When the value of cryptocurrencies plummeted last year, it also affected many businesses that rely on blockchain and non-fungible tokens. Dapper Labs, which operates the NFT NBA Top Shot and NFL All Day markets, laid off 22% of its workforce in November, just over a year after a $250 million funding round valued the company at $7.6 billion. In January, Candy Digital's founding shareholder, Fanatics, sold its 60% stake in the digital collectibles platform.
However, while the market downturn has sent valuations sky-high, those still operating and investing in the space are generally bullish on the long-term outlook, though not without taking away some key learnings from the past year. One of the biggest lessons is the importance of NFT companies offering value beyond mere hype or the hope that a digital collectible will one day go up in price.
โThe challenging market of the last few months has shown that IP alone is not enough for the consumer. The successful projects are the ones that create a unique experience in one way or another,โ said Michael Meltzer, head of business development at fantasy sports platform NFT Sorare. He added that future success in the space โwill be based on the ability to take advantage of blockchain and its benefits, which are scarcity, affordability and authenticity, and then layer on a meaningful experience or value proposition that goes further.โ there. Just price speculation.
Even Fanatics CEO Michael Rubin suggested as much, at least as far as sports memorabilia is concerned, in an internal memo following Candy Digital's divestment of his company: "NFTs are unlikely to be sustainable or profitable as an independent business. โฆ We believe that digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors.โ
Another important discovery was the need to better differentiate NFT businesses from the volatility and risks of cryptocurrencies.
"Because a lot of the people who were active in the NFT space were also active in the crypto space, there's a clear alignment in terms of sentiment," said CAA executive Adam Friedman, who leads the agency's Web3 strategy. . โHowever, if you really look at the underlying technology here and if you look at what is an NFT versus Bitcoin, ETH or any other form of crypto, they are clearly different.โ
Friedman, who is also an investor in CAA and NEA's Connect Ventures, highlighted Ticketmaster's NFT concert ticketing pilot and Warner Bros. Discovery Sports' debut as a "watch to win" game for viewers of their "Inside the NBA" programming as NFT innovations. No ties to cryptocurrencies. โBlockchain is the technology, and cryptocurrency leverages that blockchain technology,โ Friedman said. โBut that technology can be used in many, many ways that have nothing to do with currency or finance.โ Connect Ventures has stakes in Web3 companies such as Candy Digital, OpenSea NFT marketplace, Mojito trading platform, and Royal music royalty platform, among others.
The sports industry's interest in NFTs certainly doesn't seem to have waned alongside the collapse of cryptocurrency. Sorare secured a four-year contract with the Premier League in January that followed other recent partnerships with MLB, the NBA and the players' unions of both leagues. โIn my discussions with the leagues, they are still encouraged by the long-term potential of blockchain to connect with fans,โ said Meltzer, noting that Sorare now has some 3.5 million users in more than 150 countries. Candy Digital CEO Scott Lawin told Sports Business Journal in January that his company has also seen growing interest from intellectual property owners. Candy has made deals with MLB, WWE and the NASCAR Race Team Alliance.
If anything, for those optimistic about the future of NFTs in esports, the market downturn has only lowered the price of entry and offered some respite to prepare for an anticipated next wave of interest.
โWe were flying the plane while building it when we really jumped into this space in early 2021,โ Friedman said. โ[The market slowdown] It not only provides time for entrepreneurs, founders and their teams in this Web3 space to build; selfishly, it allows us to really be in a position where when the market comes back, we'll be ready and not catch up. And our mentality has not changed. This is the technology industry right now where there are long-term implications across our business."
