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Intro Notes, Plugs & Amendments 🔌🔧

Crypto markets continue to look treacherous and whilst there’s been some respite more recently, I do think that this feels like the beginning of a bear market where we could see prices go lower (not financial advice, of course). 

In very early 2018 we saw a Crypto crash that saw Bitcoin drop from $20k to about $10k before taking a short pause, and then dropping to $4k and staying there for a while. About 2 years, in fact.

We might be at that short pause now.

Or we might stay here for 2 years.

We might rally from here.

No one really knows, but it doesn’t feel like there’s quite enough doom and gloom for this to be the ‘bottom’.

What does that mean for brands and sports franchises? 

I’ll go into this deeper in the ‘Crypto deep dive’ section that I’ve revived for next week’s edition of Sporting Crypto as I gather my thoughts!

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This Week’s Deep Dive: Sorare Partners with MLB

Sorare, one of the great successes that we’ve seen in the Sports NFT space, has signed a deal with MLB and their player’s union (MLBPA) to be their NFT Gaming provider.

Sorare have been on a trajectory like few companies in the world, let alone the crypto world specifically, over the last few years.

They raised $50 million in a Series A round in February 2021 and $680 million in a Series B round in September 2021 that valued the company at a $4.3 billion valuation…the latter was Europe’s largest Series B round and the second-largest private fundraise among blockchain startups, only trailing the goliath exchange that is of course FTX.

Sorare had $325 million in trading volume last year, and they expect to achieve at least $700 million in volume this year. The company claims to have 1.8 million registered users in 185 countries, with nearly 20% of users residing in the U.S.

When it comes to leveraging licenses, few have done it better, if any, from an NFT perspective.

Having struck deals with basically every major club or league in the world apart from the Premier League from a soccer perspective, they’ve done exceptionally well.

The Premier League is still the holy grail from a licensing perspective, and I’m sure Sorare still feel like they have unfinished business here, but the opportunity to steal a march on possible competitors in other sports was too good to miss out on.

And hiring Ryan Spoon experienced US-based COO Ryan Spoon earlier this year gave us some hints about their plans.

Sorare started as a football game. But it’s now trying to become a global sporting powerhouse. Because, when you’ve got a good model - expansion is the name of the game.

There are some hitches in comparison to their soccer game, however.

Instead of cash rewards for gameplay in tournaments, the baseball game will offer only more NFT cards for winners. That helps avoid running afoul of U.S. gambling laws and MLB’s own wagering prohibitions.

The US is a mess when it comes to regulation from a…pretty much everything perspective.

National and state laws have to be abided by, but then leagues and private institutions can also have stringent rules to ensure they keep as much upside as possible.

Back where it all began

Baseball cards were the first sports card collectibles created with the very first known baseball card being created in 1865.

Fast forward to summer 2021 and we see one of the biggest booms in sports cards history, with baseball being a big part of that.

In August 2021 a T206 Honus Wagner, 1909-1911 card sold for $6.6m at auction.

The most expensive sports card ever sold. 

Safe to say that baseball cards started as fun memorabilia - but have grown to become much more than that.

This is sporting culture in asset form.

Outside of the crazy volumes and prices we’ve seen, there’s also been a shift from a licensing perspective.

Topps, who hit over $550m in revenue in 2020, have had the MLB & MLBPA trading card licenses for the last 70 years. So there was a shock in the market when MLB awarded Fanatics both its MLBPA and MLB licenses in August 2021.

The deal effectively ended Topps’ 70-year connection with baseball.

A hammer blow to say the least.

So the MLB and MLBPA have made moves on the physical side but what about the digital?

MLB Launched NFTs With Fanatics-Owned Candy Digital.

So Fanatics not only scooped up the physical card licenses, but they also secured the MLB’s first NFT proposition via Candy Digital.

They debuted with $2.7m worth of sales in their first weekend on market.

If you combine Sorare’s $325m worth of sales and the strong debut that Candy had in the market, it bodes well for this future partnership.

What’s clear so far is that brands, leagues and sports clubs want to leverage their licenses for NFTs.

And those that can bring home the bacon consistently stand a good chance of winning those licenses.

Is there a bear case for Sorare?

It’s difficult to see Sorare’s grip on the sports NFT market waning, but as we know, when you live by the license, you can also die by it.

As I wrote in this edition - to license or not to license - being at the mercy of license deals can be a blessing and a curse.

The authenticity, legitimacy and brand credibility this gives to projects in the NFT space cannot be understated.

If they’re not successful, license owners will look to go where they can leverage said license for more capital.

Sorare have got THAT core component right - make money for the license owners so they're in a good spot to renegotiate in the future.

But that only happens by having a viable product that people love using.

And Sorare has a diehard userbase that isn’t slowing down.

In addition to that, they have also started to seep into the culture of soccer in an interesting way. Certain players on Sorare have more followers on the platform than they do on social media. Some players also play the game themselves.

Sorare have basically created a melting pot where collectibles, soccer, fans, players and clubs all mesh together all via NFTs.

Therein lies the magic. That magic could of course dissipate if there's complacency, a better product from a competitor or demand in their game reducing.

And of course, these in-game economies, as we’ve seen with many other examples, are hypersensitive. A slight change can disrupt these economies massively. 

License owners could also think about creating their own fantasy games, but the technical and executional expertise to do so required cannot be understated. A possible but improbable risk to consider.

Could the main challenge come from Web2?

Sorare is a fantasy game at its core.

And 1.8m users worldwide is nothing to be sniffed at.

But only 140,000 of them are revenue drivers. That figure is the number of people who own a card on Sorare. 

So there are a lot of signed up users but not as many ‘paying’ customers.

That’s fairly normal when it comes to ‘sign ups’ vs active users for any application, or in a ‘freemium’ product which I suppose you’d say Sorare is.

But what if a DraftKings, Fantasy Premier League or other huge fantasy platforms in the world decide to really compete in this space?

Licenses would be an issue in Soccer and now Baseball, but Sorare could see competition in other sports from some of these more traditional players if they feel it’s a market they want to expand in. And likewise, when those licenses end, competitors could try and steal a march.

DraftKings for example have 2 million unique paying monthly users - which is pretty massive. 

The question would be whether or not a) these brands have the technical and general understanding to create something that leverages blockchain technology or b) have the ability to get the licenses required to make a meaningful mark on their bottom line.

With those two things in mind, Sorare have put themselves in a pretty strong position. Not an unassailable one, but a strong one.

Strong funding. A lot of licenses. A crypto native team who are technically strong.

It would take a lot for their thunder to be stolen.

Baseball is a fresh chapter for Sorare in a market they’re not used to.

And questions may be asked as to whether it could drain liquidity from their soccer game…

But overall, this feels like an opportunity that had to be taken by the french unicorn.

Usually, when there’s a gold rush like this in a new emerging hot thing - if you don’t do it - someone else will.

Sorare might have to learn as they go in a new sport - but some of their recent hires - such as the aforementioned Ryan Spoon, may well prove the difference between success and failure for this new game.

I’m really intrigued to see how the launch goes for Sorare MLB.

All the signs are pointing to success - but with a waning crypto market - nothing is guaranteed.

More sports crypto stories & things to put your radar

• The LUNA/UST debacle made people wonder…what happens with their sponsorship of the Washington Nationals. Well, apparently it was a 5 year deal paid upfront in cash. It remains to be seen whether the brand will stay there!

• Physical and digital markets colliding is something to watch over the next 2 years. 

• Chelsea have got a new sleeve sponsor. Whale Fin, an app that allows you to buy, swap and borrow digital asses will be their partners for 2022/23.

• Toulon rugby enter the metaverse!

• Manchester City teamed up with Puma, with what was Puma’s first ever NFT drop!

• Arsenal have signed a deal with Ultimate Champions - a competitor to Sorare.

• Michael Owen has been shilling crypto since 2018. Everything in this tweet is bad. Has he not learned anything?

• Paige Bueckers, a college basketball athlete, is one of the people selected by Instagram to trial NFT support. 

• Dwyane Wade has partnered with Budweiser to drop some NFTs/

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

• IP, rights, licenses - people are getting confused when it comes to crypto interacting with these things. 

• Kallaway is spot on here. When brands start thinking differently, they’ll do some good things here.

• If you’re an influencer trying to scam people on a transparent public ledger, you deserve to be caught. 

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.