A Sports NFT Just Sold for 113 ETH, Here's Why...
Physical sports collectibles, in particular, trading cards are HUGE. Could digital collectibles be next?
GM DOers!
Physical trading cards and other sports merchandise are hugely popular with fans and collectors alike.
So much so that a Mickey Mantle 1952 baseball trading card sold for $12.6 million. While sports NFTs haven’t reached that level just yet, they might be on their way with a recent record-breaking Sorare NFT sale of 113 ETH or $187,000.
But why? What makes physical trading cards and their digital counterparts valuable? 🤔
To answer that question, we have LG Doucet, the founder of The First Mint, a top web3 sports community, podcast, and newsletter who’ll share his knowledge in this Deep Dive.
He’ll be covering:
The state of sports NFTs and the main platforms in the space 🏈
Larger macro stories of the sports world 🌍
Some potential trends that will shape web3 sports 📈
Sport NFT areas that you should pay attention to going forward 👀
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The State of Sports NFTs With LG Doucet
In total, licensed sports NFTs brought in about $100M in primary sales in 2022 and roughly $700M in secondary.
Those are not small numbers. And yet, they are actually smaller than the previous year, when we saw $150M in primary and $1.065B in secondary sales.
This chart includes primary and secondary sales for all projects. Primary sales for Dapper Labs were estimated at $100M in 2021 and $100M in 2022, across all projects.
That’s a 31% drop, year over year.
When we say that the story of web3 x sports revolves around Top Shot, you can see that we aren’t kidding.
Top Shot alone did 75% of secondary sales in 2021 but has since cooled off, allowing for a clearer picture of the industry.
In terms of users, we take the monthly unique buyers as the measure of retention and the marker of “regular” customers on the platform.
That story tells a very interesting tale as well:
Sorare is the clear winner here, as the only platform that actually grew in 2022 (and recently broke 50,000 monthly buyers, a new record for the platform). 🚀
Despite sports NFTs “arriving” in 2021, many of the platforms are relatively new to the scene, having joined right before or just after the big crash of Spring 2022. That’s why we have the smaller lines starting around January 2022 belonging to NFL ALL Day, UFC Strike, and Candy Digital.
Note: Draft Kings Reignmakers is also a pretty big player here, but their Marketplace data is largely inaccessible and was not included in this piece.
Two Companies | Two Ways To Play
At this point, we can point and laugh at the numbers (Top Shot), but to understand where this is all going we need to look at the two types of product being built here: Fantasy Sports and Collectibles.
And naturally, the two biggest players in the space, Sorare and Dapper Labs, dominate their respective product classes.
Fantasy Sports
The DFS (Daily Fantasy Sports) component of NFTs is very similar to the current applications in the mainstream market.
Here’s how they work:
Pick players for upcoming games.
Selection is restricted by a “budget” that weighs plays on skill.
A strategic approach is rewarded.
Sorare and Draft Kings’ Reignmakers function similarly. However, the web3 part is that users own the game pieces and can trade them freely. 💡
Hence:
Users can profit from predictive performances.
Users can exit the product (sell their cards).
The platforms can manage supply (and revenue) based on demand.
It’s exactly what Fantasy was meant to become. And as a result, it has drawn a healthy audience of people that like to bet on sports.
Collectibles
Collectible NFTs also mirror their current mainstream application of physical collectibles:
Packs are sold to collectors.
Packs have varying supplies of rare cards and top players (lottery system).
Cards trade on the secondary market.
However, the possibilities of web3 collectibles outweigh those of physical ones. 💪
With digital collectibles:
The secondary market is far faster/better (online, on-chain).
Product quality is consistent (whereas sports cards need to be “graded”).
The platforms can alter metadata to correct misprints, make upgrades, etc.
And of course, the biggest advantage of all, the collectibles can be videos. This is Dapper Labs’ bread and butter with their trademark NFT “Moments”. 📸
This class also includes Candy Digital, Panini, and a variety of other small players who have purchased “collectible” licenses from the big sports leagues.
However, despite its clear potential, this market has struggled of late, as it has been the victim of the same pitfalls as 1990s baseball cards, oversupply.
Top Shot famously oversupplied its market back in the spring of 2021. And to make matters worse, they continued this practice through 2022, and have seen their monthly buyers drop from ~64,000 (Jan 2022) down to just over ~11,000 (Jan 2023).
Their counterparts have fared no better. NFL ALL Day halted their supply release just six weeks into this past season, and Candy Digital did the same last Spring.
The issue of oversupply isn’t complex. It’s driven by one main factor, a lack of new users. 📉
Mainstream interest has dropped off for sports collectible NFTs, and the web3 degen crowd has moved on due to a lack of profit potential.
As a result, we’re left with a fractured community, and the platforms are shrinking.
However, these are tech companies with tons of funding and runway. They will figure it out. But the product may look very different by the time they do.
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The Big Stories in Sports
Now that we’ve gotten a snapshot, it’s only fair to look at the bigger picture and understand where and how web3 fits.
Although sports is a place where there are constant new narratives, there are a couple of “big macro stories” we want to highlight:
Sports betting taking over the USA.
Sports keeping cable TV alive.
Saudi Arabia’s massive play.
Sports Betting Taking Over the USA
If you watched the Super Bowl on Sunday, you would’ve likely been greeted by sports gambling commercials the way we used to be inundated by crypto ones.
This is the culmination of the industry’s decade-long takeover of North America. 🌎
But there’s a longer story here, and to understand it I highly recommend How The Sports Betting Industry Quietly Consumed America.
The TL;DR:
In 2008, sports gambling was banned.
But it allowed “games of skills,” such as fantasy sports.
Overnight, FanDuel and DraftKings were born.
Their enormous profits caught the attention of sports leagues.
The leagues lobbied to legalize sports betting - and succeeded in 2018.
Now the leagues make bank—in 2021 the NFL made $12B in betting revenue.
And in that story, we cannot emphasize enough the role fantasy sports really played, as apps like FanDuel propelled their popularity.
Fantasy sports grew from 0.5M players in 1988 to 56.8M in 2015.
The average time spent “consuming” sports in 2015 was 18 hours/week, 50% of which was on fantasy sports.
The industry banked $21B alone in 2021 and is expected to double that by 2027.
There is an incredible appetite for sports gambling in the North American public.
Now, you might be asking, do collectibles factor into fantasy sports? They do not. That is Sorare’s turf.
Dapper Labs and crew, on the other hand, are part of an even bigger industry: Sports Memorabilia, which currently sits at around $26B per year and is expected to grow to a $227B industry.
Autographs. Cards. Bobbleheads. Game Ticket Stubs. And yes, NFTs! 👀
Nostalgia is a far greater emotional turret than wagering, and these figures alone are a good reason to stay bullish long-term on the Dappers of the world.
Sports Keeping Cable TV Alive
The next major macro trend may be a hard pill to swallow: Sports is the last form of truly unscripted, live entertainment and each league organically renews the main characters and narratives year after year.
If you need a sense of just how much sports is keeping traditional TV alive, 82 out of 100 top US broadcasts of 2022 were NFL games. 82!
TV matters to the leagues. The NBA is set to rake in $2.6B this year on their TV deal, which accounts for roughly 26% of their revenue.
Tickets. Merch. Jersey Ads. None of those come close to broadcasting rights money, and the cost of those rights will only increase.
And now two of the biggest companies in the world want a piece of the action: Amazon has started broadcasting Thursday Night Football, and Apple has a deal with the MLS and MLB.
With the rise of AI and its potential to do writers’ jobs, the value of live sports as the last bastion of human, unscripted TV might make it even more valuable still. 🤔
Saudi Arabia’s Massive Play
Along with everything else, Saudi Arabia has its eyes set on sports domination.
As part of their Vision 2030, the kingdom has already invested billions. Last year, they funded LIV golf and paid hundreds of millions to top golfers to join.
Other moves made by the Saudis:
Signed Cristiano Ronaldo to a 5-year deal (a huge loss for the MLS, which has been the destination for aging euro stars).
Signed a 15-year contract with F1 in 2018.
Signed a 10-year $500M deal with WWE in 2021.
Bought a $1.1B stake in ticketing giant Live Nation.
Bidding on the 2030 World Cup, alongside Greece and Egypt.
Hosting a $15M eSports tournament in the near future.
Couple this with the Saudis’ clear interest in becoming a massive emerging tech hub, it's not hard to imagine the incorporation of NFTs into Saudi-backed sports ventures.
Regardless, the Saudis are the ones to watch! 👀
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Where It’s All Going
We’ve looked at the current state of web3 and sports then zoomed way, way out to the larger macro stories.
But where might they meet in the near future? In the next bull run or at the end of the decade?
Personally, I’m bullish on two major factors in the digital sports ecosystem that will be drastically enhanced through blockchain.
Loyalty
Many of the platforms covered here have already launched loyalty programs sending tickets, merch, and experiences to collectors.
However, that’s just the tip of the iceberg when compared to the Starbucks model and barely touches on any other market of fandom outside of NFT collections. This will change.
Ticketing
Currently, Dapper Labs has a partnership with Ticketmaster to tokenize NFL game tickets on Flow (although the program is very much in beta).
Personally, I think ticket stubs are ripe for change, as they’ve barely evolved over the last 100 years. Tickets are so exciting and could lead to incredible retention and loyalty in sports.
My Ideal World
I’d like to see a world where your fandom is tracked across all chains, items, and events.
I want an all-encompassing app that combines:
Every game you’ve ever been to.
Every piece of merch you’ve bought.
Every NFT/highlight that you own.
Every game you’ve watched on TV.
All other similar marks of fandom.
In the real world, you still can’t prove that you’re the biggest fan of a team, club, or player. But tokenization can deliver that.
What to Look For in Sports x Web3 Right Now
Whether you’re a straight casual, or you’re deep into sports, here is what’s on my radar these next few months, both as a collector and trader:
MLB x Sorare
The MLB will be starting its first full season on the platform, and Sorare is known for going big on marketing. Full disclosure: I'm a holder.
EPL x Sorare
The long-awaited launch of the English Premier League on Sorare has solidified its grip on the soccer world. Expect Sorare to grow even more in Europe.
NFL ALL Day End of Season
The platform will be celebrating its first full season, and all eyes will be on them as they prepare for an off-season of upgrades. Of all the platforms mentioned here, ALL Dau has by far the most support from their licensor.
That’s it for now, friends. If you want to see more of LG’s work, make sure to check out the author section. 😁
See you on Wednesday for the DOer Spotlight with the President of Vayner3!
ABOUT THE AUTHOR
LG Doucet
Founder + Host of The First Mint, a web3 sports community.
Find him: Twitter
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