Professional sports leagues have earned billions over the years from the sale of licensed collectibles, taking a cut on everything from team jerseys to artwork to autographed footballs. In the US, the National Basketball Association is taking the industry to a new level: selling game highlights to fans as digital tokens on the blockchain.
The enterprise is called NBA Top Shot, a venture between the league, its players’ association and a consumer blockchain company that says it is creating licensed sports memorabilia for the digital age.
The popularity of Top Shot has skyrocketed in the past few weeks, to the point that a single, 12 seconds-long highlight of a November 2019 LeBron James dunk resold for more than $200,000. A similar clip can be viewed on YouTube for free.
In plain terms, Top Shot takes actual NBA highlights, encrypts them into a digital asset known as a non-fungible token (NFT), and allows consumers to buy and sell them in an online marketplace licensed by the league itself. These transactions are saved on the blockchain, which serves as a record of ownership.
Each token, known in Top Shot parlance as a “moment”, is given a serial number and sold in limited-edition “packs”, which range from $9 to $230 depending on the moments they contain — similar to packs of baseball or basketball cards.
Collectors can buy and sell moments from each other on the secondary market, which has recorded over $300m in sales since Top Shot’s public launch in October, $250m in the last 30 days, according to NFT tracker cryptoslam.io.
Players, team owners, and broadcast presenters have all contributed to the hype for Top Shot in recent weeks. Portland Trailblazers point guard CJ McCollum tweeted about getting in on the trade, inviting fans to direct-message him on social media to discuss. “I want to learn more about these moments,” he wrote. “Especially my moments lol.”
Line chart of Total daily sales volume, $m showing NBA Top Shot digital collectibles marketplace reached record sales in February after public launch last October
The US sports memorabilia market is already worth as much as $5.4bn annually, according to a 2018 estimate by Forbes. Angela Ruggiero, chief executive of the Sports Innovation Lab, a research firm studying technology and fan behaviour in sports, said that digital tokens could expand the market to individuals who are not considered “traditional fans”, generally defined as those who watch games on television or buy tickets and jerseys.
Case in point: Robyn Batnick, a high school guidance counsellor from Long Island, New York, said she became immediately enthralled with collecting Top Shot moments after her husband suggested it as an activity they could do together.
“He was like, ‘I have a confession to make, I just spent $2,500 on a hologram’,” she said. Initially alarmed at the dollar value, she became intrigued once he demonstrated to her how the process works online.
Collectors have to sign up on the Top Shot website at appointed times to await a “drop”, or release, of packs of moments. Demand is so high that more than 200,000 people joined the queue last Friday for a drop of just over 10,000 packs.
“I am definitely not a sports fan”, said Batnick, 35. “The players and the moves? They mean nothing to me. I look at it as a game, and I’m like, I want to play!”
The blockchain company Dapper Labs partnered with the NBA to develop Top Shot in 2019 after the success of its earlier venture in NFTs, CryptoKitties.
Column chart of Monthly sales volume for major categories of NFTs, $m showing monumental growth in non-fungible token sales
Dapper Labs co-founder Mik Naayem said his goal was to develop a product whose popularity could extend beyond the insular cryptocurrency community. “We wondered, if we could create something cute and appropriate on blockchain, could we get regular people to engage?” he said.
Revenues from the sale of Top Shot packs are split between Dapper Labs, the NBA and the players’ association. The three groups also split a 5 per cent cut of each sale on the secondary market, according to two people familiar with the arrangement.
Treemap of the top 40 best-selling crypto collectible products in terms of all-time sales. NBA Top Shot has out-sold all of the next-best selling crypto collectibles combined
The league helps determine which highlights are made into moments, according to Adrienne O’Keeffe, associate vice-president of global partnerships at the NBA. Current moments are mostly limited to games from the 2019-2020 and 2020-2021 seasons, but the league could release historical highlights — such as those by Michael Jordan — sometime in the future.
Meanwhile, Naayem said Dapper Labs plans to eventually enable collectors to use their moments as tokens in a digital game, similar to Pokémon.
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Top Shot comes at a time when the market for traditional sports trading cards and collectible card games is booming. The “trading cards” category on eBay grew by 142 per cent last year, with 4m more sales in the US alone compared with 2019. Basketball card sales, eBay’s second most popular card category after Pokémon, grew by 373 per cent.
To illustrate Top Shot’s meteoric rise, the Financial Times compared the price trajectories of a LeBron James trading card and a LeBron James Top Shot moment.
Both the card, a 2003 Topps Chrome LeBron James #111 in mint condition (PSA 10), and the moment, a 13-second clip of James replicating a Kobe Bryant dunk from 2001 as a tribute to the late Lakers star, recently sold for around $34,000. For the card, that was more than twice the price it fetched in October; the value of the moment, meanwhile, grew by more than 700-fold over the same period, from its October resale price of $46.
Line charts comparing the price trajectories of a LeBron James trading card and a LeBron James Top Shot "moment" (a 13-second video highlight from a game). Both the card and the moment have recently sold for around $34,000, but the moment's price has risen much more steeply over a shorter time frame, illustrating NBA Top Shot's meteoric rise
Robyn Batnick’s husband, Michael, who works as a financial adviser and co-hosts a podcast on finance and culture, said Top Shots are “about as speculative an asset you could possibly own” and hype has driven him to make financial decisions against his rational judgment. “I spent $400 for a Duncan Robinson moment. He isn’t even good. I want to punch myself in the head.”
A 2003 Topps Chrome LeBron James #111 trading card
A 2003 Topps Chrome LeBron James #111 trading card © Card Ladder
Nonetheless, he has earned returns of between 20 per cent and 50 per cent on resales thus far.
Batnick said he became interested in Top Shot in late January as the online collecting community offered an antidote to pandemic boredom.
“When the drop happens and you get in the line and you see your spot, there’s something about the community, it just erases the loneliness,” he said. “It’s not about the money, it’s about the chemicals in your brain.”