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Just three years after acquiring RTFKT, Nike shuttered the Web3 fashion studio who announced via X that it would be winding down operations in early 2025.

So why has this happened?

Why after what many (including myself) claimed to be an industry-defining acquisition, have Nike decided to move away from Web3 completely?

There have been two schools of thought that I have observed since the announcement, both of which I think are off the mark:

(1) The crypto native lens: RTFKT took in 100s of millions of dollars and ‘rugged’ its community members.

(2) The ‘outside’ lens: See, I told you crypto is a scam and it was obvious this was a bad idea from the outset by Nike.

Ultimately, both schools of thought are wrong when nuance and context are applied.

The TL:DR is:

The macro tailwinds for Nike are too strong for anything other than ‘back to basics’ to steady the ship, under new leadership.

In a slightly different format than usual, I’ll go through each point I think is a factor in this decision.

Subscribe below to read them!

I've long thought that Nike have one of the best-in-class Web3 strategies in the space from an incumbents point of view. But one part of their strategy that didn't stack up (to me), was the distance that .SWOOSH had from RTFKT. There was never a real convergence and they always felt quite disparate. Nike acquired RTFKT and the virtual studios made close to $200m in NFT sales and royalties in 2022, so the return on investment there was clear. But there has been inconsequential incorporation of the virtual studios and it’s been 3 years since the acquisition. Fast forward to 2024 and Nike decided to sunset their Web3 arm .SWOOSH, and close down RTFKT. Perhaps the reason why there was never any significant connectivity between the two is because Nike decided that they had other priorities, as soon as the broader business began to struggle.

In addition to this, it’s clear that RTFKT’s volume of innovations in the space dried up as soon as Nike acquired them, leaving many to speculate that the more corporate, conservative environment stifled much of the magic and creativity that the startup was acquired for.

At the start of 2024, Nike signalled that they were moving toward gaming more. They wrote in a blog that customers would "be able to unlock exclusive real-world apparel based on the in-game wearables” but did not specify that these in-game wearables were NFTs. This shift was largely due to the huge drop in NFT volumes and general interest that the crypto derivatives have had since peaking in the 2021 - 2022 bubble. Few NFT projects have found sustainable business models, and brands who are building in this space are viewing NFTs as a feature, rather than the product.

Additionally, secondary market royalties, which were once a key selling point have dried up completely, with NFT marketplaces racing to zero with their fees, and also enforced royalties. What felt like a huge unlock and business model innovation for incumbent brands, suddenly disappeared — and so did much of the revenue for almost every NFT project in the space.

The Macro environment is unavoidable for Nike.

Nike's share price is down 25-30% YTD, and they are not the only ones hurting, with many incumbent sportswear brands also struggling. There are a variety of reasons for this but the bottom line is that sales have decreased for Nike, 2% quarterly from last earnings reports. When times are bad for businesses, they hunker down and double down on what they know - they don't double down on the unknown (Web3). That’s symbolised by the change in leadership — going to a trusted hand and Nike veteran in Elliott Hill and removing the digitally focused predecessor John Donahoe.

In my opinion, no matter what RTFKT did as an innovation unit within Nike, unless they continued the unsustainable rate of revenues they generated in early 2022, it is likely the result would have been the same; a shuttering of the studio.

Acquiring RTFKT, data integration startup Datalogue, a presence in Roblox and Fortnite, launching Web3 & Gaming studio .SWOOSH, and chatbots in their e-commerce stack — Nike went for it. In a pandemic world, where people spent less time outdoors, it felt like the sportswear giant was once again a pioneer, a step ahead of its competition. But in a post-pandemic world, Nike had lost much of its wholesale distribution and simultaneously, has had sales eroded by smaller brands such as Hoka — which directly correlates to their waning stock price.

As per Massimo Guinco, a former Nike Marketing Exec:

Again, when you add this to the equation it becomes increasingly obvious why Nike have gone in the direction of culling their digital innovation units.

John Donahoe stepped down as Nike CEO signalling a big change within the organisation. In June 2024, their market cap plummeted by $28 billion signalling the worst day for Nike stock since its 1980 IPO.

Donahoe was brought in to make Nike digitally native, pivoting to e-commerce and DTC rather than wholesale distribution. To fill his boots, Nike have named company veteran Elliott Hill as its new CEO. When Nike acquired RTFKT in December 2021, Donahoe said it was a step to accelerate “Nike’s digital transformation and allow Nike to serve athletes and creators at the intersection of sport, creativity gaming and culture”

When Donahoe left the position in September 2024, retiring, the RTFKT logo was left out of press releases.

In retrospect — to some extent Nike’s digital ambitions were born, and died with, their former president Donahoe.

Disclaimer; this is speculation on my part.

I believe Nike have booked the revenue from RTFKT since their acquisition and then decided to dispose of the asset as a tax write-off. The announcement to shutter RTFKT almost 3 years to the day since the acquisition, makes me think that bookkeeping is playing a big part in this — and that Nike can write this off from a tax perspective to make their books healthier.

The timing feels pertinent.

In 2020, Nike, Adidas, Puma, Under Armour, and Vans collectively held 80% of the global sportswear market. By 2023, that number had fallen to 65%, with challenger brands growing at an annual average rate of 29% compared to incumbents, which grew by just 8%. [Source: Wired]

Those brands are not doing so with innovation in digital, phygital merchandising or metaverse activations — they’re selling products.

With their digital D2C strategy, Nike felt like a pioneer once again but ended up having their market share eroded by smaller brands with simpler, more orthodox strategies.

Nike made layoffs that probably signalled a turn in their digital strategies in late 2023.

Many of the people working in digital and innovation were let go. When you let go of the talent that is building out your digital innovation strategy, the writing is on the wall.

Although a silo to some extent, RTFKT would have likely felt the pain here internally. Those who were in the innovation unit likely lent on the Web3 native team for the expertise and valued it. With fewer internal champions and the CEO who acquired them no longer there, RTFKT likely felt like they were on an island of their own within the fashion behemoth.

When I wrote about .SWOOSH being shut down by Nike in September 2024 I said:

“It’s a shame that we have seemingly lost one of the most compelling, innovative leaders from a brand perspective in Web3. One thing I’m interested in and we will follow on Sporting Crypto with great depth is the future of RTKFT. Could they break out of Nike or be acquired by someone else?”

And there has been chatter online with high profile crypto influencers putting their hat in the ring to execute a Pudgy Penguins style community takeover of the RTFKT brand and project.

I find this incredibly unlikely due to the constraints of a publicly listed company owning this IP and the legal resources that would be required.

More likely is the RTFKT team creating a new brand — although there may not be any reason for them to consider this due to the payday of the Nike acquisition.

That being said, should they do so, it will be interesting to see:

(1) If the crypto native, collector community turn their noses up at a former RTFKT team revival
(2) Whether they would innovate and ship faster than they did internally at Nike

Nike have made the biggest headline (from an incumbent brand) in this space twice in the last three years.

When they acquired RTFKT in late 2021, it felt like a Google - YouTube level acquisition and they doubled down on Web3 in late 2022 with .SWOOSH months after the FTX collapse.

Two years later at crypto’s all-time high, they are cutting off that limb to save the body, rather than to spite the face.

Nike’s macro position and crypto’s growing prominence makes this a hard headline analyse, but when taking a fine comb to the details it becomes increasingly obvious that Nike have made the right decision here.

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