Over the last few years, the market for sport cards has “risen back from the asses” and the industry has seen spectacular growth and deals worth amounts of money that never before seen. Overall, the entire sports memorabilia market is estimated to be worth $5.4 billion, and among the most outstanding sports cards deals, we can find the following:
Back in January 2021, a Mickey Mantle baseball card sold for $5.2 million
In August 2021, $3.4 million were paid for a Mike Trout card
In this New York Times article you can find two Lebron James rookie cards worth a combined $7 million
During 2021 we have been witnessing the “boom” of what is considered the evolution of sport collectibles, sport-based NFTs (Non-Fungible Tokens). In case that you have not heard the term before, in this Coindesk article it is defined as follows:
Non-fungible tokens (NFT) are digital assets that represent a wide range of unique tangible and intangible items, from collectible sports cards to virtual real estate and even digital sneakers.
And as explained in this CNBC article, they can be bought and sold, like physical assets, but since they run on blockchain, a decentralized digital ledger that documents transactions, ownership and validity of the asset they represent can be tracked.
Several stakeholders of the industry are amazed at just how quickly the market is increasing and identify the huge opportunity behind it. Just to provide some context, the same Coindesk article reports that between November 2017 & February 2021, an estimated $174 million were spent on NFTs.
Mark Cuban, owner of the Dallas Mavericks, had this to say about digital collectibles:
“This is like the early internet days all over again, I think [NFTs and blockchain tech is] going to be huge. Gen Z value digital goods more than anything, other than maybe a house, maybe a car [and] their phone. After that, it’s digital. They’re going to respect something that’s digital before they buy something that’s physical.”
The advantage of owning a digital collectible item is that it is built with unique features, verified by Blockchain technology, that makes it unlike any other. This potentially implies a great benefit for digital content creators; as explained in this Andreesen Horowitz article, there are three ways they can do so:
It removes the intermediaries; for instance, an artist may decide to avoid selling through art galleries and keep the full profit for him or herself. With NFTs, any future sale of the artist´s work will benefit them directly.
NFTs can help creators or businesses establish different price tiers for certain items that they can sell to a selected group of fans / customers.
NFTs give users empowerment, meaning, the customer is actually owner of the digital asset.
Precisely Andreesen Horowitz did a fantastic episode on NFTs which we highly recommend in case you want more detailed information on what NFTs are, the realms they can be applied to, and who benefits most from them, among many other topics.
In the blog we already touched upon several applications of blockchain technology in sports and briefly mentioned NFT technology. In this post, we want to deep dive into the cases of NBA Top Shot and Sorare, two of the companies that are revolutionizing the industry through their blockchain solutions and are actually prime examples of the 3rd benefit we mentioned above. Now, we do not claim to be experts on this topic, far from it, but we will look into learning much more about the space and both platforms and share the insights with you in the future.
NBA Top Shot: Revolutionizing the basketball collectibles industry
NBA Top Shot is an initiative created by Dapper Labs in partnership with the NBA and the NBPA, and it is one of the most promising opportunities in our view.
Essentially, Top Shot identifies highlights (moments) and mints a certain number of each of them with a unique blockchain token, offering them in "digital" packs that range from $9 to $999. Blockchain is actually one of the “key to win” features of the platform, as it enables verification of the asset, guarantees the claim of “scarcity” and tracks all transactions around the asset.
In case you want a bit more detail, the following ESPN video explains quite well how NBA Top Shot works:
Front Office Sports reported some that as of September 2021, the platform has more than 1.1 million users (with almost half of them owning at least one moment and that total user transactions are above $780 million.
Ledger Insights also estimates their total revenues to be around $12 million - $13 million and their main sources of revenues would be direct sales, transactions in the secondary and fees from each deal.
So far, some of the top selling moments up to date include a Lebron James moment ($208,000), a Ja Morant moment ($100,000) or a Zion Williamson block which sold for the same price.
As with other platforms that are gaining massive popularity in the NFT space, NBA Top Shot is playing with the principle of “scarcity” to drive growth. Thousands of followers actually wait in line to get access to limited edition packs of cards that drop on the platform from time to time. Just as an example, in February 200K people waited in line to get access to 11,6K packs that dropped on the platform for $99. Think about it, that is almost $1.2 million in revenue waiting to be generated.
And the benefit for players? Well, they actually keep 100% of the price paid in the marketplace of the ones they feature in assuming they are owners of them.
The competitive advantage of NBA Top Shot, as we discuss at the end of the article, is that the content is fueled by the very NBA. This may mean that, in an effort to monetize amazing plays or milestone moments that happen regularly across the league, the league decides to post it exclusively on the platform.
For example, how much do you think Kobe Bryant´s 81st point vs the Raptors may have been worth? Or “The Shot” by Michael Jordan?
Thanks to the success Dapper Labs has enjoyed with NBA Top Shot, it has been able to expand into other major competitions such as La Liga. Caty Tedman, head of partnerships at Dapper Labs, had this to say about the agreement:
“With over 3.5 billion football fans around the globe, the experience’s layered environment has the power to revolutionize how fans connect to the sport of football and how they engage with the teams and players they love, both virtually and in real life. We look forward to working alongside LaLiga, home to some of the best clubs on the planet, to bring this wildly new and dynamic fan-driven experience to football lovers everywhere.”
Sorare: Fantasy sports taken to a whole new level
Sorare, a football (soccer) based fantasy league, is another platform that has been experiencing astounding success. Ledger Insights describes remarkably well how this platform works:
Sorare offers tradeable cards for professional soccer players enabling fans to play fantasy football games by using the cards to participate in the platform’s weekly competitions. Users purchase tokenized cards of players of various teams to build their own squad, and depending on how the football players perform in real life, they may receive rewards in more trading cards or cryptocurrency (Ethereum).
The platform has signed deals with more than 200 football clubs, including Real Madrid, Liverpool, Bayern Munich, PSG and Juventus. Some of the biggest sports clubs around...
Over the course of the last three months, Sorare reports volume growth of 52% per month and as of early January 2021, it reported having 55.000 active users while in February it had already reached 80.000 worldwide. As of January 2021, trades in cards were valued at $4.2 million, which is an amazing increase over the $60K it was trading one year before that. Their revenues, however, in comparison with NBA Top Shot, come solely from card auctions for the time being.
The growth in their popularity has enabled them to raise significant investment rounds over the course of the past several months, as we detail down below, and to close partnership deals with La Liga, just like Dapper Labs has done, and with the Bundesliga. Nicolas Julia had this to say about his deal with La Liga:
"This partnership isn’t just a sign of Sorare’s growing leadership in the NFT sports space, it is a major signal of intent by the sporting world that it sees Sorare’s unique ability to connect fans with sports through NFTs as a crucial part of their plans for the future. LaLiga is one of the best leagues in the world, home to some of the most exciting clubs and footballers on earth. We are very proud that they have become our first ever league partnership, and we are looking forward to working together in the years ahead.”
The environmental impact of NFTs
One of the biggest concerns behind the rise of NFTs is the negative impact they have on the environment due to the carbon footprint created by the "mining" processes around it. In fact, Digiconomist, through its Ethereum Energy Consumption Index, shares a surprising comparison to provide further context as published picked up by Sportico:
Ethereum consumes roughly the same amount of electrical energy over a calendar year as Belarus, and a single transaction on Ethereum requires more power than the average U.S. household does over 2.48 days—that’s the equivalent of 77,300 VISA transactions or 5,800-plus hours of watching YouTube.
It must be noted thought, that NBA Top shot uses "Flow blockchain," which consumes less electricity and carbon emissions than Ethereum or Bitcoin. This is because they are based on a "proof of stake" model rather than on "proof of work," which essentially means that, as explained in the Sportico article cited above, miners enforce consensus and verify transactions according to how many tokens they lock up as collateral.
As the NFT industry evolves and experiences further growth, it remains to be seen how fans react to this matter, specially considering that, as published on a study by IBM & NRF, almost 60% of consumers are willing to change their buying habits and brand loyalty to reduce environmental impact.
Looking into the future of Sport NFTs: This game has just started...
Environmental concerns aside, there are many skeptics that argue sport NFTs are a “fad” as one could potentially enjoy the same moment for free in YouTube for instance. On that topic, Mark Cuban shared his opinion on his blog:
"Some people might complain that I can get the same video on the internet anywhere anytime and watch it. Well guess what, I can get the same picture on any traditional, physical card on the internet and print it out, and that doesn't change the value of the card."
And, he also shared his prediction with USA Today:
“NFTs in general, of which Top Shot is the first and a leader, could turn into a top 3 revenue source for the NBA over the next 10 years.”
There are other "Sport Business" executives that follow the same train of thought as Cuban. Ted Leonsis (Founder, CEO & Chairman at Sport at Monumental Sports & Entertainment and also owner of, among others, the Washington Wizards) had this to say in Sportechie´s State of the Industry conference in March of 2021:
“This is like the birth of a new internet, this is that significant. For those of us who have been on the internet for a long, long time, we know this isn’t about blockchain. We know this isn't about NBA Top Shot. We know it's about the reinvention of other parts of our business, using this platform that's global, that’s frictionless and that can give accountability into the customers that we have.”
Along the same lines, Humza Teherany, CTO at Maple Lead Sport & Entertainment, believes that NFTs are “fundamentally going to change the experience on the fan side, on the asset side for sports, whether that's a trading card, whether that's an experience, or whether that's a host of other things that the industry is thinking about it."
Finally, Gary Vaynerchuk, who has been insisting on the rise of the sports memorabilia market (sport cards in particular) for years now, explains his vision around NFTs and why they are “here to stay” in the following video:
All in all, in our opinion, the fact that the NBA is actually behind NBA Top Shot or that the major football powerhouses are partnering with platforms such as Sorare, seems to prove this is not a fad. They are a new relevant piece of the fan engagement model and a a way for fans to collect sport memorabilia, as confirmed by Javier Tebas, president of La Liga after its partnership with Dapper Labs was made public:
“The partnership between LaLiga and Dapper Labs will bring us even closer to our fans worldwide through a new and growing medium, and alongside the industry partner that created the NFT video product for the NBA. This experience will place football fans all over the world at the very centre of the action, giving them a platform and product that allows them to enjoy and express their passion for LaLiga in a unique way.”
Moreover, both Dapper Labs and Sorare have been able to secure major investment rounds, which seem to confirm the faith the industry has in their future:
In September 2021 Dapper Labs raised $250 million (just a few months after raising $305 million) in a round that values the company at $7.6 million.
As of February 2021 the company had raised about $60 million with investors such as Benchmark, GaryVee, Gerard Piqué or Antoine Griezmann being involved in those rounds. Then, in September 2021 it was announced that they had raised an additional $680 million in a series B round.
As for further features of these platforms, according to Bleacher Report, the vision for NBA Top Shot is to enable similar Pokemon-Go type features for fans to “capture” moments in live games or some of the same ones currently found in NBA 2K.
On the other hand, though, the user experience needs to improve significantly if these platforms are to be adopted by the “mass market.” As Ledger Insights rightfully explains:
Collectible platforms usually require the user to leverage two different types of tokens. One is to buy ether or some other cryptocurrency, which is then used as an ‘on-chain’ means of payment to purchase the item the user really wants.
Initially, Sorare found out that between 80% and 90% of the users either did not understand or care about cryptocurrencies and additionally, the process to sign up, choosing a crypto wallet, going through the required protocols made it a complex “journey.” The onboarding process for these new “ digitally-based” platforms is critical (as for any digital product for that matter) and hurdles like these imply a major barrier of adoption. This is the reason why Sorare partnered up with Ramp, ca rypto-based project that claims that the purchase of collectibles is much faster thanks to their solution.
We cannot lie, whether sport NFTs are a trend or are here to stay, we are excited for the developments that are yet to come in this industry. Visa estimates that sport organizations worldwide lost around $18B in revenues during the Covid-19 pandemic, and many are looking to NFTs to recover some lost ground so it does seem like more efforts will be put into the space. And as we said at the beginning of the article, we are not experts on the topic but our aim is to learn as much as possible and share them with you through this blog, so stay tuned!
Meanwhile, keep safe.