tell apart a sustainable category, as opposed to a fad.
This is the internet in 1996. That’s where I think we are. We’re going to look back and we’re going to say, there’s some great things that have happened, and there’s some things that probably didn’t make sense. But the next, you know, Amazon, Google, whoever is probably out there right now starting to think about what this means for the next 10 years.