Web3 in Sports: 2023 Review

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Introduction 🔌🔧

👋 Welcome back to Sporting Crypto!Quick PSA… the last newsletter of 2023 will go out next Monday the 11th of December. We will also have Episode 11 of the podcast launching on the 14th of December. 

Sporting Crypto will be back in your inboxes from the 8th of January 2024! 

2023 has been so much busier than I could have anticipated, especially considering how depressed the crypto market has been for a large part of it. A winter break is much needed!

Before you read on…

🔌 Our latest event saw coverage in Decrypt! Check out the article titled: Sports And Web3 Collides During Sporting Crypto Social NYC Edition → Here 

🔌 Listen to the latest episode of the Sporting Crypto Podcast with the CEO of Animoca Brands, Robby Yung! Listen here or watch on YouTube 

The Sporting Crypto Newsletter is supported by The HBAR Foundation.

The purpose of today’s newsletter is to review key events in the intersection of sport and Web3 during 2023. It’s also a good chance to assess some of the predictions I made at the start of the year, in terms of what key trends we’d see.

Perspective is key in any walk of life, and perhaps even more important when analysing a rip-roaring, volatile space that moves at lightspeed.

Discussed in this Newsletter:

❓ Reviewing 2023 Sporting Crypto Predictions🔑 2023 Key Themes🧠 Concluding Thoughts

❓ Reviewing 2023 Sporting Crypto Predictions

At the beginning of 2023, I predicted 3 key trends we would see throughout the year.

In this section, I’ll review how accurate these predictions were for the sports x Web3 industry, and what the impact of those trends has been on the industry.

1) Co-Creation - Prediction rating: 6/10

In 2023, I expected that we would see propositions that allow fans to do something with their NFTs.

2022 had been the year of the static image.

The collectable.

The ‘thing’ you own digitally.

But 2023 had to become the year when you could do something with that ‘thing’.

Co-creation, for me, was an easy ‘base level’ thing to consider within these propositions.

Penned at the beginning of this year, I wrote:

And speaking to the value of co-creation in Web3: 

And we’ve seen some good examples of this, but perhaps fewer than anticipated.

In sports, the most recent and probably one of the best examples has been the ATP’s POSTERS launch, which was covered by Sporting Crypto here.

Tennis fans globally were able to co-create, with globally renowned artist Honor Titus, posters representing the Nitto ATP Finals in Torino. These were digitally co-created and also available to ‘claim’ physically.

Outside of sport, we’ve seen the likes of Casio experiment in this space, abstracted slightly.

They launched Virtual G-Shock, a blockchain-based program. It began with 15,000 free-to-mint G-Shock Creator Pass NFTs, which gave holders access to the program’s Discord. There they were able to enter a co-creation competition to create a variant design for the passes, the winner was decided by community vote.

🤔Why am I giving myself a 6/10 for this prediction?

Quantity.

There were very few projects that adopted co-creation at the baseline of their proposition.

And to be honest, I understand why.

The infrastructure to execute a project with co-creation at the heart of it is very difficult. The middleware is lacking and there has to be a lot of bespoke building. Look at Casio for example, who circumvented this slightly by using Discord.

Most brands looking at this are those who have already dipped their toes into Web3 waters. It’s not the creativity or the appetite that is the issue here, it’s mostly the infrastructure to execute and deliver.

2) Customisation - Prediction rating: 8/10

This is something that has happened in more ‘Web3’ native propositions but has still been fairly prominent on the brand side as well. The aforementioned POSTERS project by the ATP is a great example of this.

At the start of the year, I wrote:

One of my regrets at the time, and more so today, is not combining co-creation and customisation predictions into one category — into something like ‘dynamic’ or ‘evolving’ digital assets.

I mean, I said it right there “NFTs have been very good at just ‘being’” and the answer to that in 2023 has been ‘dynamic NFTs’.

ALTs by Adidas has been one of the most bleeding edge examples of this.

ALTS by Adidas centres around the concept of a base ‘ALT’ NFT, that can be upgraded with collectable traits. The collectable traits can be viewed as ‘attachments’ to your base ALTS NFT.

🤔Why am I giving myself an 8/10 for this prediction?

I would go higher, if I’d chosen ‘dynamic NFTs’ instead of customisable because that’s a more accurate description of the types of projects we’ve seen. Customisation has become a feature, not a selling point of these digital products and rightly so.

It was essential that 2023 saw the rise of NFTs that were functional, and had some interactivity. The ability to customise, upgrade and modify NFTs in 2023 has become much more prevalent as the year has gone on, and will no doubt continue to become a mainstay in Web3 over the coming years.

3) Big Brands Come to Play in a Meaningful Way - Prediction rating: 9/10

Look at the above graphic.

How many of these brands are still meaningfully developing Web3 propositions?

NBA, Gucci, Adidas, Puma, Nike, Starbucks, Reddit.

But for so many their Web3 activations have been short-lived.

Throughout this year, many more have jumped on the train. At least 1/3rd of Interbrand’s top 100 brands have already entered Web3 as per Marc Baumann.

I can attest to the enthusiasm and seriousness with which many of these brands have taken Web3 this year. It’s even taken me by surprise, even if I had predicted this general trend.

At the start of 2023, I wrote: 

“2023 will be the year brands build meaningful things that utilise blockchain technology.”

When JPEGS don’t capture the imagination, you need to do something more.

And many brands are doing exactly this.

We saw Disney and Dapper Labs announce Pinnacle, an NFT platform specifically designed for mobile use, with an iOS app in the works, planned to launch on the Apple App Store by the end of 2023.

Away from entertainment, Lufthansa, one of the largest European airlines, launched an NFT loyalty program called uptrip.

It allows passengers to collect digital trading cards when they fly a Lufthansa-owned airline. Amassing all of the cards needed for certain themed collections, Uptrip users can unlock special perks on the airline such as free in-flight Wi-Fi, access to airport lounges, redeemable airline miles, and more.

🤔Why am I giving myself a 9/10 for this prediction?

Because the big brands came to play in a meaningful way.

Lufthansa, Disney, Epic Games — and the likes of Adidas, Nike, Starbucks, Reddit and more doubling down — 2023 was the year of the brand.

The prediction wasn’t an outlandish one, but it takes bravery from a big brand with a huge reputation to ply their trade in an industry riddled with bad optics, scams and grey operators. Seeing the tree from the forest is difficult when there’s so much negative news, but a credit to some of these large brands and the partners they’ve worked with for creating some solid, mainstream propositions.

🔑2023 Key Themes

Beyond the Sporting Crypto predictions (some better than others!) what were the key themes we saw dominate this space in 2023?

📱Loyalty becoming *the* buzzword

Loyalty became the go-to headline maker for Web3 brand side in 2023.

We’ve seen some of this in sports, both in execution and also teased by rights holders.

NEAR and the ICC have both teased an all-in-one digital engagement platform in their partnership, and both Nike and Adidas are building out their already successful digital engagement programs.

Manchester United, McLaren and the ATP Tour have all stated it’s a huge area of interest for them at conferences, in PR and our podcast of course!

Brands outside of sports such as Starbucks, Lufthansa and many others have gone hard and early, and seen strong results. Starbucks Odyssey for example is now viewed by many as the ‘standard’ in Web3 loyalty from a brand perspective and is at the tips of many executives’ tongues both in and out of sport.

It remains to be seen how the siloed, closed nature of loyalty programs marries with the decentralised, open-source nature of Web3 but 2023 has seen this area explode.

🎮Gaming got bigger 

I was quite bearish on just how big an impact gaming could make on this intersection but at every end of the spectrum, that’s been a bad position to take.

NFL Rivals has seen over 3m downloads for its mobile game and substantial secondary market volumes.

On the fantasy NFT gaming front, DraftKings Reignmakers and Sorare have both had very solid years considering. Both have seen months of $10m+ in monthly sales from 10-50k unique monthly buyers throughout 2023. A strong showing from both considering the market.

We’ve also seen mainstream gaming companies such as EA announcing a strategic partnership with Dot SWOOSH by Nike, the latter of whom also partnered with Fortnite to create collectable NFT achievements.

To top all of that off, the CEO of Roblox talked about NFTs live on TV late this year.

The Web3 x Gaming intersection is growing at a substantial pace, and sport is very much at the heart of that, as it has been with traditional gaming to date.

👥DAOs make a comeback?

In 2021 and 2022, we saw a lot of DAOs try to buy sports teams. Or at least say they were raising money to.

However, the majority of these were either scams, incredibly disorganised, or aimed to rip off fans.

However, the ones that have remained in 2023, like Krause House, LinksDAO, and Karate Combat, have done well in this bear market.

Links, for example, bought a golf course in Scotland, which was their goal when they raised funds via NFTs.

Krause House were named as a potential buyer of the Phoenix Suns, which is pretty extraordinary.

Karate Combat, probably the most radical project of the three, has seen substantial growth in numbers on their fan engagement application using the Karate Token, month on month since its launch.

On the other hand, we have seen the likes of Fan Controlled Football fail to come back for season three, showing that the ‘fan-controlled’ element still needs to find a business market fit, rather than product market fit. Their numbers were pretty strong, but they clearly couldn’t make the economics work.

🥽The Metaverse

The Metaverse has long been the biggest opportunity for brands, but also by far and away the biggest buzzword. It’s frothy, and many who talk about this ‘thing’ don’t know what they’re talking about.

That's because it's a real unknown what this new kind of digital, interactive world will look like and become.

I think many people have been too early to the party, creating things that won't last long term. Both in the Web3 native world, but also on the brand side. Those experiments are important, though, as what point of reference is better than failed projects?

Building in the here and now, whilst trying to envision the distant future, is incredibly difficult. But it’s clear that what is being created in the "Metaverse" right now, won’t be here for long unless there's a significant upgrade and the highest fidelity in what they offer.

However, the launch of the Apple Vision Pro marked a huge watershed moment for everyone in Web3.

Suddenly, many promised things in this world became a reality.

Now, how the idea of an open, interconnected and interoperable Metaverse aligns with the very centralised and siloed world that is Apple remains to be seen. Still, with competitors like Meta and Sony, alongside numerous other tech companies exploring this world, I believe there'll be a significant push towards the end of this decade to create higher fidelity experiences, that will inevitably overlap with Web3 technologies.

Brace yourself, because it will likely happen faster than expected. ➡️ Free-to-claim and cheap projects dominate 

Projects that are free to claim or inexpensive dominate when markets are depressed and speculation is low.

In such times, the focus shifts to creating products that people genuinely want to collect and own. With the sports market in particular, we've observed numerous projects, either free or low-cost, dominating transaction volumes on many blockchain networks.

While speculation is inevitable in a decentralized landscape resembling the digital wild west, we've also witnessed entities like McLaren, Manchester United, and Reddit truly leading the way with their free-to-claim collectables. The numbers from these programs rival some of the best Web2 engagement campaigns.

Manchester United saw 800k+ free claims of their first NFT drop and McLaren Racing’s 23/23 campaign has seen almost 3 million throughout the F1 season.

Outside of sport, Reddit have seen over 25m collectable avatars claimed by almost 22 million people.

This approach serves as an onboarding opportunity for individuals entering the Web3 space, especially during a downturn.

It demonstrates that people do have a passion for owning digital collectables without necessarily spending money or speculating on their future prices. For brands, it demonstrates that you can have a successful Web3 venture without generating direct revenue.

🌎Phygital and Real World Assets (RWAs)

This trend has significantly contributed to the uptick in interest in Web3 in 2023.

Being able to connect digital items with physical ones is the holy grail for many in Web3, and these last 12 months have seen great progress in this space.

On the real-world assets on the blockchain front, the process of digitising and utilising the power of blockchain technology to secure physical assets has been a significant game changer.

Entities like Courtyard, specialising in digitising collectable trading cards, have experienced remarkable volume. By placing items like a Pokemon card on the blockchain, you remove the need to validate authenticity. It remains securely stored in a vault and is traded as an NFT to ensure higher liquidity. If one prefers not to physically possess the item, it doesn't occupy physical space as it is secured in a vault, and if they want the physical item they simply burn the NFT.

2023 has shown that NFTs, whilst valuable purely in digital form, can have transformative impacts if connected to physical assets.

⚖️Regulation bites Regulatory changes were a significant theme in 2023, and this transformation has been overdue for about five to six years.

This space has operated in a grey area for far too long.

Some groups are advocating for looser and progressive regulations, while others push for stringent measures that might stifle innovation.

The reality will likely land somewhere between these extremes because the actions of entities like Binance engaging with sanctioned countries, alongside incidents such as FTX, cannot persist.

The past year should ideally mark the end of major crypto scandals and the tarnished reputation of this world must improve.

Moreover, the technology must become safer for users to engage with. The prevalent "code is law" mentality within blockchain poses challenges in creating secure and user-friendly applications.

It's crucial to establish more secure and reliable ways for people to interact with this technology given its current complexities.

2023 was a year which rooted out a lot of the bad, and regulation globally has helped with that. It hasn’t been perfect, but the UK, EU and many parts of Asia have started developing comprehensive frameworks that ensure Web3 doesn’t operate in the grey forever.

🧠 Concluding Thoughts

The year 2023 witnessed a crypto market initially mired in a deep bearish trend, before rallying towards the year's end. The anticipation of ETFs and similar developments spurred the surge in prices, reigniting interest in the market.

From an enterprise perspective, however, the focus on price has been minimal.

Brands have primarily concentrated on establishing strong propositions in the Web3 space, largely through sponsorships and partnerships with blockchain networks that financially support their initiatives.

Yet, notably in the latter half of 2023, an increasing number of brands have begun self-funding or co-funding their investments in this space. This trend is something I expect to continue into 2024 as business models evolve and attain greater product-market fit.

2023 was the year when every brand publicly got involved with Web3. And if they didn’t, they’re thinking about it behind the scenes. All this amongst a backdrop of regulatory uncertainty and a slew of negative headlines, I think that says all you need about the belief that this technology is here to stay.

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More Sports & Web3 Stories

• Cristiano Ronaldo faces $1bn lawsuit after launching NFT collection (Read more here)

• GET Protocol have now processed 5 million NFT tickets (Read more here)

• From SportsBusiness: Spurs deal marks ‘new stage’ in Socios fan engagement strategy (Read more here)

• FTX users name Mercedes F1 team and MLB in new promo lawsuits (Read more here)

• Crypto Sponsorships Are Back? University of Miami Strikes Deal With Helium Mobile (Read more here)

• Alabama Linebacker Uses NIL Funds to Invest in SailGP Team (Read more here)

• Japan’s National Football League Urawa Red Diamonds Collaborates with Minkabu for (Read more here)

• Polygon Gave DraftKings Multimillion-Dollar Edge in Special Staking Relationship (Read more here)

General ‘Stuff’ that Could Impact You

• According to CoinGecko, 3 of every 4 ‘GameFi’ projects have failed or are inactive (Read more here)

• Shopify tease out crypto build outs via X (Read more here)

• Coinbase 'Not Planning' to Launch Token for Layer-2 Network Base (Read more here)

• Dallas Mavericks owner Mark Cuban selling majority stake to Miriam Adelson at ‘US$3.5bn’ valuation (Read more)

• FTX Cleared to Sell $873 Million in Grayscale Bitcoin Trust Shares and Other Holdings (Read more here)

• Louis Vuitton launches new NFT, a virtual trunk costing 6,000 euros (Read more here) 

Thanks for reading the latest edition of the Sporting Crypto newsletter. I’m happy to see so many people enjoying and sharing it with their networks.

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