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Sunday, June 16, 2024

Why NFTs Dominated the NIL Market In Year 1

  • Brands poured more cash into NFTs and trading cards than any other segment of NIL, per Opendorse data.
  • But the crypto crash has called into question whether NFTs are a sound investment.
Jalen Suggs/OpenSea

From their digital nature to the ease at which athletes can profit from them, NFTs became one of the most popular vehicles in the first year of name, image, and likeness.

Iowa’s Luka Garza and Gonzaga’s Jalen Suggs minted some of the earliest NFTS in the college sports world shortly after finishing their final seasons in the NCAA. When July 1 hit, college athletes across the country followed suit.

Companies flocked to the industry — some existing sports memorabilia brands created NFT products, while many new companies popped up specifically for the space. Brands poured more cash into NFTs and trading cards than any other segment of NIL activity, comprising more than 17% of the NIL market, according to data from Opendorse.

But the early success of NFTs has given way to increasing controversy. The recent crypto “crash” has called into question their long-term value — and whether the NFT industry is a sound investment. 

NFT company executives told Front Office Sports the popularity of NFTs lies in their convenience, brand-building opportunities, and revenue potential — and that they’ve found ways around the crash to keep the industry alive.

The Different Approaches

It’s difficult to call any type of NFT “traditional,” given the concept itself is so young. But if there is a protyptical NFT, it would be a virtual trading card — either highlighting an athlete or a key moment in their career. Companies like Topps, Signing Day, and Candy Digital used that model, but many other approaches have been taken since. 

FOS spoke to three companies with as many different focuses.

  • The Players’ Lounge, started by two former Georgia football players, has created school-specific groups of NFTs — though most of their value lies in the associated in-person events.
  • Legacy League focuses on offering NFTs to women’s sports and Olympic athletes — often in collections relating to athletes’ interests — and also handles graphic design, so athletes don’t have to create NFTs themselves.
  • Katana Capital — a fund that isn’t specifically for college athletes — sees them as celebrities, artists, and influencers equal to its other clients. It focuses on NFTs, DAOs, and the Metaverse.

“The NFT is a very, very broad thing,” co-founder and CEO of The Players’ Lounge and former NFL player, Keith Marshall, told FOS. He noted there are “hundreds” of use cases.

Appealing to Athletes

While some NIL activities like brand endorsement deals or social media campaigns rely on an athlete’s reach and fame, NFTs are open to a much broader scope of athletes.

“If you have 1,000 true fans…that’s enough really to have a successful business,” Katana founding partner Kuntal Shah told FOS.

Founders agreed that in many cases, NFTs require much less effort than other NIL activities — which is particularly important for athletes’ busy schedules.

Then there’s the financial aspect. Compensation range varies broadly but appears to be lucrative given how little time athletes have to put in.

  • Stuart Bush, CEO and co-founder of the Legacy League, said athletes can make anywhere from $300-500 to $10,000-20,000. On his platform, athletes receive 75% of the total NFT sale. 
  • Marshall also noted that when NFTs are sold on the blockchain, athletes can receive profits for secondary market sales, which isn’t possible with traditional paper trading cards or autographs.

The indirect financial advantage: Athletes are “using whatever social reach they have to promote another product that’s not them,” Bush told FOS. “They are able to promote themselves.”

Bush said that some Legacy League athletes have been discovered by other brands who wanted to partner with them, based on their personal interests. “It’s sort of like a launching pad,” he said.

The Crypto Crash and Future

Despite all the benefits of NFTs, the recent crash in cryptocurrencies is a major concern. Will NFTs be worth anything in the future? Will the money athletes receive through cryptocurrencies be severely devalued?

Both Legacy League and The Players’ Lounge believe their business models are stable despite volatility in the crypto market.

Bush said many Legacy League NFTs are paid for with credit cards and regular money, while Marshall maintained that even though crypto is the transactional currency for the company’s products, the intrinsic value of in-person experiences will remain intact.

Shah is optimistic that the market will rebound. “There’s a lot of stuff in the news that says, ‘NFTs are dead,’” he said. “NFTs are really only 2 years old.”

As far as the opportunities go? “This is probably not even the first inning,” Shah said. “It’s like, the pitchers are still in the bullpen, getting ready for the first pitch.” 

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