In a quote made famous by basketball legend Michael Jordan, it’s said that “you only make the shots you’re willing to miss.” It seems apt, therefore, that one of the biggest digital media long shots of recent times is centred on basketball and is currently paying off big time.
At Yard, we’re always interested in tracking the latest developments in the wide world of digital media, and a new NBA highlight marketplace is definitely one that has caught our collective eye. The NBA, with annual revenue of over $8bn in both 2018 and 2019, is a huge industry in and of itself, but this latest partnership offers even more value.
NBA Top Shot, an invention of Canadian blockchain company Dapper Labs, allows users to purchase, sell and trade a digital collection of highlights, known on the platform as Top Shot Moments, that they can then add to their personal collection. The highlights are offered as NFTs, short for non-fungible tokens, and are a prime example of the rapidly emerging market for trading in digital assets.
But what does it actually mean to ‘own’ a sports highlight?
Is the owner of the Top Shot Moment now the copyright holder for the original highlight? And if so, can they lodge a claim for remuneration any time this thundering dunk or mystifying no-look pass gets uploaded to YouTube, or played as part of a TV highlights package?
Well, no, they don’t actually own that highlight in the traditional sense. They’re not even the only one to own that highlight on the Top Shots platform. Some highlights see up to 150,000 of the same clip released to the marketplace, with the lowest serial numbers attracting the highest prices. More on that later.
The technical term for these assets is non-fungible tokens, which despite sounding like something your doctor might prescribe a cream for, is in fact the latest commodity sweeping the world of digital media.
WHAT ARE NFTS AND WHY DO THEY MATTER?
NFTs took on a new level of mainstream notoriety in early March when rock royalty Kings of Leon announced that they would be making their new album available for purchase as a non-fungible token.
Another high-profile NFT sale was the recent case of Twitter co-founder and CEO Jack Dorsey selling his first ever tweet as an NFT and fetching a price just in excess of $2.9m!
But what exactly is a non-fungible token?
It might be easiest to first look at what a fungible token is. Fungible, derived from a Latin phrase that means “to serve in place of” refers to goods that are mutually interchangeable, able to replaced by an identical item. The most famous fungible tokens in the mainstream at present are cryptocurrencies.
NFTs, therefore, are not interchangeable, as in theory they are unique and each hold their own specific value. That’s easy enough to understand when it comes to a one-of-a-kind tweet. But didn’t we just cover that some of these NBA Top Shot highlights reach the marketplace in batches of up to 150,000 of the same clip? How can they be unique?
That’s where the serial number comes in. In a similar way to bank notes – where a serial number like 12345678 could make a note particularly valuable to collectors – a Top Shot Moment serial number marks each individual highlight with its own unique identifier.
That means that opening a Top Shot pack – we’ll get to that – and receiving the perfect combination of a sought-after highlight clip and prime serial number, can see the value of that highlight skyrocket. Just look at the recent sale of a Lebron James dunk, serial number #12, which changed hands for $208,000 in March.
While it is usually a case of the lower the serial number the better, there are some other factors. For example, any highlights of Greek-born NBA superstar Giannis Antetokounmpo with the serial number #34 will fetch a particularly high price, as this is his jersey number.
So, while a splashy album release or robot painting may get more mainstream press, it could be argued that NBA Top Shot, with over 800,000 registered members to date, is truly exploiting the potential of NFTs in the most impressive ways.
CREATING SCARCITY IN A WORLD OF ABUNDANCE
The real trick here, which speaks to the heart of marketing, is that Dapper Labs have managed to submit the supply and demand equilibrium to their will and create a perception that something previously available in abundance – sports highlights – is actually a rare and must-own commodity.
In many ways, it’s no different to trainers such as Yeezys or Balenciagas being released as limited editions, or motorway service stations selling bags of M&Ms and Doritos for four times what they cost in Tesco. If you can convince people that you’re their only option, you can charge a premium.
But how did NBA Top Shot create this idea of scarcity?
CUSTOMER EXPERIENCE AND GAMIFICATION
As someone who has recently signed up as a collector, I’d say that the level of excitement and engagement NBA Top Shot has generated comes down to offering an excellent customer experience – that, and the clever way that the platform has gamified the buying and trading of assets.
Once you sign up for the platform, you’re met by a colourful dashboard that looks very similar to many of the most popular video games of the moment. In addition to its visual impact, many of the platform’s features are designed to create the idea of a scarcity of assets and the perception that the user is being invited into an exclusive group. For example, their running of timed pack-release promotions, giving each user the opportunity to reserve a place on the list to buy a pack during certain weekly slots.
On signing up for the platform, I immediately reserved a spot for the next Base Set to be released, and once the deadline hit, I was able to purchase one pack – yes, only ONE PER USER – for $9.
On opening the pack, I ended up with three fairly non-descript Moments worth a combined $8 on the open market. But of course, I reserved a place on the list for the following week’s pack as soon as the reservations opened. After all, it’s surely worth a couple of rolls of the dice as I look to build my portfolio as an NBA Top Shot collector.
Another genius customer experience move they’ve applied is setting a series of challenges that allow users to receive special rewards and/or unlock the option to buy more premium packs. (These are packs that promise a greater likelihood of containing rare and valuable Top Shot moments.)
Examples include the current “Hustle and Show Challenge 2”, where a collector needs to purchase 8 specific individual moments, available at present for a combined $155 across the marketplace. If you have all 8 in your collection by a certain deadline, you receive a reward in the form of a premium Ja Morant dunk Moment – which could be worth a considerable amount depending on which serial number you get.
This combination of an emerging industry, a topic that inspires ravenous fandom and a very slick customer experience has made NBA Top Shot a complete winner. Especially in a year when most people have been sat at home unable to attend live sports in person.
LESSONS FOR OTHER INDUSTRIES LOOKING AT NFTS
So, what’s the ripple effect of this unmitigated success – over $500m in gross sales to date, with a portion of every transaction going to the NBA – on other sports and industries?
Whether they jump on this new revenue opportunity to quite the same degree remains to be seen, but there are various examples of NFTs in the sports and retail worlds.
One fascinating example is luxury watchmaker Hublot. They recently announced that any consumer who purchases one of their 200 limited edition special Euro2020-themed Big Bang E watches – available at a cool £4,800 each – will also receive an NFT related to one of Hublot’s Football 2021 podcast episodes, each episode featuring a different football icon.
Some of you will undoubtedly be sceptical of the potential of this market to sustain past the initial boom. Certainly, the 50 to 100-year window the Dapper Labs PR team are talking about might seem very unlikely.
But with the combination of an excellent user experience, many of the world’s most marketable athletes, and the fact that – well, let’s be honest – human beings love collecting shiny things, it looks set to go from strength to strength as more and more collectors get involved.
There are also undoubtedly a range of opportunities for all sorts of industries to monetise the popularity of NFTs around their own products and content. While it may be popular memes and viral clips such as “Charlie Bit My Finger” that make the news when they sell as NFTs, the real ongoing market has a much wider range of applications, so long as you have an audience who sees value in what you have to offer.
Whether you’re looking to explore the possibilities of NFTs as a business asset, or simply want advice on how to sign up for NBA Top Shot, feel free to get in touch. I might even have a highlight or two to sell you! Rael MasonMay 28, 2021