Disney Launch NFT Platform with NBA Top Shot Creators Dapper Labs

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Disney Launch NFT Platform with NBA Top Shot Creators Dapper Labs

The Sporting Crypto Newsletter is supported by The HBAR Foundation.

March 2023 → Disney fire 50-strong Metaverse divisionJuly 2023 → Dapper Labs make 3rd round of cuts in 9 monthsNovember 2023 → Disney sign blockbuster NFT licensing deal with NBA Top Shot Creator Dapper Labs

(Why do the biggest headlines of the year always seemingly happen while I’m abroad?!)

Dapper Labs and Disney have partnered to launch Pinnacle, an NFT platform that will leverage Disney IP to create digital pins that are ownable and tradeable by enthusiasts.

For those of you who don’t know Dapper Labs, they are the company behind Cryptokitties, NBA Top Shot and NFL ALL DAY.

Discussed in this Newsletter:

🪄 Disney’s ‘Pinnacle’ NFT platform Explained🧪 Dapper’s rocky 12 months & Disney’s Metaverse Plans🧠 Analysis

🪄 Disney’s ‘Pinnacle’ NFT platform Explained

So what is Pinnacle?

The platform is inspired by physical pins sold at Dinsey theme parks, and this platform, in collaboration with Dapper Labs, aims to digitise the pin-collecting experience.

These digital pins are NFTs minted on the FLOW blockchain, the chain created by Dapper Labs, that NBA Top Shot, NFL ALL DAY and their other collaborations all run on.

Disney enthusiasts can expect to see digital pins based on characters and properties from Disney, Pixar, and Star Wars, including notable characters like Buzz Lightyear, Woody, Disney Princesses, and Darth Vader. Marvel, however, was not mentioned in any PR releases.

The waitlist has been opened on Disney Pinnacle’s website, where users can sign up with an existing Dapper account or their email. No specific date has been given or a public launch.

The platform is specifically designed for mobile use, with an iOS app in the works, which is planned to launch on the Apple App Store by the end of the year. Users will have to be 18+ to access Pinnacle.

Dapper Labs CEO ‍Roham Gharegozlou said in a press release:

🧪 Dapper’s rocky 12 months & Disney’s Metaverse Plans

More often than not, Dapper and Disney have made the headlines due to negative reasons over the past 18 months when it comes to Web3 and Metaverse activities.

For example, In March 2023 Disney fired their 50-strong Metaverse division. This was just weeks after Disney CEO Bob Iger was announced as an investor and board member of Web3 company Genies, a Web3 digital avatar and fashion platform. The mixed optics from Disney and their CEO respectively, were something many were struggling to reconcile at the time.

The former Metaverse division at Disney was reportedly "tasked with finding ways to tell interactive stories in new technological formats using Disney's extensive library of intellectual property”.

And speaking of, earlier this year, a series of limited-edition NFT Star Wars toys were released in partnership with Cryptoys, whom Dapper Labs are an investor in. The digital toys cost $39.99.

For Dapper Labs, on the other hand, things have been much more turbulent.

They have made 3 rounds of layoffs over the last 12 months.

In July 2023, the company cut 51 people representing around 12% of the business according to reports.

In November 2022 the company went through a further 22% downsizing in employees and an even further 20% cut in staff in February 2023.

Rough, back-of-the-napkin maths would presume that the company has shrunk from almost 700 people to ~450, presuming no staff has been hired (which is unlikely, of course).

In May 2023, three months prior to the company’s latest cuts, there were headlines that outlined NFL All Day, Dapper’s NFL video moments product, had fallen ‘hundreds of millions of dollars’ short of expectations. Later that same month, in May 2023, there were reports that the NFLPA had failed to recoup $41.8m from crypto-related products, namely Dapper and DraftKings Reignmakers. It’s not been made public how large a slice of that $41.8m that Dapper Labs were responsible for, but it’s clear that at the time, they were hurting due to market conditions. A month prior to this, in April 2023, there were also reports that NFT Sports companies were going back to the table with big sports IP — including Dapper Labs — to renegotiate terms.

If this wasn’t all enough, this two month period of uncertainty and pain for the business came months after a lawsuit was filed against Dapper Labs in February 2023 alleging that NBA Top Shot video moment NFTs were securities (tradable financial assets).

To summarise: → November 2022: Dapper Labs laid off 22% of their staff.→ February 2023: Lawsuit filed against Dapper Labs alleging NBA Top Shot video moments are securities→ February 2023: Dapper Labs lay off a further 20% of staff→ April 2023: Dapper Labs part of NFT Sports companies who re-negotiate terms with sports IP→ May 2023: Dapper Labs NFL video moments product reportedly falls ‘hundreds of millions of dollars’ short of expectations → July 2023: Dapper Labs lay off a further 12% of staff

🧠 Analysis

For Disney, this is close to a no-lose situation.

They are likely receiving a huge minimum guarantee to secure their iconic IP, and if wildly successful — Pinnacle could have huge upside for them and attract a digitally native audience of collectors who love Disney IP.

And in the real world, Disney enthusiasts love the pins that Pinnacle is centering its proposition around. Of all Walt Disney's millions of fans globally, those who collect and trade the Hollywood studio and theme park operator's signature pins may be among the company's most loyal consumers.

There are pin-trading events that are ticketed, that sell out in the hundreds and have demand for far more.

There have been some issues with fake pins, however, that have flooded the market on eBay in years gone by, catching out unassuming collectors.

(Insert: The blockchain fixes this)

📱 Mobile native is smart

The next big rise in crypto adoption will come from consumer-facing applications that are easy to use and not from web-based domain products.

You have to:

1. Go to where consumers are or

2. Give consumers something of such value that they will go out of their way to purchase it

Many crypto products fit into bucket 2 because there is the perceived speculative upside by early adopters.

But this speculative nature of crypto won’t and can’t last forever if it is to fulfil many of its promises.

🧑‍🔬 Dapper Labs go big

Dapper Labs are running leaner than they have for several months.

Adding Disney to a portfolio that already includes the NBA, NFL, UFC, and is to reportedly add the English Premier League, is incredibly impressive, even in the light of the cost of these licenses.

And for Dapper Labs, licensing in the short term is the only way they can win and survive, because they have, for the most part, made a knack of turning Web2 and franchise IP into Web3 content that people will buy in droves. That is a good thing to have going for you.

The economics of these deals long term are trickier. There are deals you will break even on, but potentially cross-pollinate audiences leading to a rising tides lift all boats type of situation. But on top of the operating costs, staff and licensing costs — this is not an easy business to generate massive margins on. And if the margins are massive, IP owners go back to the table wanting more money, naturally. It’s cyclic, and difficult, generally speaking — and the markets quickly turn into oligopolies. Dapper, Sorare, Candy Digital and likes have this market cornered in the same way that Fanatics have the sports card market in their grasp. For now, anyway!

⛓️ Big Brands Believe in Blockchain

The headlines keep saying that crypto is dead.

But the reality is that every single major brand is looking at blockchain in a very serious way.

Execs either have approvals internally or are vying for them, to go out and really experiment and investigate how this could be a game-changer for their existing respective business models.

Disney make almost $100bn in revenue per year, with $21.24 billion in revenue announced in their latest quarterly earnings report.

This is a big deal for the entire space, whether you look at it as simply a licensing deal, this is something revenue-wise that will be a drop in the ocean for them.

And is it a surprise that they choose to work with a company known for their sports NFT projects?

Disney own ESPN and have launched ESPN Bet recently, and sports are a big part of their overarching strategy as a business.

Disney are not the last big brand that will make a big Web3 splash.

This will be the first of many, multi-billion dollar companies experimenting and launching Web3 propositions over the next 12 months.

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General ‘Stuff’ that Could Impact You

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• JP Morgan’s Onyx Taps Avalanche for Tokenized Funds (Read more here)

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• Over 40 brands have launched Web3 propositions in 2023 (Read more here)

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