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For Free or not for Free?
Over the past 12 months we've seen a shift to a 'free to play' model in sports x Web3. Is this shift to 'engagement' long overdue or a temporary market driven move?
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Last week I posted on LinkedIn about sports Web3 projects moving from being commercially oriented to engagement-first.
The reaction was broadly positive from people who agreed that they are seeing a more engagement-first approach, but there were some who disagreed.
The reality is, there’s no right answer because Web3, crypto, blockchain — whatever buzzword you go by is a technology, so there’s no ‘one size fits all’ approach.
It’s easier to write an essay or newsletter about the subject than go back and forth on LinkedIn - so that’s what I’m doing in this post!
I didn’t expect to do this much writing on my birthday… so hopefully some of you can make it to the very end and share your thoughts to make it worthwhile.
🔌 PS. If you’re hiring for any interesting roles in sports, entertainment, gaming or media that touch Web3 - please email me back at this email address! I’m creating something cool I’d love you to be a part of :)
For Free or not for Free?
Should your Web3 activities make you money in sports?
That’s the, quite literally, multi, multi-million dollar question. If not billion, depending on which consultancy’s projections you’re relying on.
I’ve had conversations with sports brands in the past who have literally said the following:
We saw Beeple sell an NFT for $69m, how do we do something similar?
Which of course in hindsight, is an insane thing to say. But at the time, you could forgive them for misunderstanding what NFTs or digital art were. And there was this presumption that because they had a big brand, it was a guarantee that they would make money from leveraging their IP.
This has obviously not been the case.
✍️ In this newsletter, I cover:
Revenue-generating Web3 Sports projects
The IP wars and how they’ve impacted sports Web3 strategies
Are free Web3 activations actually free and how well have they gone?
Is this too ‘Web2’
💰 1. Revenue-generating Web3 Sports projects
Let’s set the scene and add some context.
To do this, let’s look at what sports Web3 projects are actually generating revenue.
At the moment, this is mostly businesses or platforms that are either:
1) Buying premium IP and leveraging it (Sorare, Dapper etc.)
2) Bidding for IP with projected % of revenues, most of which usually fall short (Agencies and tech vendors)
Sorare for example are still generating 7 to low 8 figure volumes in sales on a monthly basis.
FLOW blockchain projects like FanCraze Cricket, NBA Top Shot and NFL ALL DAY are also generating relatively strong volumes, albeit from small audience figures.
These are, however, incredibly well-capitalised businesses that have signed mammoth rights deals with the most valuable IP in sport. And they have large communities with good momentum and propositions that sports fans clearly like.
In this scenario, for the most part, the platform, rights holder and users are all satisfied. The former two are making money and the latter is enjoying the proposition.
But this landscape has followed what we’ve seen with the physical collectables market — where there are few, very big behemoths who dominate the license bidding process and are sometimes even willing to buy these as a loss leader to ensure a monopoly share of the market.
The agencies and vendors, for the most part, are pitching teams and brands ideas for a cut of revenue. Most of these businesses, in my opinion, won’t last for long — especially if they are pitching direct-to-consumer offerings to teams specifically, or to athletes.
⚔️ 2. The IP wars and how they’ve impacted sports Web3 strategies
2023 was kicked off with a bombshell of a headline.
Michael Rubin and his company Fanatics announced that they’d be divesting its 60% stake in Candy Digital — stating:
“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,”
And to be honest, whether you think he’s right or wrong — Candy Digital was a big bet that Rubin didn’t feel comfortable with. Fanatics had also just raised $700m, so presumably Rubin’s decision was also driven by prioritisation.
On the other hand, we know that Panini are taking Web3 seriously — as they push forward with NFTs as a strong part of their offering even with the crypto and collectable markets in pain over the last 12 months.
Beyond that, we saw The National Hockey League (NHL) and Sweet join forces to offer video moment NFTs — where Dapper Labs are the outright leaders when it comes to that niche. Many saw this as a surprise, expecting Dapper to just continue scooping up the biggest and most valuable IPs in sport. That wasn’t to be, and the NHL have another vendor in Sweet.
So this ‘battle’ for IP in the sports industry has well and truly begun as big vendors start to move their chess pieces across the board.
But realistically, this is a small market that essentially creates the following:
The same dynamics we see with likes of Fanatics and Panini etc. but this time within subsections of Web3 (Fantasy, Video moments etc.)
It gives less leverage to the IP holders because they’ve seen that going direct to the consumer often doesn’t work if it’s too commercially oriented.
Eventually, the bigger fish come to play — the likes of Amazon, Apple, Disney etc. will be at the negotiating table for some of these rights, this decade in my opinion.
I was asked last month by someone at a large Web3 business what they would do with the talent they had on their roster from an IP perspective: “Do you know anyone looking to leverage athlete rights in [redacted] category?”
Clearly, a lot of these businesses that have promised big cheques to athletes or brands are struggling to find buyers — because there just aren’t that many around.
🤔 3. Are free Web3 activations actually free and how well have they gone?
So if you’re not selling your IP to the highest bidder, what are you doing?
We’ve seen a lot of sports teams, leagues or brands go direct to consumer more in the past 5 years with content — Web3 is one area where that hasn’t been as successful.
Within 9 months, we went from Liverpool trying to sell almost 200k NFTs to their fanbase — to Manchester United, the largest football brand in the world giving away almost 1m NFTs on the Tezos blockchain to their fans. They then sold 7,777 NFTs for $30 each off the back of it to create a digital fan club. That actually wasn’t too dissimilar a price to the Liverpool NFTs, but the Manchester United strategy was well thought out in comparison.
But of course, in this situation — Manchester United have the luxury of a big-money sponsor in Tezos facilitating a lot of this. And realistically, if it is a cost centre to them, which it undoubtedly is, the sponsorship covers the losses.
Now, we come to the post that sparked the idea to write this newsletter edition.
It was about Paris basketball and Polygon partnering with OxSequence to create free digital collectables for their fans.
Over 22,000 were claimed and the minting experience was seamless and slick.
Again, we have to ask, who paid for this?
Was it Paris Basketball or did Polygon offer free services for exposure?
There was some transactional element that of course didn’t make this ‘free’ but if we look that deeply into anything, nothing is really free, is it?
On the broadcasting front, we have seen B/R’s trivia game W2E have over 1 million claims, at about a 0.5% conversion from a spectator perspective — which you can read about more in last week’s Sporting Crypto below:
When Esports team 100Thieves launched their 2022 championship chain NFT, almost 800,000 of them were claimed on Polygon.
Clearly, the uptake in free NFTs is strong across sports — and this time the success isn’t exclusive to the huge, tier 1 operators. The smaller communities that have fewer fans, but equally passionate ones, are seeing great uptake also. Another example is McLaren Racing, having almost 1 million NFT claims from 5 drops, one at every race.
So if we leave the question “Who foots the bill?” for a second, the important thing to discuss is; what is the strategy here?
Not necessarily a business model — because — as we’ve seen the objective can be PR or an engagement proposition.
But what will sports brands do from here on in?
🌐 4. Is this too Web2?
One of the rebuttals I was faced with regarding my thoughts on the trend we’re seeing where sports brands have started treating Web3 like they do social media, was along the lines of: “that this will mean that sports business models will not change any time soon — and that Web3 is about community which offers an entirely new way of creating value exchange.”
My frank rebuttal to that is that if the value exchange mentioned is sports engaging in models with fan tokens that simply make no sense or creating quick cash-grab NFT projects, then this path is far, far better. Whether it’s as ‘innovative’ or not is another story.
The reality is, some of the more ‘purist’ Web3 ideals of decentralised governance and such are all but impossible in incumbent sports leagues or teams.
This is why greenfield, smaller and more nimble properties are more interesting in this regard.
It’s why, whilst there are so many crazy ideas out there — when you look at the likes of LinksDAO, Krause House and Karate Combat — there are few that are executing at the level required to make a significant mark on the industry.
The next wave of phygital, co-creation, loyalty and such may create new ways of monetising fandom and consumers, or they’ll simply be a way to cross-sell into existing channels that sports brands, leagues and teams more regularly monetise using.
The reality is where the incumbent properties and greenfield players converge in terms of innovation may disappoint us, but the reality is innovating at organisations that have long-term broadcasting, stadium and sponsorship deals is difficult.
What Pickleball can do as a sport or league is very different to Wimbledon.
What the incumbents do however have is mass scale. And if they can get light touch activation that paves the way for their activities in this space, and grow into it, that probably seems the best course of action.
🧠 Concluding thoughts
There’s no right answer to whether you should or shouldn’t make money when it comes to your Web3 strategy.
But we’re in this incredibly interesting period where the likes of Nike, Reddit, Adidas and such double down on their Web3 strategies - many in the industry are still trying to figure their own strategy out. All whilst the economy is in the worst state we’ve seen in 15 years, and crypto and tech markets are down.
Remembering the direction of travel rather than where this Web3 thing ends up in absolute terms is the most important thing to do.
Roblox sold $774m worth of Robux in Q1 2023.
The biggest brands in the world are all working hard to future-proof their businesses.
From a sports perspective we have this set up where the larger IPs will be leveraged in a much more similar way to Web2 counterparts than many will have hoped. But greenfield, smaller leagues who have passionate fanbases, next gen sports, Web3 native sports communities, IP-less projects like GOALS — all have a shot at making significant impacts.
All the while incumbent teams, leagues and federations begin to figure out director-to-fan models.
How this all plays out is difficult to predict exactly, but it’s exciting and there’s an abundance of opportunities.
More Sports & Web3 Stories
Warner Bros. Discovery Sports’ event division partners with Nexthash to launch NFT collections (Link)
Slam Dunking into the Future: Krause House and the First Fan-Governed NBA Team (Link)
NBA Top Shot have pushed on the accelerator on pack sales over the last 3 months (Link)
Sorare have launched a collector mode on their platform which encourages users to collect entire teams (Link)
Why Spider-Man Is Swinging Into Soccer Stadiums Via Fan Token Maker Socios (Link)
Degenz NFT are launching a fantasy game (Link)
Manchester City and Ready Player Me have created 3D avatars using OKX branding (Link)
General ‘Stuff’ that Could Impact You
Web3 Gaming raises since 2021… courtesy of Jon Jordan’s GamesTX newsletters
Tim Sweeney jabs at Bussiness Insider’s ‘RIP Metaverse’ article
Binance Leaving Canada, Market ‘No Longer Tenable’ for Exchange (Link)
Epic Games invest in digital fashion company (Link)
Super League acquires metaverse experience developer Melon (Link)
Marvel Studios Founding Chairman David Maisel Is Plotting a New Universe (Link)
Reddit have onboarded more NFT users than OpenSea and ETH NFTs combined (Link)
5 Things Every Web3 gaming studio should consider (Link)
The most well funded Web3 game to date, Illuvium, is hosting a live gameplay trailer on the 18th of May (Link)
MLS and AI.IO have partnered to give Give All Soccer Players an Opportunity to be Analyzed, Scored, Rated and Seen by Scouts from MLS, MLS NEXT Pro and MLS NEXT (Link)
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