Cultivating Culture Through Commoditisation: Why NFTs Present An Unparalleled Opportunity For The Sports Sector

In 2019, the National Basketball Association (NBA) and the National Basketball Players Association (NBPA) partnered with Dapper Labs, a production studio specialising in blockchain technology.  At that stage, few could have anticipated the impact the partnership would have on both the rightsholder’s brand and the wider sports sector.  Fast-forward to the present, the ground-breaking non-fungible token (NFT) marketplace, NBA Top Shot, which allows fans to purchase and trade digital highlight clips, leads the market in digital sports collectibles.  In April this year, it was reported that NBA Top Shots had seen $500m in sales and had registered 800,000 users since being made available to the public in October 2020.[1]

Despite a recent dampening in expectations following a decline in key metrics (namely, the value and volume of trades, and number of unique users registering to the platform),[2] wider developments in the sports sector indicate that the commoditisation of scarce, digital assets is here to stay. Unsurprisingly, it appears that rightsholders remain intrigued by the potential in exploiting NFTs; namely, that the creation and sale of unique, digital assets can simultaneously generate a diversified revenue stream and also drive fan engagement.  Just last month (September 2021), the platform behind NBA Top Shot, Dapper Labs, raised a further $250m in its latest funding round, reportedly valuing the firm at $7.6 billion.  Similarly, Sorare, the French-based company that offers a fantasy football game utilising NFTs, raised $680m in an investment round led by the Japanese investment giant, Softbank.[3]

This introductory article, the first in a series related to NFTs in the sports sector, will:

1. Breakdown what constitutes an NFT;
2. Explore why they represent a valuable opportunity for the sports sector; and
3. Identify the key legal and commercial considerations for rightsholders looking to enter the NFT market.