NBA scores big with program letting fans buy collectible videos with cryptocurrency
There has been some speculation that the concept's strong sales and China's love of the NBA will result in that country becoming involved.
The NBA’s Top Shot product, a blockchain-based trading card game, has resulted in more than $230 million being spent on digital NBA highlights, according to its creator, Dapper Labs.
The product works similar to trading cards, but instead of receiving a physical card featuring a picture of LeBron James dunking a basketball, a video of him dunking in a game is instead purchased.
In other words, the concept combines popular trading cards and the rising interest in cryptocurrencies.
The concept and the revenue it has generated, combined with the NBA's international appeal, has also sparked some speculation that China will soon get involved, but so far there is no reportable evidence of that happening.
Other concerns include the authenticity of the so-called "next-generation collectables" and whether the operation will result in yet another boom-and-bust ordeal.
Also, in the days following a late-February marketplace spike, trading of the so-called "moments" was halted for hours at a time, which led to a sharp drop in their prices.
Some users, worried over not being able to sell their cards and get out, and watching the value of their accounts plummet, compared Top Shot to Robinhood – the stock-trading platform that came under fire for prohibiting users from buying GameStop stock in January, sending the price of their shares and profits crashing, according to Sports Illustrated.
Current "packs" needed to get in the game have gone for as low as $9 and are constantly sold out.
The National Basketball Association partnered with Dapper Labs, which developed the CryptoKitties game, to make a collectible digital asset for basketball highlights.
NBA Top Shot is a crypto-collectible highlight that can be purchased as a non-fungible token, which offers ownership of digital artwork. Each collectible is tied to a blockchain, similar to that of bitcoin, which provides each NFT with a unique certificate of authenticity that cannot be hacked as even copies of the collectibles can be recognized as fake.
Caty Tedman, head of marketing and team partnerships at Dapper Labs, says over $230 million has been made thus far as a result of Top Shots. However, the majority of the money generated has come from the trading of the NBA highlights after their initial sale, rather than the original purchase, according to CNBC.
Dapper generates revenue through transaction fees and releasing new packs of NFTs.
"It’s a nice evolution and good to see that people are still doing collectibles, even during this time," said Lars Rensing, CEO of the blockchain service provider Protokol. "It’s a new step to the future."
Additionally, the game has become a way for the NBA to profit after Top Shots came about following a licensing agreement the NBA and its players’ union made with Dapper Labs in 2019.
Tom Richardson, a digital media professor at Columbia University’s sports management program and who once was head of publishing at the NFL, says the NBA can receive 10 to 15 percent of sales from a company that uses its intellectual property.
The NBA licenses the highlights to Dapper Laps, which makes a limited number of digital collectibles to create scarcity. One reel is currently listed for more than $240,000.
Traders hope that in 30 years the digital highlights will significantly increase in value as the scarcity of each increases, similar to that of physical trading cards like a 1952 Topps Mickey Mantle card, which recently sold for $5.2 million.
"One of the things that have defined the digital era is we’ve moved from a world of scarcity to a world of abundance with all kinds of media assets and products," said Tedman, according to crowdfundinsider.com. "But the thing that defines the trading card business is a physical scarcity of the cards. So (Dapper) created these NFTs with the idea of scarcity combined with authenticity because of the way the blockchain works."
The mobile game featuring these digital assets, expected to be released this year, will allow players to create rosters of NBA athletes by acquiring NFT collectibles and competing in online tournaments, which could result in winning even rarer NFTs that have the potential of increasing in value.
"It can be the opportunity to have some fun with your interest and love of a sport – in this case, basketball – combined with your interest in new technology experiences and financial experiences such as cryptocurrency and NFTs," Richardson said.
Dapper is capitalizing on a digital-driven generation that prioritizes digital properties as much as physical ones.
"The new generation is more digital-native," Rensing told CNBC. "I think it will stick around because it’s a solution that also brings in new fans and digital natives."
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