When Spencer Dinwiddie was drafted into the National Basketball Association in 2014, he says the players’ locker room conversations were typically on the breezier side. “Maybe it was girls, cars, and stuff eight years ago,” he says on a Zoom call. But about five years ago, as players became more financially savvy, that started to change; suddenly people were giving tips on their stock portfolios and chatting about VC funds.
This past season, things evolved even further. “Now it’s Bored Apes, NFTs, and digital assets,” Dinwiddie says.
Dinwiddie’s observations are spot on: Indeed, Web3 projects have penetrated the league’s culture to a degree that remains unmatched in professional sports. Dinwiddie himself has pursued several such initiatives, including an attempt to turn his own NBA contract into a tokenized digital asset. More recently, he cofounded Calaxy—that’s a portmanteau for “creator’s galaxy”–an open-source platform that allows influencers and entertainers to monetize their work, likeness, and brand using blockchain-powered social tokens.
“We call it Web2.5,” says Dinwiddie, who plays for the Dallas Mavericks. “It’s designed to have a lot of the look and feel of Web2, but it’s all underpinned by Web3.”
Dinwiddie is one of a number of current and former NBA players pursuing a Web3 venture off the court. LeBron James, Michael Jordan, Steph Curry, Josh Hart, John Wall, and Baron Davis are just some of the major basketball names behind recent NFT collaborations. The NBA as a league as well as individual franchises are also following suit, offering their own NFT collectables that typically come with exclusive perks and rewards.
While just about every major league has experimented with NFTs and other Web3 endeavors, none have come close to the widespread adoption seen across the NBA. Unlike other merchandise products, the digital assets provide a unique opportunity for leagues to tap into a secondary market, earning fees for trades and sales well after the initial purchase of its licensed products.
While financial gain is likely a key motivator, other major leagues had the same opportunity to cash in. So, why is the NBA and its players so much further along the adoption curve? It depends on whom you ask.
Players are given the freedom to speak their minds, and follow their role models
Dinwiddie, for one, thinks the answer has a lot to do with the amount of autonomy NBA players are given as compared to other professional athletes. While some leagues keep a tight lid on what players can say and do while under contract, the NBA is known for being relatively hands-off in that regard. “The NBA has trended towards being one of the more progressive organizations, whether that’s exploring new technologies or player empowerment,” he says. “They let their players speak out on social issues, and speak about their entrepreneurial endeavors more openly than other leagues.” Most notably, NBA players were encouraged to include some (pre-approved) civil rights slogans on their jerseys in the wake of the murders of George Floyd and Breonna Taylor in 2020, and wear “Black Lives Matter” T-shirts on the sidelines and during warm-ups. That same year, Colin Kaepernick struggled to find a place to play in the NFL after taking a knee during the national anthem in protest.
Another major factor, according to Dinwiddie, is the example set by the role models that this current crop of NBA players grew up idolizing.
“LeBron James is the first NBA billionaire; Magic Johnson is a successful businessman; Kobe Bryant going into it with BodyArmor, for example,” he says. “We understand that our career is finite, we understand that there are a lot of things we can do [with our money] like partying or whatever, but doesn’t it sound much cooler that Kobe Bryant made $400 million from a $6 million investment in BodyArmor? That’s ridiculous.”
One of the most successful, early NFT projects was tied to the NBA
Another major turning point was a partnership between the NBA, its players association, and Vancouver-based Blockchain developer Dapper Labs in 2019. That partnership resulted in NBA Top Shot, an NFT marketplace where fans buy, sell, and trade highlight-worthy digital clips of NBA moments.
Much like traditional basketball cards, fans can purchase “packs” of assorted Top Shot moments—giving them sole (albeit limited) ownership rights over the video clips. While most are only worth a few dollars or less, some of the top moments have sold for six-figure sums.
“Dapper Labs, NBA Top Shot, that was a catalyst, that was the big turning point,” says Dinwiddie. “That validated the technology in a lot of NBA players’ minds.”
The NBA cemented its reputation for experimentation and innovation during the pandemic, when it transported the entire league to a tech-heavy enclosed “bubble.” The venue, which was located at Disney World in Orlando Florida, used new technologies to keep the virus out, and allowed fans to participate remotely on screens surrounding the courts during games. It was that embrace of new technology and the league’s reputation for being trailblazers and risk takers that ultimately inspired Dapper Labs to approach the NBA before other major leagues.
“As a digital-forward organization, they had a real openness to explore with us, which was crucial to the strong foundation we’ve built for Top Shot and the community,” says Dapper Labs’s senior vice president of sports partnerships, Jennifer van Dijk, adding that professional basketball players are also known for being active on social media. “What NFTs enable is the next level of that player-fan relationship, because athletes can engage directly with fans through the communities built around these digital collectibles.”
Within eight months of its launch, NBA Top Shot had a million users, and more than $700 million in sales. Within its first year, Dapper Labs was valued at more than $7.5 billion. Pretty soon “Top Shot” had entered the popular lexicon among NBA players and fans, becoming shorthand for a highlight-worthy play. In total, NBA Top Shot has processed over 25 million transactions, totalling more than a billion dollars in sales, according to van Dijk.
“We thought it had potential, but I don’t think anyone was fully prepared for the phenomenon that the whole thing started,” says Matt Holt, the head of merchandising partnerships for the NBA. “Top Shot was one of those seminal projects in the early history of the NFT space.”
The meteoric rise of Top Shot, however, was soon followed by an equally dramatic crash, with sales plummeting 68% between April of 2021 and April of 2022. In July, NFT transactions hit a 12-month low, from $12.6 billion at its January 2022 peak to just over $1 billion last month. Holt, however, says the league isn’t too concerned with the wild fluctuations of the NFT market. “It hasn’t impacted any long-term plans,” he says. “Most of this technology and most of these products are barely a year old, so with that will come some growing pains and some volatility.”
The sudden drop in value and transaction volumes is already causing problems and delays for a number of NFT projects within the NBA. For example, the Golden State Warriors’s 2022 championship collection sold for a fraction of the team’s collectables from its less successful 2021 campaign.
Holt adds that despite the recent crash Top Shot’s rapid rise helped bring NFTs into the mainstream, creating widespread awareness and validating the market, at least among NBA fans.
NBA fans were already trading digital assets–including sneakers
Another factor that helped fuel the rise of Web3 technologies among NBA fans, according to Holt, is the video game culture that surrounds the league. He explains that recent partnerships with games like Fortnite, Horizon Worlds, and NBA All World (a collaboration with Niantic, the creators of Pokemon Go)—not to mention the NBA 2K and NBA All World franchises—created some degree of comfort with trading digital assets among fellow fans.
“If you’re comfortable playing NBA 2K on Xbox or NBA All World on your mobile phone, I think there is a natural transition to things like NFTs or digital trading cards,” he says. “Digital collectables are a really significant component of our video game business, and with Top Shot it’s just a new, interesting, emerging area for fans to engage with the NBA and the players.”
Many basketball fans today also came of age when the league and its players were synonymous with a different kind of game inspired product: sneakers. What began with Michael Jordan’s iconic Air Jordan collaboration with Nike in 1985 has since blossomed into a robust community of “sneaker heads,” which remains closely linked to the NBA.
“I definitely saw a move from sneaker collectors into NFTs, and I’m in a few NFT/sneakerhead chat groups where we’re posting both the NFTs and sneakers we’re collecting, so there’s definitely an overlap,” says Josh Ong, who founded Bored Room Ventures, a Web3 consulting agency.
Ong explains that to those in the sneaker-head community, the physical product is often viewed as a commodity, not something to wear on your feet. In fact, Ong says the market has gotten so advanced that trades can happen before the seller even has a chance to touch the footwear.
“If I buy a sneaker and never take possession of it, and then I sell it, did I buy and trade a digital good, or a physical good?” asks Ong. “As the world gets more digital, the lines between a physical collectible and a digital collectible start to feel blurry.”
“Our fans and our culture in general, we’re used to this, we’re used to doing things out of the ordinary, we’re used to trying to grab Michael Jordan’s exclusive new shoes, that’s how our demographic works,” says Dinwiddie.
Tech billionaires are buying NBA teams
Ong has another theory as to why the NBA has embraced NFTs more than other leagues, and it comes down to the decision-makers at the top.
Specifically, Ong points to a generation of franchise owners who made their fortunes in the tech industry—including Los Angeles Clippers owner and former Microsoft CEO Steve Ballmer, Golden State Warriors owner and tech VC Jacob Lacob, Utah Jazz owner and Qualtrics CEO Ryan Smith, and Dallas Mavericks owner and celebrity tech investor Mark Cuban, to name just a few. “There are now tech luminaries running these teams,” he says.
Holt agrees, adding that having more tech savvy owners in the league has furthered its embrace of Web3 technologies, starting with Mark Cuban, who bought the Mavericks in 2000. “He is extremely knowledgeable on the space, and he has also been very much at the forefront, along with several other owners,” he says.
Cuban, however, doesn’t think he deserves much credit for the popularity of Web3 projects in the NBA, telling Fast Company via email that he has “No idea how that started.”
The NBA has a young, tech-savvy fan base
Cuban believes that the connection between basketball and Blockchain is the natural result of having a comparatively young and tech savvy fan base. According to a 2017 study, the average NBA fan is 42 years old, trailing only major league soccer (MLS) for the youngest fan base in major league sports.
By comparison, National Hockey League (NHL) fans average 49 years, National Football League (NFL) fans average 50, Major League Baseball (MLB) fans are 57 years old on average, and Professional Golf Association (PGA) fans average 64. Half of the NBA’s fans are also under the age of 35, according to Holt.
“We have the youngest, most digitally literate fan base,” writes Cuban, adding that he wasn’t surprised by how readily the NBA and its players embraced NFT and Web3 projects. “The NBA and our players are dominant on social media and digital platforms, so it made perfect sense for them to have a strong connection [to Web3].”
Will other leagues ever catch up?
The NBA had certain advantages when it came to the adoption of Web3 technologies, ranging from a relatively young and tech savvy fan base to a relatively autonomous and entrepreneurial player population to a franchise owner community that is increasingly comprised of tech entrepreneurs and investors—but none of these aspects are entirely unique to the NBA. Other leagues also have young and tech savvy fans, entrepreneurial athletes, and franchise owners who began their careers in tech. It isn’t even unique for launching NFT projects.
Dapper Labs has recently partnered with the NFL to launch NFL All Day, and with the Ultimate Fighting Championship to launch UFC Strike; the MLB is rolling out NFT baseball cards in partnership with Topps, and the NHL has a partnership with Sweet to help roll out its answer to Top Shot. The NBA, MLB and NFL have also each partnered with Fanatics to launch digital collections.
Up to this point, however, it would be hard to argue that NFTs and Web3 technologies have penetrated the culture of any other league to nearly the same degree as the NBA, and it’s too early to tell whether the others will ever catch up.
“I think the NBA has an advantage, but all leagues will have the ability to expand their NFT offerings,” says Cuban.
“I think we’ll continue to be at the top in terms of Web3, because we continue to be progressive, we’ll keep trying to push the envelope, but the whole entertainment industry is going to copy it,” adds Dinwiddie. “They’re going to learn from our mistakes, and they might have a more seamless integration, but we’ll still be the first movers.”