To date, much of the media coverage for NFTs — cryptographically unique tokens tied to creative works — has centered on the art world, where Christie's recently sold one NFT for a whopping $69 million. But NFTs have found a more down-to-earth niche, along with greater sales volume, via their use as a novel kind of sports collectible.
What's happening: A collection of investors, professional athletes and sports leagues are betting that the business of fans purchasing and trading NBA Top Shots — NFTs tied to key moments in past NBA games, which have already done hundreds of millions of dollars in business — will keep growing.
Driving the news: Dapper Labs — the maker of NBA Top Shot, which has run a market for these basketball collectibles since its 2019 launch, with an open beta since September 2020 — is announcing $305 million in fresh funding on Tuesday.
- The round values Dapper at $2.6 billion.
- Investors include VC firms such as Coatue, Venrock and Andreessen Horowitz, as well as a collection of sports stars and Hollywood personalities, including NBA players Kevin Durant, Andre Iguodala and Kyle Lowry, as well as Ashton Kutcher, Will Smith and Shawn Mendes.
How it works: This subject can get nerdy fast. The acronym "NFT" stands for "non-fungible token" and means basically that each item is unique — unlike, say bitcoin, where every bitcoin is like another.
- In the case of NBA Top Shot, buyers stake a claim to a limited-edition video highlight.
- Just as purchasers of art-world NFTs don't own the original work or its copyright, TopShot buyers don't actually own the video highlight — they own one of a limited number of claims on that moment that they can can view or sell.
Between the lines: TopShot and its investors look at NFTs as a new, digital twist on the old trading-card business.
- The last generation of baseball card collectors are an established market, many of whom now have disposable income, and the market also attracts a generation of people who are used to buying in-app digital goods.
- TopShot doesn't even use the term NFT and focuses on selling the digital moments in random "packs," a term familiar to card collectors.
The upsides of digital collectibles: They don't get creases or rounded corners. They're easier to sell than cards. And we're just beginning to discover ways to display and share them.
The downsides: The whole NFT market is new and could sputter or even disappear, too. The market could also end up glutted, since there's an endless supply of game moments. And NFTs lack baseball cards' feel — along with the deterioration and loss that drives up their value over time.
What they're saying:
- NBA player Josh Hart told Axios: "In the same way that the NBA has its die hard fans, there are hundreds or thousands of other pieces of IP globally that have a rabid fanbase," Hart said in an email interview. "I believe that Dapper can scale and build ecosystems for all of them."
- Venrock's David Pakman: "'Collecting' is something that humans have done for several millennia. It's not surprising that these collectibles are being embraced by digital natives who have already amassed virtual goods in video games..."