Why Sports NFTs are not dead

One reason why NFTs, or digital assets, have “failed” in the eyes of many is that expectations have just been too high from the start. The same is true for the metaverse and cryptocurrencies. These are innovations based on new technologies which are slowly going mainstream.

But their adaptation will take time! Many people still do not understand their benefits and the underlying technology.

Below is a picture of Gardner's hype cycle indicating that in 2023, NFTs are slowly leaving the "peak of inflated expectations".

Why do people purchase sports NFTs?

Certainly, recent market downturns have significantly impacted NFTs and their perceived value as an investment. However, sports NFTs as investment vehicles are just one side of the medal. Even more interesting for sports organizations than earning a quick buck by selling NFTs to hopeful investors are the prospects NFTs provide in terms of sustainable fan engagement, for instance by appealing to collectors. For an impartial observer, it may be hard to comprehend why anyone would pay for an NFT version of a player picture or soccer video that you could easily watch for free on the internet.

From this perspective, however, it is also irrational for a printed player card to sell for thousands or sometimes millions of dollars when the intrinsic value of the player card is close to zero. The most expensive physical player card to date is a Mickey Mantle baseball card sold by Heritage Auctions in August 2022 for USD 12.6 million.[i] Of course, this player card could simply be copied or printed but from a collector’s perspective, this is not the same as owning the original. NFTs follow the same logic. NFTs within collections are usually marked as ‘common’, ‘rare’ or ‘iconic’[ii] indicating their scarcity.?

The value of an NFT from a collector’s perspective is not only influenced by its scarcity, but also impacted by the “prominence of the athlete, the significance of the event, any additional content included within the NFT, and demand.”[iii]

Use of NFTs in sports video games

NFTs can also be built into online video games to represent in-game items including armor or weapons which users can purchase and trade with other players. In sports-related games, NFTs can be sold as virtual apparel, or special equipment or take the form of virtual player cards which can be collected to build a team and then used in virtual competitions against other collectors.[iv] These in-game NFTs give users “a sense of ownership and rarity for their in-game items, adding a new level of immersion and excitement to the gaming experience.”[v]

Using NFTs to simplify processes

NFTs can also be leveraged to simplify processes and make lives easier for sports consumers in addition to their value as investments or as collector items. As unique identifiers on the blockchain, they are ideally suited to revolutionize the ticketing process, for instance. Team supporters, for example, could purchase season tickets in the form of NFTs which assign clear ownership and later re-sell their season tickets via the blockchain at their convenience without the need for an intermediary.

Sporting event organizers could also offer digital tickets to prevent illegal market sales and counterfeit ticketing leading to bottlenecks at security checkpoints and eventually, to massive clashes between fans and authorities at the UEFA Champions League final in May 2022.[vi]

In summary, NFTs will not go away. Particularly the sports industry will benefit immensely from NFTs once their full potential is used to enhance fan experience.

[i] “Most Valuable Sports Trading Cards Sold at Auctions Worldwide 2022”, Statista, November 22, 2022, https://www.statista.com/statistics/1258572/sports-trading-card-sold-auctions/.

[ii] See FIFA+ Collect website. https://collect.fifa.com.

[iii] Paul Lee et al., “From Trading Cards to Digital Video: Sports NFTs Kick Sports Memorabilia into the Digital Age”, Deloitte Insights, February 16, 2022, https://www2.deloitte.com/xe/en/insights/industry/technology/technology-media-and-telecom-predictions/2022/sports-nfts-digital-media.html.

[iv] See https://sorare.co/.

[v] Kaj Leroy, “The Future Of NFTs: Gaming And IP”, Forbes, February 24, 2023, https://www.forbes.com/sites/forbesbusinesscouncil/2023/02/24/the-future-of-nfts-gaming-and-ip/?sh=7b9f70514670.

[vi] Matt Foster and Mngqosini Sammy, “UEFA, European Soccer’s Governing Body, ‘Primarily Responsible’ for 2022 Champions League Final Chaos, Report Finds”, CNN, February 14, 2023, https://edition.cnn.com/2023/02/14/football/uefa-responsible-champions-league-final-2022-chaos-spt-intl/index.html.