Nearly two years ago the National Basketball Association (NBA) and its players union (NBPA) embarked on a partnership with Vancouver-based blockchain company Dapper Labs to develop a new digital platform called NBA Top Shot. Fast forward to now and that platform is at the forefront of the evolution of the sports collectibles landscape.
Made available to the public in October following a period of closed beta testing, Top Shot is a non-fungible token (NFT) marketplace where fans can buy, sell and trade NBA moments, which are packaged highlight clips that operate like trading cards. In the same way that basketball enthusiasts collect physical items, Top Shot effectively brings that experience into the digital realm, where users are banking on the value of their highlight collections increasing over time.
Business Insider reported last month that the platform has registered more than 800,000 users, who are able to interact with each other on Top Shot’s messaging platform Discord. To date, Top Shot has generated north of US$500 million in sales, with the most valuable moment – LeBron James dunking against the Houston Rockets – going for a reported US$387,600. Revenue from transactions is shared between Dapper Labs, which was formed in 2018, the NBA and the NBPA.
Speaking last week during SportsPro Live, Caty Tedman, head of partnerships at Dapper Labs, explained in her own words what she says when people ask her what Top Shot is and how it works.
“NBA Top Shot is a next generation collector experience,” she said. “It’s a way to really take part in the economy of basketball and it’s a way to collect your favourite players, their greatest plays and build community around it. We have almost half a million people in the Discord channel just talking about basketball together every day now, so it’s a basketball community of collectors.
“It brings the hard in your hands experience online, so it makes it more global and it makes it an opportunity to have a much wider audience that you’re playing with, collecting with and buying, selling and trading with. What the blockchain elements bring to it is the ability to truly own those assets in a digital space. In the same way you feel like you can tangibly hold your physical cards, you truly own your Top Shots in a digital space.”
In the same way you feel like you can tangibly hold your physical cards, you truly own your Top Shots in a digital space.
As popular as Top Shot has become, it has not arrived without some confusion. Tedman also took the opportunity to address some of the most common misconceptions people have about the platform and what ownership of a digital collectible actually means.
“The first misconception is that what you own is just a highlight,” she explained. “The thing you own is really so much more than that. It’s highlights that are smashed together with a ton of data. We put so much data on chain having to do with that moment in time, how the team is performing, how the player is performing. So we pull all of that together in a great package and we put that on chain. So it’s really not owning a highlight, it’s owning a collectible.
“The other piece is that you don’t own that highlight that you watch. You don’t have any rights to commercialise it in the way that you can sell it to somebody else in its entirety. So the really big difference is that true ownership piece.”
Building the NBA Top Shot platform
Tedman detailed how Dapper Labs went about building the Top Shot platform from a fan perspective. Instead of setting business-oriented goals, Dapper Labs set out to create something that users would love and want to come back to, correctly evaluating that it would deliver success in the long run.
“[NBA Top Shot] combines things that fans love because we tried to build something that fans would love,” she said. “We didn’t have any revenue targets when we launched Top Shot into the closed beta. We wanted to build something that’s really sticky, that people will want to come back to every day and feels endemic to basketball fandom. I think we did that. We started from a fan perspective, so it was hard for fans not to love it. We’re fans and we love it.”
That fan-led process also continued throughout the early stages of the platform.
“We all played it,” said Tedman. “We had the whole team in June on Discord chatting to our beta testers, trying to gather as much feedback as possible, making sure that group was full of fans. At the time it was much easier to find fans who were not crypto-knowledgeable. At this point we’d be hard pressed to do a survey where a large number of people say they have never heard of or had no interest in cryptocurrency – which was on the qualifiers in our early surveys to get into the beta.”
We wanted to build something that’s really sticky, that people will want to come back to every day and feels endemic to basketball fandom.
Ultimately, though, Top Shot is designed to be like a digitally enhanced experience of collecting. The innocence of playground trading in an environment populated by like minded people is something that Tedman says reminds her of the early days of social media.
“It’s fun, opening the packs and seeing what moments you got is really fun," Tedman continued. "Going to the marketplace and seeing what else you can trade is really fun. People have made friends [on the platform].
“It really feels like 2007, 2008 where we were making real-life friends on Twitter, when Twitter was still really young and it crashed all the time. As a product it was still really unstable but it changed the way we were communicating. It feels like that moment now that fans are changing the way they are communicating and changing the relationship they have with sports.”
Pairing NFTs with real-life experiences
Digital collectibles more broadly can come in many forms, whether it be a video highlight or a virtual recreation of a ticket stub from an iconic game. Whatever shape they may take going forward, there appears to be growing interest around opportunities to pair NFTs with physical experiences. The Golden State Warriors, for example, recently announced that some of the items available in their first digital collectibles offering will come with live experiences, such as a custom championship ring presentation at a future game.
Tedman acknowleged that “NFTs as access is a really exciting use study”, but cautioned that there is still some ambiguity around value when tying a digital collectible to something in the physical space.
“It is very confusing the value of those two things separately,” she said. “If you look at projects that say, ‘here’s the total cost’, and you get a physical item and you also get an NFT, it always begs the question is that the cost of the physical item and then the NFT is a thrown in? Is it the cost of the NFT and the physical item is a throw in? I think there’s some confusion at this point in the industry that the physical IRL components bring to the table, but unlocking experiences is a great way to think about it and unlocking the ability to have access.
“One of the things that we look at for Top Shot - and I think people who are starting to join the queues now for pack drops are seeing – is that we want to also reward people for being collectors, and for putting together really interesting collections. We do showcase challenges to reward people who have put together interesting storylines around their collectibles. We may not let you into a pack drop if you haven’t held a moment for a certain amount of time, because it’s a leading indicator of your continued participation in the community.”
The Golden State Warriors recently announced plans to pair NFTs with physical experiences
Maintaining positive engagement
NBA Top Shot also has a thriving digital ecosystem built around Discord. Using the audio forum platform was not a pre-thought strategic move for Dapper Labs, but it has now become synonymous with NBA Top Shot. Tedman acknowledges that Dapper Labs has been fortunate that the community it built during testing has now evolved into acting as moderators in the conversations on the Discord servers.
“I think the reason that our Discord server has been more positive than people expect from a forum is because that beta group or the closed beta group - and some of our early adopters - are moderators for us now and have been stewards of what the fan relationship with Top Shot should be,” she said. “We as a company try to be really transparent and fan-forward, so having them be the arbiters of what the culture is and maintain the positive culture has been really great.
“I often get asked, ‘is Discord where you should market a NFT launch?’, but a little under half of the participants in our Discord server are net new to Discord. So [while] we have a place people can join, it’s not necessarily where they were. In many cases, they’ve not only had to onboard themselves to blockchain technology but to Discord. It’s a place where that live conversation makes a huge difference; it helps find bugs really quickly, get feedback really quickly and they let us know how they feel every time we publish a blog. That stuff is really great and we’re into transparency of it.”
Bringing NFTs to other sports
Tedman pointed out that Dapper Labs first talked to the NBA three years ago. Now that the NFT space appears to be booming she said that the major difference when talking to brands is that they “want to make smart decisions” but also “enter the space very quickly”.
Indeed, given the success of Top Shot one would expect that other leagues are exploring how to launch their own NFT collections in the near future. Tedman, though, said that anyone looking to get into the space should take the time to understand what their fans would want from a digital collectibles offering.
“There’s a triangle of cost, speed and quality, and you can never have all three,” Tedman said. “The conversations we have now are to think about brand reputation and brand execution and what that means to you, and more than anything else, what does that mean to the value of those assets for your consumers?”
I think that there is a world in which both physical trading cards and digital assets can live side by side and can both be valuable.
The popularity of Top Shot no doubt played a significant part in helping Dapper Labs to secure an additional US$305 million in funding at the end of March, which gives the company a reported valuation of US$2.6 billion. At the time, Dapper Labs said it plans to use the fresh injection of capital to expand into other sports, as well as gaming and entertainment.
Early last year, Dapper Labs unveiled plans to develop Top Shot-style digital collectibles for the Ultimate Fighting Championship (UFC). In terms of other sports, Tedman also fielded a question about whether NFTs could be coming to soccer, a sport which could pose a few more complications given the number of different rights holders.
“I have quite a spreadsheet which is a matrix of rights ownership [in soccer],” Tedman said. “What I hope we see is a global football market arise, where whether I’m a fan of Juventus, Real Madrid or Paris Saint-Germain I can go in and I can look at my moments next to other league moments, next to other club moments. I think that there is the possibility to have a framework where all of those things live in a place where you can then cross reference them, and I hope that happens in North America, too.
She added: “For football, especially in Europe, it’s really looking at what rights do you as an individual or a club or a league have, and then how do you create something that fans will love within those rights? Or the opposite, which is what we did with the NBA. [We] said 'we want to do video collectibles now. What do we need to do to do that? How do we get the right rights to do it?'”
Can digital and physical collectibles coexist?
One would be forgiven for thinking that the emergence of NFTs could spell trouble for the more traditional methods of collecting, but it was only last week that a signed LeBron James rookie card sold for US$5.2 million, breaking the record for the most expensive basketball card ever sold.
NFTs might be the latest acronym on everyone’s lips at the moment, but Tedman is confident that digital and physical collectibles can coexist.
“I think that there is a world in which both physical trading cards and digital assets can live side by side and can both be valuable,” she said. “When you think about collections and collecting there’s all sorts of different kinds of opportunities there.
“I will say that we’ve heard from some of the hardcore trading card collectors that they love the low end of the Top Shot market as well. Someone told me they would never mail one of their low-end basketball cards because it wouldn’t be worth as much as the stamp, so just the ability to prune your collection in a different way has been really excited.
“We have many, many collectors who are physical card collectors as well and I don’t think that they would say they see them as competitive. They’re really complementary.”