Sports NFT offers changing after market headwinds – Sportico.com

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Two years after launching NFTs into the sports industry’s consciousness, Dapper Labs has so far had a challenging 2023. The company has laid off 20% of its staff for the second time in four months, lost executives including its chief business officer, and dealt with legal issues over whether its digital collectibles should be treated as securities.

In addition, the company has discussed a possible restructuring of its licensing agreement with the NFL and NFLPA, according to several people familiar with ongoing talks who spoke on condition of anonymity because they were not authorized to discuss the situation publicly.

And Dapper is not alone; such conversations have become common, insiders said, as NFT brands try to change the nature of their obligations to leagues and players’ associations. DraftKings has also brought the NFLPA back to the negotiating table for its Reignmakers product. Sorare is seeking new terms for its MLB and MLBPA agreements, and it has also been in talks with partners at MLS and MLSPA.

The existence of these negotiations signals two things: an acknowledgment of a changing landscape – once again – for crypto collectibles, and a continued commitment to the category by at least some sports executives.

Typical league-level NFT licensing agreements in the wake of NBA Top Shot’s success centered around revenue-sharing agreements with built-in minimum guarantees for the rights holders. As several companies competed for those rights, some annual minimum guarantees pushed past $10 million, according to executives involved in the negotiations who asked not to be identified.

As part of the current renegotiation discussions, those guarantees could be cut in half or more in certain situations, according to conversations with a handful of executives involved in those discussions for NFT companies, leagues and players’ associations. In exchange, leagues and PAs may be able to negotiate equity stakes in the underlying companies or a higher percentage of additional revenue in the event sales numbers pick up. One advantage NFT companies have in the back and forth: There don’t seem to be any newcomers aggressively seeking new partners.

A league executive said they weren’t shocked to be back discussing their deal so soon after NFTs emerged — it’s always a possibility when deals come together in new categories.

While any updates to the NBA’s partnership will likely come during the offseason, the league’s role in creating NFT excitement has also made it a critical barometer for the market in general. Since October, NBA Top Shot has seen relatively flat secondary market sales of about $3 million per month, according to CryptoSlam! data. That’s down from close to $30 million in March 2022 and $208 million in March 2021, which was Top Shot’s second biggest month ever. Meanwhile, the platform’s number of unique buyers in the secondary market fell below 10,000 in March for the first time since 2020.

Last week, Crypto slime! the rain 3,751 unique buyers on Top Shot’s marketplace, while Sorare’s NBA games courted 3,142 such customers. First-party sales data is not publicly available for any of the platforms.

In total, Sorare has registered more than 3.5 million users. Last year it said 85% of the people who played the MLB game did so from outside the US. It added 615,000 users in the first quarter of 2023.

As Sorare attempts to update its agreements with MLB and MLB Players Inc., it is still building the track for fans. This year, the game added cash prizes (in the form of cryptocurrencies), a popular feature of the soccer offering that makes the competition a closer competitor to real-money fantasy sports. It has also added Juan Soto and Julio Rodriguez as company ambassadors.

Similarly, Dapper Labs has focused on improving the mobile experience for collectors. It has also teased the launch of products linked to “two new major global IPs”, although it is unclear whether they will be sports-related.

Fanatics has taken the most public step back from crypto collectibles, selling most of its 60% stake in Candy Digital in January. “Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” Fanatics CEO Michael Rubin wrote at the time.

Candy, for its part, has continued to release MLB products, with an emphasis on its digital ticket program this year. Fans redeemed approximately 200,000 NFT commemorative tickets last season. “The tourists are gone, and the settlers are here to keep building,” Candy CEO Scott Lawin said in March.

DraftKings executives did not mention their web3 efforts in February’s earnings release after citing “headwinds from the Reignmakers NFT product” late last quarter. However, they recently launched a new golf product under the Reignmakers brand, with competitions starting last month.

Other previously announced platforms, such as an Autograph-built PGA product and an overarching NHL offering from Sweet, have yet to announce launch dates.