Sports NFTs: A New Era of Fan Engagement with David Pakman

hey everybody I'm David packman from coin fund I'm the last talker on this stage which means I can take all the time I want but I I won't I'll get you guys to cocktails very quickly uh I'm here to talk to you about nfts sports nfts to be very specific uh let me just tell you why you're you're here to listen to me I'm not so sure but I'll try to give you a good reason so I'm with coin fund we're one of the oldest uh and longest running firms focusing on crypto native investment we've been investing since 2015 seed stage Venture stage liquid stage and I've been playing around with nfts for a long time I was uh the series a lead of dapper Labs I sit on the board there that's the company that invented the first nft standard and invented the first sports nft so that's what we're going to talk about today but let me just uh refresh your memory about what we're here to talk about nfts we all know are property rights for intellectual property we can take any kind of digital good and we can turn it into something that we can now own we couldn't do that with digital objects but we've been able to do that with physical objects forever right we can own physical things but in the digital world we couldn't own anything digital because it was too easy to copy so blockchain's changed that and let us own digital Goods any kind of digital good not just a JPEG could be a song could be a movie could be a book could be a font could be code so we're in a world now where we can own digital things and that unlocks some really cool business models in the digital world because we couldn't own digital things before we had to stream and rent everything because we couldn't do anything except control access but now we can buy and own things now why does that cool well it's because we as humans like to collect things we've been collecting for millennia and so we collect digital things too and there's other reasons why we like to own digital things we might think it's going to go up in value or we might want to collect a whole set for Nostalgia reasons or we might want to use the object that we buy for doing more things like trading with others or for using them in games so how's that gone this invention of nfts well not so bad actually 10 million people have bought more than 50 billion dollars of nfts in the last two and a half years it's an extraordinary amount of money spent yes probably a third to 40 percent was wash trading as we all uh airdrop farmed and uh and uh reward farmed but so even if you cut it in half even if 25 billion dollars of nfts were sold in the last two and a half years that makes nfts the most successful consumer product released since the smartphone like it's a real big deal and only a small number of consumers have responded 10 million people is not a lot compared to the four and a half billion on the internet but it tells us that we're on to something and people buy them as we talked about for different reasons also it's kind of cool that just in a short amount of time nfts really tipped into the mainstream this is a clip from Saturday Night Live if you you know the show they did a sort of send up on nfts uh about a year and a half ago so in a short amount of time it kind of captured the imagination of consumers which also tells us that we're on to something uh the media was fascinated by the idea that us stupid consumers were spending our hard-earned money to buy jpegs of course that's not what we were doing we were buying ownership in a piece of intellectual property that we identify with maybe it helps us show off our identity just like we do that for physical things we've collected art and LPS and CDs and wine and shoes and antiques and so we collect digital things too and so the media might have sort of caught the wave on the way up and of course now they're beating us up on the way down so where are we in the Journey of nfts well you're familiar with the Gartner hype cycle this is a one of the longest observations about new technology that it tends to follow this curve and can you guess where we are with nfts we're right there and it almost follows exactly the sales numbers that I showed you on the second slide that we peaked in like q1 of 2022 and now we're doing about a billion dollars of nft sales a month so it's not a tiny amount of activity 12 billion dollars a year but it's nothing like the hundreds of billions of dollars at the Market's Peak but we have to dig out of this trough we have to find real use cases that Inspire not just nft d-gens trading but we need to inspire Mass Market use the billion dollars a month or so of nft sales that are happening now that's about 30 to 50 000 people who are mostly nft Pro Traders they're on blur they're using catchment they're in the discords and they're they're flipping nfts mostly because there's economic reward for doing so it's not a bad thing but it's not the main history market right where we sort of lost a lot of the normies so why why are we what are we going to do to re-engage the normies well that's what I want to talk to you about that's why we're going to talk about sports first of all like what types of nfts where did we see activity well um digital art like clearly some of the early nft sales in generative art where we're using algorithms to create art that has responded with I would say relatively a small number of people but still well it's it's certainly a category of nfts that had sales um Collectibles uh the biggest category of profile pictures the board apes and the cyberpunks right this is where the the mass majority of nft sales occurred and then Sports would be the third category that really tipped just to give you a sense so the first major sports nfts were NBA Top Shot you remember that exploded out of the gate uh that that uh property which is still live today has done about a billion and a half dollars of sales to about a million people um so it's uh it's um high arpu and we're going to talk about that in a second but sports fans tend to be among the most engaged audiences for any product they have a sort of Rapid fandom for their teams or for leagues and so that it's not surprising that Sports nfts resonated early on with their consumers another product that's done pretty well I'll show you the numbers in a second is so rare uh the company that launched a sort of fantasy football European football soccer with the English Premier League and with La Liga where you are buying uh cards of players and then assembling fantasy football teams and um that's also an interesting market so so we saw those three areas of nfts kind of work pretty well um the next four are areas that haven't worked very well to be to be honest digital fashion and avatars um buying land in the metaverse uh music nfts and then real world nfts where you buy an nft that corresponds to something physical in the real world I'm not saying it's been zero but there have been much much smaller sales traction than the other categories and so I think they're promising but it's not where the action's been let's take a look at some of those numbers so you can see here the top 15 collections of nfts that have sold an all-time axi Infinity which was talked about in the last presentation as the top selling game did about four billion dollars of sales and then we have a lot of the collectibles like board Apes the crypto punks art blocks uh as I said Top Shot did about a billion the Nike clonex stuff we'll talk about in a second 845 million billion and you can see so rare down at about uh 500 million so um these are really big numbers um but Things fall off pretty quickly after this but what I wanted to show you was not just the total dollars spent but take a look at the number of buyers column so which ones attracted the most number of users well it's the gaming ones axi and the two Sports Products um really by like uh at least uh an order of magnitude now you might say to me well that's obvious because the pfp collections only have 10 000 skus in them there's only ten thousand uh board Apes you can buy so why would there be a million buyers there's only 10 000 people could hold them at any one time it's true so by Design those communities are are meant to be small which is another reason why they haven't fully tipped into the mainstream but if our goal is to get nfts adopted by mainstream users focusing on gaming or even Sports gaming is probably a reasonable place to spend time um one question I get asked a lot is which change should we develop on if you're trying to build nfts I just thought I'd show you um the amount of sales volume of all time across the different chains so obviously ethereum super dominant 36 billion but Ronin which was the chain for axi Infinity uh Solana flow polygon all pretty credible and in fact probably there's more potential in the non-etherium chains given their speed their throughput and their ability to onboard users a little bit easier than the you know sort of ethereum experience so I think we're going to have a diversity of chains of on which nfts will be built um one type of entity that's critical especially around Sports nfts something we don't see a lot of and honestly I'm pretty disappointed are dynamic nfts or nfts that change or improve over time after you've bought them sort of silly that that we made them static given that an nft is basically software we can attach a smart contract or execution code to an nft why wouldn't we offer some benefit to you the longer you hold it or the things you do with it in fact if our the whole point is to discourage flipping why wouldn't we make an nft get more rare and develop new properties the longer the first buyer or the second buyer holds it so this is one nft that's starting to do some interesting things like that this is the board Apes um that launched um uh the the land that's part of um other deed so if you buy a land unit they sold 561 Million by the way in 24 hours that um these will this the land units will be usable within a forthcoming metaverse but that the land units um uh evolve over time the way real land does so I'm watching closely to see what happens did the consumers respond to Dynamic nfts that have improved properties there's the proverbial like well if you use a sword in a game and the sword slays the dragon the sword gets you know plus one this is a long long established gaming concept that should be reflected in nft in-game items um I did want to talk a little bit about uh since Nike is so such an interesting part of sports um the Clone X experiments you know Nike bot artifact and nft issuance Studio that has released some of the most exciting kind of digital fashion uh they've done it in a couple different ways they've released digital shoes they've released fidgetals which are uh the combination of an nft with a real world product so like buy the sneakers in real life get an nft attached to it so but the the Nike artifact clone X collab did 20 000 units sold 845 million dollars in sales it's an unbelievably successful digital fashion product with a physical tie-in and you can see how that's helped this is um a slide showing you all the sales of sort of all digital fashion nfts many of them are sports related the Nike and the Adidas ones and you can see Nike just dominated with uh with the the sort of dark blue um bar chart there so again another indicator that consumers are responding to sports related nfts um I did want to show you a slide on the data of the fidgetal volume those are the physical Goods tied to a digital nft and you can see that artifact is done about 70 percent of all fictional volumes so really dominating this sector um pretty impressively so um remember the thing that I like most about about nfts is the arpu the average revenue per user if only 10 million people have spent 25 or 50 billion dollars for nfts the average revenue per user is high I've seen it as low as about nine hundred dollars on an annual basis but just in the last the last 30 days the arpu is trending between three and four thousand dollars so the people who buy nfts buy a lot of them or at least they spend high for them this is what a lot of game Publishers like about it so let's get specific on gaming sports is such an obvious place to dig in with nfts because with sports as I mentioned before we have high long-term fan engagement very high monetization consumers spent a lot on sports sports related merchandise attending Games sports subscriptions for television access jerseys and apparel merchandise Collectibles fantasy um and as I say there are multiple reasons to own an nft around sports for wagering for for gaming for collecting for Fantasy to unlock physical access um you know one of the biggest Concepts in sports today are to have personal seat licenses for season ticket holders there's no reason why that can't have a digital tie-in as well and let's just take a look at these two charts the upper right shows you the largest sports leagues around the world by Revenue these are Big Sports these are big businesses the NFL is a 17 billion dollar business it's largely just a U.S phenomenon Major League Baseball number two the NBA which has 800 million fans worldwide it's about a nine billion dollar business they're big businesses and then I just wanted to show you the value of teams these are individual sports teams around the world and and you see uh Manchester United just sort of at number 15 or 20 and the Dallas Cowboys at the top but these are enormously valuable franchises so tying uh digital merchandise to them makes a lot of sense and also the reason sports leagues and teams love to include um um betting and interactive elements to get to sports are because it improves engagement Sports Bettors are 2x more likely to attend a game or watch a game and this is a fascinating statistic so the NFL as I said is a 17 billion dollar a year business that's all revenue associated with the NFL on the Super Bowl Super Bowl weekend 50 million people wagered 16 billion dollars so in one weekend on one game the biggest game of the season the entire size of the League's revenues was spent on basically gaming wagering and so like this is a thing that people want to do and there's no reason why we wouldn't want to tap into it into it more um another stat for you fantasy um uh Sports is about a nine billion dollar a year business just in the U.S that a little smaller than some of the other Industries we talked about here but with um this is demonstrated real world spend by consumers and one of the ways to predict what will happen in the digital realm is to look at what people do in the real world and try to create digital versions of our digital proxies for the same type of behavior we know that DraftKings and FanDuel in the U.S has been incredibly successful creating uh in-game betting and basically betting on almost anything and they've enlarged significantly the size of the sports wagering market so it makes sense to take markets like fantasy wagering and collecting and transport digital products into those and so my my argument is the place we will see lots of consumer traction as more and more leagues teams and sports adopt nfts and digital products and more Studios bring interesting products to Market and we're just getting started you know horse betting alone is an 11 billion dollar a year business in in the U.S um and so you know one of the first successful nft games was zedrun which was sort of an attempt at building um a sports betting or um sorry not just horse betting but um like uh horse lineage horse racing um gameplay and had some early success there's a one called silks that's out now getting some modest success um we'll see uh the NFL all day which was released by Dapper uh it was sort of a similar gameplay to NBA top shots and of course the so rare has the English Premier League and La Liga football and is is also uh just released an NBA game so we've got fantasy we have collecting we have sports betting and gameplay nfts all coming to Market and I think my my observation is that this is probably one of the most likely categories of nft products to try to bring us out of that trough of disillusionment uh oriented you before at least I'm hopeful because we'll all benefit from more consumer adoption well uh thanks for listening hope you guys get some cocktails tonight and enjoy uh Friday night in Denver I'm David at coinfun.

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