“How to make $4 million overnight”: The complicated world of the All Blacks and digital art

It was only two years ago that sports teams, leagues and international superstars were being told that they could get rich quick if they were early adopters of non-fungible tokens.

Predictions were like sports
was supposed to be at the forefront of a digital revolution that would be akin to a modern gold rush, as the revenue opportunities associated with NFTs were supposedly almost unimaginable.

For the uninitiated, NFTs are non-fungible digital assets stored on a blockchain, giving them a unique proof of ownership that can be verified and authenticated regardless of the platform they are hosted on.

The excitement of sports was that it would be able to produce collectibles, digital art – video and audio clips, and images of iconic moments, players and events – that could be exchanged between fans.

And for a period the market flourished. The NBA was one of the first major organizations to embrace NFTs and the Top Shot collection – licensed video clips of big moments – earned US$700 million in sales less than a year after its launch in late 2020.

New Zealand Cricket was another to cash in early when it last year sold its NFT rights for $25 million to Dream Sports, while the success of Wimbledon’s Centenary Edition and the NFL’s Arena Club led major accountancy firm Deloitte to predict that NFTs would net US sports market around 2 billion dollars in revenue in 2022.

But for all the optimistic growth forecasts made at the end of 2021, values ​​collapsed in the second half of 2022.

Some individual items sold for $200,000 in 2021, but a year later, it was estimated that most NBA Top Shots traded for about 10 percent of what they were originally purchased for, and in February 2021 sales peaked at $224 million dollars, but in February this year they stood at 2.8 million dollars.

Confidence in the digital asset industry has been further damaged by the collapse of cryptocurrency exchange FTX and Silicon Valley Bank, which provided funding to many involved in new technologies, and with the value of NFTs 97 percent lower than a year ago, predictions of what digital art that collects can be worth to the sports industry seems to have been grossly overestimated.

Certainly, the pendulum has swung over the last 18 months to suggest that a growing number of fans and investment experts believe NFTs are a sham masquerading as an opportunity.

New Zealand Rugby also appeared to be an early skeptic, as NFTs were a notable omission when it identified potential new business streams in 2021 that it would look to develop in partnership with US fund manager Silver Lake.

The national body listed executive coaching ($33.5m), All Blacks clinics ($14.1m), eSports ($6.3m), virtual signage ($10.8m), merchandise ($3.4m ), e-commerce/social selling ($26.9) and an OTT broadcast platform ($20.4 million) as the seven ways it can earn $115 million over the next five years.

The fact that NZR have steered clear – apart from a $30,000 investment it made in buying 33 NFTs from an online community called World of Women during last year’s World Cup to support the Black Ferns – suggests they don’t think they will show to be a viable, long-term source of income.

But it would be more accurate to say that NZR is specifically a collectable, digital art skeptic.

The broader concept of NFTs has significant appeal to the national body and its investment partner Silver Lake.

Both parties can see the value in blockchain technology and the opportunity that proof of ownership and perpetual royalties present, and while collectible art may turn out to be a scam in the long run, NFTs linked to loyalty programs, unique experience and unprecedented access to the athletes could be the most valuable revenue stream in NZR’s future commercial portfolio.

OIf all the new potential business areas end up being explored in collaboration with Silver Lake, it is possible that NFTs will become the only revenue stream justifying NZR’s decision to sell a stake to the US firm.

Richard Thomas, who is interim chief executive of New Zealand Rugby Commercial, the unit set up to manage NZR’s commercial growth, agrees NFTs will be a significant part of the national body’s financial future, but he does not want to know how big before they have drawn up a sustainable business plan.

“NFTs have a role in our future, but we’re not fully developed on that yet,” says Thomas.

– We have been looking at it for a while. We primarily want to approach NFTs from a fan-first perspective, so we think there’s a risk that anything that’s been going on in this general area has been a purse strings and perhaps put the fans a little way down the priority list .

“We are concerned that whatever we do, we try to put the fans at the center. We don’t want to be a flash in the pan. We want to do it right and we don’t want to create a situation where our fans are on the receiving end of a negative experience. We have to be well prepared.”

What also deterred NZR from jumping on the NFT train for bundled content are the complications surrounding intellectual property ownership.

The NBA is the sole and undisputed owner of its archival, broadcast footage and is therefore able to monetize the sale of historic moments with relative ease.

The situation in New Zealand is more complex when it comes to rugby’s archive footage, as it is not clear who owns it.

Without clarity, it has proved too difficult to agree how the revenue should be shared between NZR, Sky TV and the athletes, and so even if there is a rise in the values ​​of collectable, digital art, this is not a path NZR is likely to take . to exploit.

“The first question is why are you doing it and what is the fan getting,” says Thomas.

“The other question is IP. If we’re honest, it continues to be a challenge to work through. We’re trying to understand whose IP is what? How do we protect our IP and given that there can be multiple IP owners in any situation , how do the ads work for it.

“You can see situations where people are trying to create new ideas that don’t have any of the IP links of the past.”

When NZR commits to an NFT strategy, it is likely to be aimed at building fan engagement and rewarding brand loyalty, with initiatives sold at a range of price points to suit all budgets.

Sam Jenkins, who is head of sport at Glorious – the New Zealand-based NFT studio and marketplace co-founded by Daniel Carter and won a commission to produce the collectible digital series for Wimbledon – says: “I could go to NZR tomorrow and say, ‘I can make you $4 million with this new product called start-XV.

“This is a lifetime NFT membership of the All Blacks. It gives you the best seats in the house for every All Blacks Test in perpetuity, you get access to training sessions, to some players, if you want to get your local school a signed jersey, someone at NZR will arrange that.

“You can sell one to 15 for $250,000 each to high net worth individuals who are huge All Blacks fans or businesses.”

Jenkins says these types of exclusive packages can be tailored to fit any budget, with for example 10,000 to 100,000 memberships available at $100 each, giving the owner discounts on merchandise, better access to test tickets, exclusive video content from players and automatic entry into the prize pool pulls.

Jenkins says other ideas likely to be developed will be the creation of metaverse properties and proof of attendance protocols.

“If you look at our lives over the last 20 years, we’ve moved to a digital life naturally.

“Work has gone from factories to laptops and zooms and friends have gone from your neighbors to your followers and kids are playing Fortnite instead of actual sports and it’s almost like it’s just happened over 20 years.

“I feel like the metaverse is the time where your online identity is more important than your real life identity. The black jersey is one of the most iconic in sports, owning an NFT of the black jersey can be more important than owning it in real life. Every year NZR can release 100 NFT jerseys and you can keep it, wear it in the metaverse, trade it or maybe you burn it and Adidas sends you the limited edition jersey.

“If I’m an All Blacks fan and I go to the World Cup final, imagine taking a picture and a few hours later you get a proof of attendance record with your picture saying I was here and you had it as a digital remind.”

It’s easy to understand why there are and will continue to be NFT skeptics, given the boom-bust nature of the first wave of collectibles.

It’s also a generational divide, and the virtual world is a happy and natural place for younger, digital natives and anathema to those who didn’t grow up with a smartphone.

But for early adopters like Jenkins, there is no doubt that NFTs have the ability to generate NZR a viable and possibly huge revenue stream.

“The All Blacks brand is powerful and they will get a call within the hour from the top platforms in the US and Europe because everyone knows who the All Blacks are,” says Jenkins.

“NZR doesn’t need to reinvent the technology, they just need to partner with the best platforms and technology teams and figure out commercially how to grow the pie and everyone wins.

“There will be a tipping point where it becomes mainstream and I think a little bit of what’s out there now is probably a fad, but long to medium term I’m sure Web3 is going to be the next internet really.

“By the end of the decade, they should be making more in Web3 revenue than they are in sponsorship and broadcasting. I just hope they don’t blow it because they could set the game up for the next 30 to 50 years if they get this right.”