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DraftKings Reignmakers: The most Slept on Sports Web3 Project? Ft. DraftKings President Matt Kalish
DraftKings Reignmakers is now one of the most successful Sports NFT projects out there. How did they do it?
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In a bear market (like the one we’re currently in), if there’s no substance to your Web3 offering, it will trend to 0.
And if you look at monthly buyers on some of the biggest Web3 Sports platforms, the ones who have the most mature products and propositions are having the most success.
One of those, DraftKings Reignmakers, are a fantasy NFT game that was launched by DraftKings on May 17th 2022.
Just over a year later, they are one of the most successful Web3 sports products out there.
In this newsletter, I had the pleasure of interviewing DraftKings President of North America Matt Kalish about their journey in Web3.
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DraftKings Reignmakers: The Most Slept on Sports Web3 Project?
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Even though DraftKings were founded in 2012, many would view them as an incumbent organisation at this point.
Especially if you consider it from a Web3 lens, where scrappy startups or ‘Web3 native’ companies are the disruptors.
But 10 years isn’t a long time for any company, and in the US market, DraftKings have taken advantage of their relatively new and robust tech stack to move nimbly enough to launch a Web3 product that has generated some incredibly impressive numbers:
This newsletter covers:
👾 What DraftKings Reignmakers is
🔢 The numbers behind their success
⛓️ Why DraftKings decided to create a blockchain-based proposition
📉 How the market impacted their development
🧠 Concluding thoughts
👾 What is DraftKings Reignmakers
DraftKings Reignmakers allows players to build a collection of NFT player cards through pack drops, auctions, and a secondary marketplace, that you can use in fantasy gaming lineups.
Upon signing up you can claim a free pack that have NFTs inside them, and once players have collected enough NFTs, they can use them to construct daily fantasy lineups.
All Reignmakers (RM) player card digital collectibles are on the Polygon blockchain, and players can collect athletes across their three verticals, RM Football, PGA Tour and UFC respectively.
Each player card NFT represents an athlete and scores points based on the player’s statistical performance in a given event or game. They are also accompanied by a card rarity ranging from five tiers: core, rare, elite, legendary and Reignmaker.
The rarity determines the scarcity of the card and which contests you can enter with that card. For example, 4 rare cards are required to enter a rare-tier contest. The contests themselves reward players with cash and player card prizes.
They also have collectible-led missions where people can unlock rewards through various collection-related achievements with their NFTs.
🔢 The numbers behind their success
Between the beginning of July and the beginning of September 2023, DraftKings Reignmakers was the 3rd largest digital collectibles project across all blockchains.
In that timeframe, it actually outperformed the total digital collectibles volume of every other blockchain, not inclusive of Ethereum and Polygon.
That’s right, in that period DraftKings Reignmakers as a project outperformed the total volume on every other blockchain, not including Ethereum and Polygon, that came from digital collectibles. Which is pretty incredible.
Between February 2023 and September 22 2023, unique monthly buyers have grown from 6,437 → almost 25,000 monthly.
Total monthly transactions have more than doubled from 255,479 → to 722,546 in August 2023 and in September they have seen 566,513 so far.
The monthly sales volume (primary + secondary total) has gone from $4.725m in February 2023 —> to $18m+ in August 2023 and so far in September 2023 (as of the 22nd) they have accumulated $13.5m+ in monthly volume.
And in these market conditions, ‘impressive’ is underselling how well this has gone for DraftKings.
Retail interest in NFTs has waned over the last 2 years and is at a 2 year low.
In terms of weekly numbers, April 2022 saw $1 billion in volume for all NFTs which is now down to $60m in Sept 2023, comparatively.
The fact that DraftKings Reignmakers is growing so explosively in a market that has dropped 90% in terms of weekly volume in the last ~18 months, is pretty good going.
⛓️ Why did DraftKings decide to create a blockchain-based proposition?
DraftKings is a successful, growing business.
They saw Monthly Unique Users grow 31% year-on-year in Q4 2022, with revenue coming in at $855m, an increase of 81% compared to $473m during the same period in 2021.
So why create Reignmakers, a digital collectible fantasy game by DraftKings?
Further to that, why launch something after the ‘bubble had burst’?
Matt Kalish, President of DraftKings North America, referenced DraftKing’s nimble nature and robust tech stack as something that allowed them to move quickly and create a proposition that their users would enjoy.
He also references a huge overlap in their consumers with those buying sports NFTs as a big reason for their pursuit:
“Because DraftKings launched in 2012, most of our technology is quite modern and we don’t feel like we're inhibited by decades old technology systems, like a lot of big companies maybe feel like they are.
During the COVID lockdown we saw a lot of prevalence around digital collectibles within our audience in terms of where attention was going. It was a movement and something that we saw our customers were spending a lot of time on, learning about and using.
While blockchain generically is cool tech, the use cases for DraftKings early on were much more around how could this apply to our business. We saw it as digital collectibles, primarily around building utility-driven games using those digital collectibles, within our core business of fantasy sports or sports betting”
The Covid pandemic certainly saw a lot of consumers turn to crypto or digital collectibles as a hobby or area of interest.
And in sports, we had the NBA Top Shot frenzy which was the first real mainstreaming we’ve seen of NFTs altogether.
It’s probably the project that has had the greatest impact on consumer crypto to date and also clearly had an impact on the way businesses viewed digital assets at the time.
In DraftKings’ case, it was about creating a proposition that aligned with their core audience and combining it with the collectible nature of NFTs, whilst also attracting new audiences that are interested in collectables such as physical sports cards
From a tech perspective, Kalish references a few different problems in the physical collectible market that blockchain is a great solution:
“When you're buying and selling sports cards, it's really hard to know what the pricing history is. You might buy it on eBay, but how do you know what the 15 sales were on the same card and the history of that card, or the provenance of it? It's very hard to actually track even for things that are very valuable. You'll go to a high-end auction house, and they say they have LOIs from a ball boy of the Chicago Bulls in a game that Michael Jordan played in, and they’re saying that Michael Jordan gave him this basketball and signed it. And then people are trying to ascertain whether that is legitimate provenance…Then they bid based on how strong they think that is.
In the case of a blockchain, there’s perfect evidence of everything. Every single transaction and the entire history are meticulously tracked. The trades are instantaneous. If I want to sell something, I can do it in one minute. It's gone. And then I have that money. I’m not shipping anything to anyone. So there are a lot of amazing blockchain benefits that are perfect for Reignmakers.
And then there's just some aspects that haven't yet been needed or haven't yet been clear as to what it would add to the game. So I think we're trying to take the aspects that make sense. And then over time as things develop, like the decentralization and the portability parts for example - those things hasn't been big use cases for our game yet, but we're prepared for the future, and prepared to use those aspects when needed.”
The provenance and near-instantaneous settlement nature of blockchain technology referenced by Matt is really interesting, as is the idea that not using every aspect of what makes a blockchain special.
A lot of businesses get bogged down with the idea that they have to use every attribute a blockchain brings at the very start of their journey, which just isn’t the case. You can definitely create a successful proposition by using specific properties that only a blockchain can allow.
And for a big business like DraftKings, you have to be tactical about how you launch something like Reignmakers that is part of such a nascent market. Both from a tech and business perspective.
Kalish describes Reignmakers as a startup within the company, and compares the complexity of the Reignmakers game to FIFA (now EA) Ultimate Team:
"I feel like it's a startup within the company.
It's a seed of what I hope is an amazing product over the course of time.
The game is deep, it's not easily mastered, it takes some time and investment to learn. I would compare it to something like Madden Ultimate Team or FIFA Ultimate Team. You're not gonna pick up the game and be the best player in the worlds straightaway, and you're not going have the best Ultimate Team collection.”
Ultimate Team was first introduced to the FIFA gaming franchise by EA in 2009 and first became free to play in 2011. 10 years later, FIFA’s ultimate team generated $1.62B in revenue for 2021 accounting for 53% of EA’s total extra content revenue for the year.
Once you add the fact that the game is not easy to just pick up and play, the unique users that Reignmakers has been able to attract are even more impressive. It shows that, regardless of complexity, if you create something that users really want to participate in — they will fight through that friction.
Whilst Kalish admits that it’s not possible for every project to ‘win’ or match the journey that Ultimate Team has taken for EA— there’s a seriousness within DraftKings when it comes to Web3.
They only launch projects when they see great upside in something and execute at a level that has enough energy and effort to generate that potential upside:
Every project doesn't win. But you want to believe if you build a successful game, that it has that kind of potential, and that's how DraftKings thinks; if it doesn't have that kind of upside, we're not going to be doing it. And I think that says something about how we view the category, how we view the game and the potential of it. It should have that kind of upside to be worth the energy and effort that we're putting into it. And we believe that.
Interviewing an exec in September 2023 and hearing that is quite refreshing.
The sensationalist headlines we’re seeing about the death of Web3 and crypto are a far cry from how some of the biggest businesses globally, across various industries, are operating in this space.
DraftKings have created a ‘startup’ within their business and they really do believe that the upside is there to have a substantial impact on their company. There is a disruptive entrepreneurial culture within a business that has 3000+ employees.
In terms of the make-up of their users, Kalish references an ‘inside out’ model that they’ve used to create a core audience, that started with existing DraftKings users, but also says they’ve seen interest from physical collectible enthusiasts, magic the gathering players and more that have layered on top that core audience:
“For the most part, with new products, we do an inside out.
We look to satisfy and please our core user, and then go from there. Immediately our focus is to prove the market fit of Reignmakers with our core users. So that's really the essence of our strategy with everything we do. Prove the concept, build it out, and make sure users are pleased and happy with what we're doing.
Then you try to go big.
There are lots of different pockets of interest layered on top of our existing DraftKings userbase. We've seen interest from sports card collectors, who like opening packs, for example. We're really trying to find the fit where this could be FIFA Ultimate Team Plus + fantasy + Magic The Gathering — the combination of everything people love amongst those worlds is really the dream.”
The ‘startup’ approach internally and quickly finding an MVP to get into the hands of their users has clearly paid dividends considering the success they’ve seen.
To go from 0 —> 25,000 monthly unique buyers in just over 12 months is again a testament to that scrappy, nimble mentality that has been generated internally.
📉 How has the market impacted their development?
The Macro environment and crypto market have both been unkind to people building Web3 propositions.
Valuations are lower, investment is harder to come by and consumers are less interested and have less expendable income.
But DraftKings are in a position where they can build while others struggle to survive:
“We're in a good spot in the sense that we have a core business that's doing very well. Even if the markets were kind of up and down, or maybe investor interest on the VC side went from Infinite to zero, we're not relying on that kind of thing. That means we’re able to create a lot of stability for the team working on it, they make their plan and execute it. I think that kind of environment in a tough market is helpful.
I definitely think it also it's a good time to be building when every single deal out there isn't going for astronomical valuations. When I was thinking back to some businesses raising money at $4 billion, $7 billion, or $10 billion , $20 billion, it was crazy and there was so much access to capital. It makes me wonder how somebody small could ever start something or compete against a16z-funded monster startups. In a market like this, though, I feel like there's a lot of lot more parity, there's a lot more equity between the companies.
And I think the best ideas will win and good teams will have a better opportunity to get a foothold and prove your concept and get a little momentum”
As I wrote at the top of the newsletter → bear markets are very good at separating the speculative, bubbly propositions from the ones that will actually create business models that last.
The best propositions for the most part are built in these down markets.
The parity we’re seeing that Matt referenced forces people to create propositions in Web3 that fans and consumers actually want.
🧠 Concluding thoughts
The NFT market has changed dramatically over the past 18 months.
We've gone from an incredibly frothy, speculative market that was driven by hype and FOMO both from the consumer side and also by brands. Many of these brands didn't know what they were doing and fueled a digital gold rush, creating propositions that their customers or fans had no interest in. The brands that have stuck around since the market crash, and are building propositions that have tangible use cases and business models, as well as genuine demand beyond speculation, are in a far better position.
Whether this is a fantasy game like DraftKings Reignmakers, digital collectibles that consumers simply want to own online, a piece of digital art that someone wants to collect, or even an avatar profile picture in Reddit’s case — we’re seeing a maturation process where people are creating propositions that have staying power.
The things being built are servicing a more mainstream and less speculative audience.
Most of the propositions we've seen in the NFT landscape up until now have been 90% speculation and 10% substance.
That has to flip to 90% substance and 10% Speculation.
Of course, within any market where there's seamless trading and liquidity available like in digital assets, there's always going to be some speculation, but that has to be a smaller portion of the value proposition within the NFT market.
With Reignmakers, they are in a great position whereby there is no immediate pressure to make revenue to survive.
They are within a big organisation that wants to see growth using nascent technology that attracts new audiences. They are driven by a startup mentality internally with Reignmakers and looking to somewhat disrupt themselves.
I like the fact that they're using aspects of blockchain that they think are pivotal to their proposition and not necessarily using blockchain for blockchain's sake. This again is where many brands failed during the hype cycle we saw 18 months ago. There were a lot of propositions and projects that simply didn't require a blockchain or used every characteristic of a blockchain without needing it.
Reignmakers started with an MVP that has attracted 10s of 1000s of users already just over 12 months after launching. That in itself is really impressive, especially in this market.
They're in a position now where they can slowly broaden their audience as they develop the product in this bear market. I think it's also a great opportunity to cross-sell into their other products. There's probably a big overlap between people playing DraftKings Reignmakers and competing in DraftKings contests already and so there's a there's a good opportunity to cross-pollinate eventually.
This period that they're building in means that if/when the market picks up again, they'll be in a good position to take on a more mainstream audience at a time when their product is more mature.
NFTs are dead, until their not, is seemingly the headline every week now.
DraftKings and a load of other huge brands are doubling down. There’s never been a bigger disparity in crypto between what the headlines are telling us and what we’re seeing being built.
The next 18-24 months are probably going to be the most interesting in crypto’s history for this reason.
💡 Sporting Crypto Spotlight - Ep. 5 of the Podcast!
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