NFT Companies Renegotiate Marquee Sports Licensing Deals
Two years after launching NFTs into the sports industry’s consciousness, Dapper Labs has thus far had a challenging 2023. The company has laid off 20% of its staff for the second time in four months, lost executives including its chief business officer, and dealt with legal questions over whether its digital collectibles ought to be treated as securities.
In addition, the company has discussed a possible restructuring of its licensing deal with the NFL and the NFLPA, according to multiple people familiar with ongoing conversations who were given anonymity because they weren’t authorized to discuss the situation publicly.
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And Dapper isn’t alone; such talks have become common, insiders said, as NFT brands look to change the nature of their commitments to leagues and players associations. DraftKings has also brought the NFLPA back to the negotiating table for its Reignmakers product. Sorare is seeking new terms on its MLB and MLBPA deals, and it has been in conversation with partners at MLS and the MLSPA as well.
The existence of these negotiations signals two things: a recognition of a changed landscape—once again—for crypto collectibles, and a continued commitment to the category by at least some sports leaders.
Typical league-level NFT licensing deals in the wake of NBA Top Shot’s success centered around revenue sharing agreements with built-in minimum guarantees for rightsholders. As multiple companies competed for those rights, some yearly minimum guarantees pushed past $10 million, according to executives involved in the negotiations who asked not to be identified.
As part of the current renegotiating discussions, those guarantees could decrease by half or more in certain situations, according to conversations with a handful of executives involved in these discussions for NFT companies, leagues and players’ associations. In exchange, leagues and PAs may be able to negotiate for equity shares in the underlying companies or a higher percentage of additional revenue in case sales numbers pick up. One benefit NFT companies have in the back-and-forths: There don’t appear to be any newcomers aggressively seeking new partners.
A league executive said they weren’t shocked to be back discussing their deal so soon after NFTs’ emergence—it’s always a possibility when agreements come together in new categories.
While any updates made to the NBA’s partnerships would likely come during the offseason, the league’s role in creating NFT excitement has also made it a critical barometer for the market overall. Since October, NBA Top Shot has seen relatively flat secondary market sales numbers hovering around $3 million per month, according to CryptoSlam! data. That’s down from close to $30 million in March 2022 and $208 million in March 2021, which was Top Shot’s second biggest month on record. The platform’s number of unique secondary market buyers, meanwhile, dipped below 10,000 in March for the first time since 2020.
Last week, Cryptoslam! counted 3,751 unique buyers on Top Shot’s marketplace, while Sorare’s NBA game courted 3,142 such customers. First-party sales data is not publicly available for either platform.
Overall, Sorare has signed up more than 3.5 million users. Last year, it said 85% of the people playing its MLB game did so from outside the U.S. It added 615,000 users in the first quarter of 2023.
As Sorare attempts to update its deals with MLB and MLB Players Inc., it is still building its pitch for fans. This year, the game added cash prizes (in the form of cryptocurrencies), a popular feature in its soccer offering that makes the contest a closer competitor to real-money fantasy sports. It has also added Juan Soto and Julio Rodriguez as company ambassadors.
Similarly, Dapper Labs has put its focus on improving the mobile experience for collectors. It has also teased the launch of products connected to “two new major global IPs,” though it’s unclear if those will be related to sports.
Fanatics has made the most public step back from crypto collectibles, divesting most of its 60% ownership stake in Candy Digital in January. “Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” Fanatics CEO Michael Rubin wrote at the time.
For its part, Candy has continued releasing MLB products, emphasizing its digital ticket stub program this year. Fans redeemed roughly 200,000 commemorative NFT tickets last season. “The tourists are gone, and the settlers are here to continue to build,” Candy CEO Scott Lawin said in March.
DraftKings executives did not mention their web3 efforts in February’s earnings call after citing “headwinds from the Reignmakers NFT product” at the end of the previous quarter. However they did recently launch a new golf product under the Reignmakers label, with contests starting last month.
Other previously announced platforms, such as an Autograph-built PGA product and an overarching NHL offering from Sweet, have yet to announce launch dates.
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