NHL Launch Breakaway, Video Moment NFTs

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Introduction 🔌🔧

This has been one of the biggest weeks of news for Sporting Crypto since its inception.

The headlines are:• GOALS raise a $20m Series A round to continue developing their arcade-style soccer game that lets players have ownership of game property.• Karate Combat raise $18m Series A round to give their fans ownership of the entire league. The 3-year combat league are one of the fastest-growing leagues in the sports industry.• The NHL launched 'Breakaway', their video moments proposition equivalent of NBA Top Shot and NFL ALL DAY (which is what today’s newsletter will focus on!).• Ledger have partnered with Web3 gaming and E-Sports content creator Brycent, to make him part of the LEDGER PRO TEAM, and collaborate throughout 2023 to educate communities on the evolving world of digital assets.

I could have picked any of these stories to dive deep into, but perhaps it’s best done over 2-3 editions of the newsletter.

NHL Launch Breakaway, Video Moment NFTs

The National Hockey League (NHL) launched their video moments proposition ‘Breakaway’ last week.

Video moment propositions like NBA Top Shot and NFL ALL DAY have been widely successful since their inception, the former of which was one of the first mainstream NFT products that found any product market fit outside of crypto native audiences.

Fast forward to April 2023, both NBA and NFL products have seen a dramatic reduction in volumes. A lot of this is perhaps explainable by this article by Giancarlo, alongside the fact the NFL is in the off-season and the NBA is in playoff mode. Some other reasons such as tax season etc. can be pointed to as reasons for the drop, but overall there is just less demand.

Taking a deeper look at the statistics, if we take the month of March for NBA Top Shot:March 2021:

• Sales volume = $208,285,837.00

• Unique buyers = 184,008

March 2022:

• Sales volume: $29,475,484.00

• Unique buyers: 40,828

March 2023: 

• Sales Volume: $3,170,641.00

• Unique buyers: 8,294

In terms of sales volume, we’ve seen a 90% year-on-year reduction, and in unique buyer terms, we’ve seen a ~25%-30% year-on-year reduction.

If we take the month of March for NFL ALL DAY:March 2022:

• Sales volume = $12,765,197.00

• Unique buyers = 15,844

March 2023: 

• Sales Volume: $1,817,681.00

• Unique buyers: 9,178

In terms of sales volume, we’ve seen a ~90% year-on-year reduction, and in unique buyer terms, we’ve seen a ~40% year-on-year reduction.

Regardless of broader factors, it’s clear that demand and usage have started to decrease.

You could say that this is probably the worst time that the NHL could launch a product similar to this.

So why now and what is the aim of the NHL?

If the revenues or useage are no longer significant for a proposition like this — what is the incentive? 

To begin, we have to look at the partners in Breakaway.

It’s not Dapper Labs, surprisingly, who are the partners in the NFL and NBA products.

There’s no knowing exactly why they weren’t the vendor of choice, but it was announced in June 2022 via a press release that the NHL and its players’ union, the NHLPA, would be joining forces with Sweet, an end-to-end solution for brands looking to create officially licensed NFTs:

Sweet seem to be an accomplished outfit when it comes to brands, having worked with Kia, Burger King, NY Knicks, Cleveland Cavaliers, Old Navy and many more.

At one point, it was presumed throughout the industry that RFPs for video moment NFTs were to some extent futile, as Dapper were expected to simply scoop up every major league from a licensing perspective - but things haven’t panned out that way. Dapper last raised in September 2021 and the market has not been as kind to them since from a pure revenue perspective. They’ve also been focused on onboarding more projects and users onto the FLOW blockchain, and perhaps they saw diminishing returns from potentially partnering with more expensive league IP.

There is an interesting pendulum swing back and forth between vendors and rights holders at the moment that I think might become one of the most interesting stories in this space over the next 18 months.

If we look at this in more broad terms and chronologically:

• A new and exciting way to engage fans and make money for rights holders comes to the fore.

• Rights holders flock to sell rights to vendors that can offer the best minimum guarantee deals or upfront cash.

• Vendors have to try and make a margin.

• Some of them do and survive, some of them don’t, or haven’t, and haven’t survived.

• Rights holders try and sell their rights once more, but there is a fewer supply of vendors, and thus the deals aren’t as lucrative. 

• Vendors have more leeway, to the extent many of them are going to the renegotiating table early… or reneging on promises.

I was actually asked during NFT NYC what I thought of the licensing market and how competitive it is right now due to a few, bigger players in the industry scooping up most of the valuable licenses around. And because only a few can afford them, I think what we’re seeing is less leverage for the rights holder due to a smaller supply of vendors writing big cheques.

How I see this playing out includes heavyweights like Amazon, Disney, Apple and such coming to the table, taking this on as a cost centre to cross-sell into streaming, entertainment, merchandise and such. The unbundling then bundles all over again but this time includes some of the biggest players in the sports rights market, adding Web3 rights to their deals.

How this turns out considering the assets that have been created are on blockchains and permanent, remains to be seen… but it sounds like something that an entire newsletter could be centred on. That’s for another edition…

Back to NHL Breakaway, let’s add some context.

Comparing the NHL to the National Basketball Association (NBA) and National Football League (NFL) is fascinating.

According to Forbes, as of 2020, the NHL had a total of approximately 148 million fans globally. In comparison, the NBA had approximately 459 million fans globally, and the NFL had approximately 187 million fans globally.

And if we look at one-off events, the picture it paints is pretty clear — the NHL is significantly less popular than the NBA and NFL.

According to Nielsen, the 2021 Super Bowl by an average of 96.4 million viewers in the United States. The 2020 Stanley Cup Final (the NHL final game) was watched by an average of 2.88 million viewers in the United States, while the 2020 NBA Finals was watched by an average of 7.45 million viewers in the United States.

Does this necessarily mean that the Breakaway product will be less popular than Top Shot and ALL DAY respectively? Not necessarily.

These products are still relatively niche and can still be successful by having enough superfans. This is just one factor, however. The data at the top of the newsletter shows that the revenue rights holders can make from leveraging video moments is volatile, and is more recently diminishing.

In terms of ages, according to Morning Consult, in 2021, the average age of NHL fans is 49 years old. In comparison, the average age of NBA fans is 42 years old, and the average age of NFL fans is 47 years old.

In terms of ages and having a younger, more likely to buy digital assets style audience, it doesn’t seem this is significant enough a difference to draw that conclusion.

Having said that, a really interesting insight that is very relatable is merchandising revenue.

According to Forbes, the NFL generated an estimated $3.5 billion in merchandise sales in 2020, while the NBA generated an estimated $1.5 billion in merchandise sales in the same year. The NHL by comparison, generated approximately $1.29 billion in revenue in the 2019-2020 season.

You can begin to draw a reasonable conclusion that market sentiment, alongside the fact the NHL has an older, smaller and less frivolously spending audience means there should be lower expectations for just how successful Breakaway is.

Not necessarily in terms of users, but in terms of sales volume.

This, as mentioned before, is important due to the nature of the deals that vendors sign with rights holders. If the numbers aren’t adding up and this becomes a cost centre for either the vendor or rights holder, they’re then in a tough spot.

Market Dependent

We’ve already seen that video moment NFTs can be successful, but their success varies from sport and market.

LaLiga Golazo, for example, one of the first European sports video moment NFT propositions by Dapper in collaboration with OneFootball, is far less successful than their NFL and NBA counterparts purely from a numbers perspective.

This is a snapshot of the last 30 days in terms of unique buyers, volume and a few other data points.

The UFC product has also struggled to attract similar levels of interest as Top Shot and ALL DAY respectively.

Again, showing us that fans of respective sports or leagues vary in their enthusiasm for video moments NFTs. This is totally normal but also shows us that the same proposition isn’t necessarily going to work across every geography, market or sport.

I often talk to people and companies who want to do ‘NBA Top Shot but for ______’

The questions I often ask look something like this:

• Have you looked at how well every one of these propositions has done?

• What are the merchandising revenues like for that league?

• Have you looked at European vs North American NFT & physical collectable markets?

• Have you considered how fans in Europe feel about NFTs compared to the US?

• Purely from a numbers perspective, how many of your fans are likely to be interested in this?

The lift and shift approach doesn’t tend to work as well as people hope, but the NHL will hope to follow NFL ALL DAY’s success which is widely seen as the only thing that has even come close to touching the success of NBA Top Shot in the video moments market.

I wish the NHL and Sweet the best of luck. They have chosen an extremely difficult time launch a proposition like this, but perhaps that will work in their favour from an expectations perspective, and push them to build something that hockey fans genuinely enjoy long term.

More Sports & Web3 Stories

• GOALS raise a $20m Series A round to continue developing their arcade-style soccer game that lets players have ownership of game property (Link)

• Karate Combat raise $18m Series A round to give their fans ownership of the entire league. The 3-year combat league are one of the fastest-growing leagues in the sports industry. (Link)

• Ledger have partnered with Web3 gaming and E-Sports content creator Brycent, to make him part of the LEDGER PRO TEAM, and collaborate throughout 2023 to educate communities on the evolving world of digital assets.

• Nike’s .Swoosh is gathering momentum with over 300k .Swoosh IDs claimed so far (Link)

• LinksDAO announced three new perks for their members (Link)

• From SBJ; As crypto recovers, sponsorship questions remain (Link)

• Latest Apple headset rumours say it’ll include VR workouts and sports (Link)

• The UK Digital, Culture, Media and Sport Committee held a hearing on crypto, the arts, and sports (Link)

• Socios and PSG have partnered to create the ‘first-ever PSG digital collectible’. (Link)

• World’s First NFT Collection of Antique Tennis Rackets Will Be Auctioned on OpenSea This Spring (Link)

• NBA Top Shot are using burn mechanics to try and control the supply of packs during the NBA playoffs (Link)

• Unyfy, a web3-ready, no-code community and content platform-as-a-service developed by German startup Liquiditeam, allows sports teams and other brands to easily launch digital platforms (Link)

General ‘Stuff’ that Could Impact You

• The a16z state of crypto report 2023 is a must-read (Link)

• Excellent post by the fantastic Giancarlo titled; NFTs are in free fall (Link)

• Marvel Studios Founder David Maisel Launches Ekos Genesis Art Collection (Link) 

• EU Lauds 'Comprehensive Regulation' as MiCA Crypto Law Passes (Link)

• Rapper Soulja Boy is alleged to have promoted 70+ crypto projects since 2021, as the excellent ZachXBT shows in this incredible thread. There’s no hiding on a blockchain. (Link)

Thank you!

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