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Intro Notes, Plugs & Amendments 🔌🔧

I’m back and rejuvenated after my break and ready to write again.

It does seem though, whenever I decide to go away, something massive happens.

In September it was Loot.

This time it was Moonbirds, but also Nike & RTFKT doing something pretty big…which will be the focus of today’s newsletter!

🔌 If you're interested in sponsoring the newsletter - feel free to reach out to me on Twitter or LinkedIn, or email me back at this address!

This Week’s Deep Dive: Nike & RTFKT Introduce the Future of Sneakers

Most readers will know about RTFTK by now.

I’ve written about them several times and they're one of the most prominent players in the digital collectable space.

RTKFT (pronounced Artifact) are an NFT studio that was acquired by Nike in December 2021.

They’ve had several successful NFT drops but most notably, their collaboration with legendary Japanese artist Takashi Murakami, is one of the most popular and most traded NFT projects ever.

They created ‘Clone X Vials’ that were first sold, which granted you a CLONE X - X TAKASHI MURAKAMI NFT.

The floor on these right now is close just over 18 ETH.

That’s over $50,000.

The all time volume on clones is 180,000 Eth as well.

The Clones then gave holders the opportunity to mint two different things;

1. A space pod

2. MNLTH Box

The Space pods also granted you a ‘Loot Pod’, which was an extension to your Space pod.

The space pods on one hand allowed for users to have their own virtual, customisable space - with many creators making skins that were sold or given away to space pod owners.

The MNLTH box on the other hand is where things got interesting.

The MNLTH box really did generate huge amounts of hype.

“What’s in the box?”

People were rattling their brains for what could possibly be in these iron cubes that were so good to look at.

Inscribed of course with the logos of both Nike & RTFKT studios…this was always likely to be the first collaborative thing that the two entities (now one!) did together.

After so much anticipation, breaking open the RTFKT MNLTH meant you got the following:

1. An RTFKT MNTLH 2

2. A Skin Vial

3. An RTFKT Nike Dunk Genesis CRYPTOKICK

And here lies the beauty of what RTFKT have created.

You are able to equip the vials to genesis cryptokicks to create awesome skins for your digital sneakers.

Watch the above video to see how amazing some of the designs are. 

Nike and RTKFT are a match made in heaven, and now they have the digital products to show for it.

The context

(I want to shout out my friend Nathan Baugh for providing me with some of this great context!)

Since 2010, Nike’s share of revenues from footwear has risen from 11% to 28%.

On the face of this, it seems pretty good.

Reasonably strong growth.

Looking at the chart above - that level of growth is okay but perhaps just that…okay.

And the reason for the lack of hypergrowth specifically within these markets is due supply chain issues.

In December, Nike execs announced temporary Vietnam factory closures and decreased inventory production by 130 million units. 

The increase in costs throughout their supply chain meant that margins were getting thinner, which is a big problem for recurring products.

Is this due to Covid-19, other geopolitical issues worldwide or something else? The answer to that is uncertain. 

But when your means of production have multiple inputs, there’s a larger chance that one of those variables messes up that supply chain.

So to recap:

1. Nike, Adidas and most sneaker producing companies have had average-to-below average growth in their sneaker vertical due to a variety of supply chain issues

2. Nike acquired RTFKT in late 2021 to make their jump into the metaverse

3. RTFKT this week created customisable cryptokicks in collaboration with Nike

More important context

One of the things that Covid did other than fuel virtual goods and services was that it gave a lot of people a lot more free time.

Free time that for some, was spent collecting things.

Sneakers, trading cards, sports memorabilia - all of these markets exploded during the height of the pandemic.

Resale market app GOAT claimed $2 billion in sales on the platform from Mid 2020 to mid 2021 with sneaker sales doubling in that timeframe.

In Dec 2021, Sotheby’s reported that 55% of its new clients came from sneaker auctions.

According to eBay, Sports Trading card sales increased by more than 300% in 2020.

If you can’t see the signal from the noise at this point, I’m not sure I can help you with any more stats!

NFTs as a thing erupted during this period, but so did physical collectibles in their own right.

Is this a bubble, or the future?

It’s highly, highly likely that this is the future.

When you sell a physical sneaker like Nike, the costs involved to design, text, create, ship, sell and distribute that sneaker is relatively high. And when some of those variables change from a cost perspective, sometimes, you’re hamstrung.

It isn’t easy getting a new leather provider for a supply chain that handles tens of millions of products per year. (I’ve never worked with physical products before so if this is a bad example, apologies) 

Moreover, when a sneaker is resold - Nike don’t make a penny. 

In the NFT world, with royalties, this is the norm. 

Every time a digital item is resold, the creator of that digital item gets a royalty. The industry standard is anywhere between 2.5-10%.

Now, virtual items can be hacked or lost.

But they can’t be scratched, muddied or broken. So resale values aren’t impacted by things we’re used to in the digital world.

And the liquidity is much better because you don’t have to physically send something to someone.

With smart contracts, selling a digital item means I don’t need to trust the seller.

On eBay and Amazon - when you’re buying sports memorabilia, trustless is not a word you’d use to describe that process.

If you combine the fact that these markets both exploded and Nike’s trainer sale growth hasn’t been comparatively explosive, it’s pretty obvious why the acquisition was made.

AR, VR and Digital items

Right now, things haven’t evolved massively since Pokemon Go.

Things are still janky, crude and slightly ‘unnatural’ when it comes to most things augmented and virtual reality.

But what we’re seeing here is a glimpse into the future.

RTFKT are part of that glimpse, showcasing what can currently be done with their wearables.

Ownable digital items that are customisable and wearable in AR and VR. 

Over the next 30 years, it’s not crazy to say that our physical and virtual worlds will blend into one.

In fact, considering how much time we spend on screens and how reliant we are on GPS to direct us and social media to communicate - some would say that blend already exists.

What does the future look like & how do sports play a part?

This is difficult to predict. But I think there are a lot of really exciting things that are to come here.

I always think about the full line of ‘inputs’ when it comes to RTFKT specifically after they were acquired by Nike.

If we think about what Nike has:

• Huge resources in terms of both money & people

• Supply chains globally

• Massive, globally recognised brand in Web2.0

• A huge pool of talent and ambassadors

If you think about what RTFKT has:

• Leading technical and brand expertise within Web3.0

• A community of holders and RTFKT lovers

• Elite level execution in Web3.0

So let’s think about how these things add up…

If you currently have digital assets that are cobranded then Nike are already making NFTs.

But to take this to the masses, there needs to be a lower barrier to entry, easy to understand products and more ‘real life’ connectivity.

Nike could in theory create a physical sneaker that grants you access to minting an NFT, that is then customisable or useable in a virtual world. It could be co-created with an athlete on Nike’s roster.

Could you have a LeBron James pair of basketball sneakers that give you the access to mint the NFT equivalent, that is then further customisable and useable in games and other virtual worlds?

That’s just off the top of my head - but by connecting all those dots - Nike have the ability to bring virtual goods to the masses in a meaningful way beyond just speculation or community access.

I’m a firm believer that Nike buying RTFKT is going to go down as one of the best acquisitions of all time.

You either acquire those who might outgrow you, or you disrupt yourself with new models.

FIFA disrupted itself with FIFA Ultimate Team. Google bought YouTube.

Facebook bought Instagram.

This is that level of importance. Nike will look back at this as a defining moment in their company’s history. That’s one thing I’m certain of.

More sports crypto stories & things to put on your radar

• The first ever NFT pay-per-view sporting event. No shocks that it involves Floyd Mayweather!

• Aku dreams, a project I’ve much admired, by Micah Johnson (former Baseball player) - had a bug in their smart contract. $45m has been locked up.

• New York Liberty will be the first WNBA team to issue NFTs.

• The NBA has had a troubling time with NFTs of late. After starting so well with Top Shots, the market has slowed (understandably), and they’ve had to make adjustments to ensure their community are happy. The NBA also released their *own* NFTs that didn’t go down amazingly. The NFT ‘cap’ was increased after they launched, there was a bug in the contract - and generally, it wasn’t fantastic.

• NFT Soccer Games is being built on Chilliz.

• Liverpool are in the market for a Crypto shirt sponsor that could be worth £70m…

Great reads, great tweeting and more general ‘stuff’ that could impact you

• On-chain stuff is important. 

• It’s slightly ageist, but it’s kinda true. The crazier my dad thinks something is, the more attention I pay to it.

• This is absolutely massive. If you can’t see where things are going from here, look harder.

• There’s something to be said about how web2 models have been built on getting clicks, regardless of truth or content quality.

• Decentralised social media. Possible without breaking the current laws we adhere to? Maybe is the answer.

• Punk 6259 is clearly a genius. 

Thanks!

Thanks for reading the latest edition of the Sporting Crypto newsletter. I’m really happy to see so many people enjoying it and sharing it with their networks. If you enjoyed this, please tell your friends who might be interested - and share it on social :)This newsletter is for informational purposes only and is not financial or business advice. These are my thoughts & opinions and do not represent the opinions of any other business or entity.