As one of the foremost global sports organisations, the NBA has played an important role in the development and exploitation of Non-Fungible Tokens (NFTs) within the world of sports. By way of example, in February 2022, NBA announced in partnership with Dapper labs the first-ever NFT auction on its own platform “NBA Top Shot”. Among other benefits, owners of the NFTs receive an “NBA All-Star VIP Pass NFT”, gaining unprecedented access to each NBA All-Star event from 2023 to 2027.
To frame the motivations and scope of the NFT phenomenon in the world of sport, it is essential to understand what these Non-Fungible Tokens are in the first place. Replacing the word “fungible” with an easier-to-understand synonym, we could speak of “non-substitutability” in reference to an asset that is not replicable because of its specific individuality. More precisely, “non-fungible tokens” are certificates of ownership of digital works of any format (JPEG, MP4, MP3, GIF, and so on). The person who acquires a digital work linked to a token therefore does not acquire the work itself, but rather merely the possibility of proving a right to it.
While in the ‘real’ world ownership is guaranteed by legally recognised contracts, in the NFT world this task is entrusted to the blockchain. The blockchain is the process by which millions of private computers around the world coordinate and process transactions on the platform, recording them publicly and making them accessible to other computers and users. The blockchain, which is also the basis used for cryptocurrency transactions, effectively functions as a virtual guarantee. The dense interconnection of the process makes the database unalterable, guaranteeing its effectiveness in terms of security. Anyone can, at any time, trace the ‘chain’ of transactions and, in the case of NFTs, identify the owner of a given token.
NFTs in this case represent, a sort of virtual merchandise for fans. The NBA, in partnership with Dapper Labs, which is behind other renowned projects such as CryptoKitties as well as the Flow blockchain, is using blockchain technology to bring NFTs and new forms of digital engagement to fans around the world. Already in July 2019 this partnership led to the marketing of so-called Top Shots, short video clips of iconic moments in American basketball history. The success was immediate: by February 2021, fans had already spent 230 million USD on the highlights, with a single LeBron James basket selling for over 200,000 USD.
As regards the recent 1-of-1 NFT auction by NBA and Dapper labs, the average winning bid of the 8 auctions that have concluded so far has been 46,205,00 USD (or around 16.91 ETH), with the Golden State Warriors 1-of-1 NFT hitting a record of 58,500 USD, and the Los Angeles Clippers NFT selling for a higher amount than that of the Los Angeles Lakers (54,000 to 51,000 USD), the Miami Heat NFT selling for 42,069.69 USD, the Orlando Magic NFT selling for 41,077 USD and the Charlotte Hornets, Sacramento Kings and Phoenix Suns NFTs all closing at 41,000 USD.
While many participants to the auction are well-established members of the NBA Top Shot and NFT communities, several members created their own NBA Top Shot accounts only recently, after the auction was announced and have made deposits worth of at least 40,000 USD. This further underlines how effective NFTs are as a way of increasing interest in a general sport or dated league.
The use of NFTs in sport is starting to become popular all around the world, including Italy. This transition, which started – as often happens – in the USA, has rapidly become a global phenomenon.
Following to which, on 16 February the Lega Basket Serie A (LBA), the body which organizes the top Italian men’s professional basketball league, as a result of the partnership with its Official Advisor Infront, entered the NFTs world by means of the first NFT collection dedicated to the Italian Cup, the Frecciarossa Final Eight 2022. The three exclusive series (‘Classic Moments’, ‘Special Collectibles’ and ‘Magic Moments’), released in two different drops which are available on the Dachain.com marketplace, will give fans the opportunity to record the most spectacular moments of the event as well as some memorable actions from the history of the Final Eight.
“We are very proud to have supported LBA on the development of its digital communication with influencer marketing initiatives and the launch of the first NFT collection in collaboration with technology partner DaChain.com”, stated Stefano Deantoni, Marketing Director of Infront Italy. “Inspired by the latest trends in fan engagement, the NFT collection uses blockchain technology and aims to further enrich the offer of certified digital content for basketball fans in the coming months”.
Although this initiative is being welcomed by stakeholders in the sports world and is not unique in Italy (as shown, for example, by the simultaneous spread of NFTs in Italian football), the growth of NFTs has as of yet not been met with a specific regulatory framework both in the USA and in the EU.
The basis for the NFT business model in sports is clear: to diversify sources of income. Although sport was likely to take this path sooner or later anyway, the pandemic has certainly accelerated it. As early as 2018, one of the main sources of income for professional sports clubs was already in troubled waters: we are talking about income from television rights. Between 2018 and 2019 this market, even considering only the English Premier League, had lost over half a billion GBP in value. This however was not an isolated case, as with the rise of the Covid-19 pandemic, ticket sales revenue also came to a screeching halt, forcing sports stakeholders to look elsewhere for stable revenue streams.
Therefore, in conclusion, while the high business volume (according to reports published by Deloitte, the sale of sports related NFTs are expected to double by the end of 2022) and the considerable potential of NFTs in terms of fan engagement remain key points, the next step in the growth of the NFT market will necessarily be ad hoc regulation capable of providing a satisfying standard of compliance and certainty from a legal point of view.