NBA Top Shot, NFL All Day and the new NFT reality: What’s next as market falls?

Digital collectibles and assets — cryptocurrencies, non-fungible tokes, exchanges, etc. — have been in the headlines for months and mostly for bad news.

And it’s not been getting any better, particularly in the wake of crypto exchange FTX, which spent lavishly on sports marketing deals, collapsing entirely and so-called currencies such as Bitcoin tumbling in value.

NFTs, in particular, were a sports industry darling in 2021 when Vancouver-based Dapper Labs saw its licensed NBA Top Shot digital video highlight collectibles explode in popularity with hundreds of millions of dollars in retail and resale volume.

Despite critics warning that many NFT projects are environmentally damaging, can be akin to Ponzi schemes, are risky assets because of wild price volatility and lack of regulation, and often feature assets freely available on YouTube and elsewhere, fans and speculators still bought in.

Early buyers made profits. The enormous wave of latecomers mostly did not. In short, a lot of people got burned, even if whatever they bought or invested in wasn’t an outright swindle.

Others have been happy to just be collectors while some buyers still seek to make profits in a radically slimmed-down market.

A year after NBA Top Shot emerged as the wildly popular poster child for sports NFTs, the cracks were clearly visible in the paint despite ongoing optimism about digital assets overall. Two years later, they’re chasms.

Dapper Labs says it’s profitable and doing OK amid the market declines, and continues to churn out its NBA and NFL projects under multi-year licensing deals, along with projects with other sports leagues and organizations such as UFC and Spanish soccer’s top-flight La Liga.

Both of those U.S. major leagues continue to be Dapper Labs partners. The NFL, whose NFL All Day product debuted in September, declined to comment on its relationship with the company and the wider NFT collapse, while the NBA provided only an emailed statement: “NBA Top Shot continues to be a key partner and a valued component of our business. Providing the NBA Top Shot community with even more ways to connect with the league will continue to remain a top priority.”

The tech sector has been slammed with job cuts in recent months, and Dapper Labs hasn’t been immune. Founder and CEO Roham Gharegozlou on Nov. 2 announced his company was reorganizing and cutting 22 percent of its roughly 600-person workforce because of the “macroeconomic environment” and too-quick company growth.

“We streamlined operations and are well-capitalized to support our team, communities and core products, no matter the economic conditions over the next few years,” said Adam Barrick, vice president of sports partnerships at Dapper Labs in an email. “As a company, we are well-positioned for the future, with a strong balance sheet, multi-year partnerships with some of the most enduring brands in the world, and business lines that are so early in their story, we believe they have 100x upside.”

Dapper, which is working to make itself a mobile-first platform, continues to insist its digital products are, first and foremost, collectibles, positioning them as serialized digital trading cards with varying levels of artificial scarcity — another strategy borrowed from traditional card makers.

The company provides a secondary market exchange for fans to buy and sell their NFTs, and that’s where the vast majority of Dapper Labs products change hands and where the most revenue is generated — and don’t forget, the sports leagues and unions get a cut of all those sales.

“We build digital collectibles to provide fans with long-term value — they are not, nor have they ever been, an investment product,” Barrick said. “That means transaction volume is not a metric that tells the full story of the product or shows why it’s successful with collectors.”

The company notes that its NFTs can have physical perks attached to them, such as meeting the athletes in person, tickets to special games, and rewards for keeping rather than selling “moments” — Dapper’s term for its video NFT highlights. It also gamifies NFTs to fuel traditional collecting — but all of that still requires consumer spending.

Giving NFTs value beyond being an investment is part of a strategy to deal with not only price volatility and enormous downward trends in the digital asset markets, but also exterior trends that affect consumer spending such as inflation and energy prices.

“We are mindful of market impacts and how macroeconomic headwinds have impacted the world, so we’re doubling down on areas where we can provide the most value back to our communities,” Barrick said. “With our sports products, this includes leaning into the net benefits our products bring to the overall fan experience.”

Whether Dapper Labs means their NFTs to be investments or not, that’s what drove a sizeable chunk of the 2021 boom, which may be more properly termed a bubble that has lost much of its (hot) air.

Because NFTs are created using blockchain technology that’s publicly transparent, sales volume is relatively easy to track, and the Dapper Labs transaction trends are stark.

NBA Top Shot, minted on the Flow blockchain that’s said to be less of an energy hog, has done just over $1 billion in all-time sales — mostly on the secondary market — since its debut in private beta testing in 2020. That’s the seventh-most of any collectible NFT tracked by

NBA Top Shot’s peak was February-March 2021 when combined sales topped $432 million — numbers that earned a lot of media and public attention, and helped fuel the wider NFT boom in sports, arts and other sectors.

That was obviously an unsustainable volume, which the company acknowledged at the time.

Since those heady months of early 2021, Dapper Labs’ NBA product has declined, falling to $82 million in April 2021 sales and steadily since with a few months of increases. Sales volume was just under $2.2 million in December.

The average sale price of an NBA Top Shot highlight peaked at $181.81 in March 2021. Last month, the average had fallen to $12.83 — the lowest average price since the product began being privately minted and recorded by in July 2020.

Dapper Labs said its products continue to sell out, and there still are buyers purchasing its basketball and football NFTs for thousands or tens of thousands of dollars, including a LeBron James “Cosmic” Series 1 highlight for $25,000 on Dec. 24 and three Luka Dončić “Holo MMXX” highlights that sold for $10,000 and $11,000 on New Year’s Eve.



‘NFL All Day’ is here: Can the NFL’s version of NBA Top Shot work amid an NFT downturn?

The pro football NFTs haven’t fared much better, even if the declines aren’t as enormous because of their late entrance into a shrinking marketplace.

The NFL All Day NFTs did $7.3 million in sales for their mid-August debut and then $14.2 million in September when the league’s regular season began — like cardboard trading cards, seasonality affects sales. Each month since has seen an NFL All Day sales decline, from $6.4 million in October to $2 million in December.

NFL All Day all-time sales are at $68 million, of which $34 million came from sales while the product was still in private beta testing from February to July 2022, per data tracking.

The number of unique buyers for NFL All Day highlights — Kansas City Chiefs quarterback Patrick Mahomes is the marketing face of the product — peaked at more than 23,000 making nearly 460,000 transactions in September and has since steadily dropped to 7,300 buying or selling 99,000 highlights in December. Average transaction price in August was $42 and that fell to just under $21 in December.

The company said an Odell Beckham “Legendary Moment” sold for $50,000 in September.

The biggest NFL All Day sales day was Nov. 18 when just under $1.4 million worth of highlights changed hands — in other words, a fraction of the NBA volume when the NFT hype was at its hypiest.

A Dapper Labs spokesperson noted that the company put out 2,000 NFT packs — the video highlights are packaged like a digital foil trading card pack on your screen — that included the late Franco Harris’ iconic “Immaculate Reception” from 50 years ago, and they sold out in less than four hours on Dec. 20. A couple were resold for up to $9,000 at the end of the month.

The number of highlight packs and their retail pricing also are factors that drive Dapper Labs’ overall volumes amid the wider market demands.

While the wider digital asset market has declined significantly — Bitcoin is at about $16,800 now, down from its high of nearly $70,000 in November 2021 — Dapper Labs is said to be profitable and sorting out what the future pace of NFT sales will settle into.

Gharegozlou, the Dapper Labs founder and CEO who wasn’t made available for this story, told The Athletic in February 2021 that the company was already profitable.

Barrick reiterated that in his recent emailed statement, and also said the company isn’t financially affected by the FTX situation (which now includes bankruptcy and lawsuits and its founder and executives jailed). Dapper Labs has no exposure to FTX, the related Alameda Research crypto trading company SOL, or other affected tokens, Barrick wrote, and 95 percent of the company’s balance sheet is in U.S. and Canadian dollars rather than in crypto.

Because Dapper Labs is a private company, it’s not possible to independently verify the financials.

In addition to NFT sales, the company has raised more than $600 million in outside funding rounds from major funds and also sports stars and celebrities such as Kevin Durant, Klay Thompson, Michael Jordan, Andre Iguodala, Kyle Lowry, Spencer Dinwiddie, Stefon Diggs, DK Metcalf, Will Smith, 2 Chainz, and Sacramento Kings owner Vivek Ranadive.

“We are well capitalized, with a strong balance sheet, multiple years of runway and no outstanding debt. We have no need for additional fundraising, and we continue to invest in each of our products,” Barrick said.

Still, the digital asset industry’s woes have spooked sports teams, leagues, and athletes — who maybe shouldn’t have been involved with a questionable nascent technologies — into ending deals, including the Miami Heat dropping FTX as its arena sponsor.



State of the sports card boom: After sky-high surge, is market still healthy?

In a shocker this week, Fanatics Inc. billionaire owner and sports entrepreneur Michael Rubin reportedly is selling his 60-percent controlling equity stake in NFT maker Candy Digital, which has an MLB licensing deal, to a crypto banker.

“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” CNBC reported Rubin as telling employees in an email. “Aside from physical collectibles (trading cards) driving 99 percent of the business, we believe digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors.”

Fanatics bought venerable trading card giant Topps Inc. a year ago, inheriting its small NFT arm that competes with Candy Digital and Dapper Labs.

What’s happened with Dapper Labs is part of a wider NFT industry trend. A report from that tracks the NFT industry wasn’t exactly brimming with positive results about the pace of sales — the third quarter of last year saw $450 million in NFT sale losses, the first time any quarter has had a financial loss, the site reported.

So how did we get here?

Financial advisor Jamie Catherwood, who specializes in the study of historic asset bubbles and finance history, said NFTs collapsed because it got harder for casual buyers to find profits.

“By and large, I think it’s a function of it’s not easy to make money anymore,” he said. “(At the beginning,) you could buy anything (digital) with your eyes closed, and more often than not you could sell it and make money.”

Like some experts and laymen watching NFTs erupt two years ago, he was skeptical the boom would last, but he also said a more sustainable NFT market of some sort will endure after the initial hysteria passes. What that looks like is far from known today and will require tinkering and development to find the bedrock benefits to retail non-fungible tokens.

“It was just so ridiculous at its height in 2021,” Catherwood said. “I think there is still something there that will be the second wave. I think there will be some core features that will be around for a while.”

Catherwood doesn’t think collectible NFTs, even with a wave of government regulations, will return to their 2021 sales volumes, although he expects additional consumer protections to bring in fresh institutional investment that provides credibility.

“It’s hard for me to envision a catalyst for what rebounds the market to something like what it was at its height,” he said.

A company like Dapper Labs may continue to motor along making nice profits for a long time without running afoul of regulators or the wider public, relying on collectors rather than speculators but without the enormous sales volumes of two years ago.

The court of public opinion also will continue to play a major role in the future of NFTs and digital assets. While what’s occurred with FTX and other companies is separate from Dapper Labs, the public often lumps digital technology firms (especially when equally complex) into a single problematic category that’s hard for individual players to emerge unscathed.

“The hype is down; we all know that,” said Merav Ozair, a fintech professor and consultant who is a go-to expert on crypto and blockchain technology. “The problem with this space is one bad things happens, it poisons the basket. People put them all together. People don’t know how to differentiate.”

That’s frustrating and requires education to help the public overcome any trepidation, particularly when a major company collapses Enron-style and fuels a typhoon of bad headlines.

Government regulation of the digital assets industry, particularly cryptocurrencies and exchanges, also will be a major step towards regaining public confidence.

“Regulation is coming, and that’s a good thing,” Ozair said. “That will put things into perspective and bring more confidence in the market. It will bring in more traditional investors. That’s a good thing that will come out of this.”

(Photo: Ric Tapia / Icon Sportswire via Getty Images)

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