Why Panini is staying in the sports NFT business amid the market’s collapse

The brief golden age of collectable sports non-fungible tokens may be over, but one of the world’s best-known trading card companies is still investing in them despite the NFT market’s dramatic collapse and their uncertain federal regulatory status.

Panini America, the U.S. business of Italy’s Panini S.p.A. that’s best known for its FIFA World Cup sticker books published since 1970, on Thursday will debut the beta of an enhanced NFT user interface, with more data, metrics, and tools for display, purchase, and resale of its digital trading cards on its primary and secondary marketplaces.

Peer-to-peer resales generate the majority of NFT collectible sales, with Panini and its licensees enjoying a cut on the retail and resale aspects. Panini, which has been in the digital trading card business since 2020, plans to continue to mint new licensed sports NFTs via its in-house blockchain technology.

This is occurring at a time when many collectors and investors are fleeing NFTs amid stark headlines around the wider digital asset space because of cryptocurrency declines, various swindles and scams, and the implosion of several major players in the space such as FTX and Silicon Valley Bank.

And at the macro level, critics have labeled some NFT products as financial scams, or assets in dire need of financial regulation, that are also bad for the environment because of the vast energy needed by the blockchain computer networks to create them.

Among sports NFTs, Vancouver-based Dapper Labs brought the technology into the wider public consciousness with media reporting, including from The Athletic, around the eye-popping sales of its NBA Top Shot licensed highlight clips — which are slicked up to look and sell online like trading-card packs.

In February 2021, NBA Top Shot total monthly sales hit their peak of $224 million — which includes up-front retail by the company and resales by consumers.

NBA Top Shot sales in February 2023 were $2.8 million. That’s a two-year sales revenue decline rate of nearly 99 percent.

Dapper Labs, which has said it remains profitable despite the volume declines but is still conducting layoffs, is indicative of the wider trend of consumers and businesses abandoning NFTs.

The dollar volume exchanged within the overall NFT collectibles market that includes sports products dropped 75 percent in the third quarter of 2022, per the most recent analysis from Nonfungible.com, which tracks the industry.

In the face of the NFT market’s sharp declines and losses, why invest anything more in the sector?

For Panini, it’s to maintain the NFT business it does have, with hopes of some growth among collectors if not investors.

“The new element is driving sustainability in the NFT marketplace,” said Jason Howarth, vice president of marketing and digital at Panini America. “What’s great about the new elements designed for user enhancement on the placement is the amount of data available for collectors.”

The company wants a “more robust user experience” for Panini’s NFT community, Howarth said.

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The sustainability goal is important now because the company faces uncertainty over the future of its U.S. business.

The launch of “PaniniNFT” comes amid not only the ongoing collectible NFT market declines but also just a few years before the company loses two of its most important sports trading-card licenses that include NFT rights.

In 2021, sports apparel giant Fanatics Inc. disrupted the entire sports trading-card market when it executed a series of deals to pick up the exclusive licenses for NFL and NBA cards (which Panini retains through 2025-26) and for MLB, which had been the backbone of industry giant Topps Inc. — and then Fanatics last year spent $500 million to buy Topps itself, to bring all three licenses back under one corporate brand in coming years (with MLB, NBA, NFL and their unions owning a small stake in the business, too).

Losing the basketball- and football-card licenses — Panini’s in-house National Treasures and Prizm brands have become much-sought by collectors and investors — certainly will be a financial blow for Panini, but it relies on its international soccer sticker and card business for much of its global revenue.

When the NFL and NBA card licenses return to Topps, that will include the NFT licenses, too. Which means that, barring some surprise business maneuvers in the next couple years, Panini not only loses its U.S. basketball- and football-card business but also the right to mint and sell NFTs of those cards.

In the card business, the major leagues sell exclusive licenses for both physical cards that include some digital rights, and for collectable video highlights like those marketed by Dapper Labs as NBA Top Shot and NFL All Day NFTs.

Even when basketball and football return to Topps, Dapper Labs will maintain its multi-year NBA and NFL NFT highlight licenses.

Topps will be able to make static NFTs of the physical cards, as Panini does now.

Panini often sells the physical card and its NFT version as a bundle, to add what’s called utility to the NFT (and the company also makes available real-world prize perks such as trips to games and events to meet athletes). Dapper Labs also does perks but cannot make a physical card of its NBA and NFL highlight NFTs.

“They’re video highlights, we’re trading cards,” Howarth said. “They don’t have physical assets tied to their NFTs.”

So what does Panini do after it loses the right to print and sell NFL and NBA cards along with their NFT copies? Not surprisingly, Panini isn’t keen on disclosing its future plans.

“We’ve got a playbook and we’re going to keep doing what we’re doing,” Howarth said. “We have a long runway.”

While not revealing the contents of that playbook, he did say the 2026 World Cup that’ll be played in North America will be an opportunity not only for its vast FIFA soccer sticker and card business, but to offer NFT soccer products, too.

It also can rely on its other sports IP licenses such as UFC and WWE for card and NFT sales.

Outside of sports, and much like its rival Topps, Panini has entertainment industry licenses including with Disney and Warner Bros., and always is in search of more (or getting IP licenses back).

“We’re in the licensing space and have been since 1961,” Howarth said.

As for the sticker and trading-card business, which has been part of a wider sports collectibles boom since about 2016 before going into overdrive at the start of the pandemic, things continue to get better, Howarth said.

“It’s still pretty white-hot,” he said. “Retail is solid.”

That’s in part because of consumer demand for sports collectibles but also because supply chain issues have eased globally, and major retailers are ending their limits on how many boxes or packs of cards consumers can buy at once.

“We’re almost there, we see the light at the end of the tunnel,” Howarth said.

And they hope that light isn’t an oncoming train.

In the meantime, the new NFT user interface is scheduled to go public this week amid ongoing marketing to entice potential customers, or keep those Panini already has.

The company began its brand awareness push for its latest NFT campaign through its NASCAR sponsorship: The No. 8 Chevy Camaro driven by Gray Gaulding in the Xfinity Series earlier in March debuted a Panini “Color Blast” paint scheme and “#PaniniNFT” in big letters on the hood.

Panini


Gray Gaulding’s Panini-branded car in NASCAR’s Xfinity Series race in Las Vegas earlier this month. (Christopher Trim / Icon Sportswire via Getty Images)

Panini’s NFT sales were never in the same league as NBA Top Shot, so it never enjoyed as much revenue but also didn’t suffer spectacular declines.

“For us, it’s steady. It’s stable, and that’s exactly what we want in the marketplace,” Howarth said. “We’re not purely reliant on the NFT space. We can be more deliberate.”

While the money isn’t as much, some buyers have resold Panini NFTs for tidy sums.

A 1-of-1 Luka Doncic “BC National Treasures NBA Logoman Autographs” NFT card sold for $100,000 in April 2022, making it the most expensive digital card Panini has sold. And at Christmastime, a buyer spent $30 on a Panini soccer NFT pack and got a 1-of-1 Lionel Messi that he was able to resell for $35,000 two days later.

Top Shot has had numerous six-digit NFT sales amid more than $1 billion in total sales, and NFTs outside of sports have sold for tens of millions — a trend that’s all but evaporated as the market adjusts.

Monthly NFT sales on Panini’s blockchain peaked at $5.64 million in August 2021, and over the following 18 months have averaged $2.38 million in retail and resale volume, per NFT tracking site cryptoslam.io data.

When Panini debuted its NFTs in January 2020, the average price per transaction was $5,665. That dropped by June 2021 to an average of $114.17 — the last time Panini’s NFT sales averaged more than $100.

Ultimately, Panini NFTs are a small fraction of the sports NFT collectibles market that’s shrinking, but they’re also only a small part of the company’s overall business — shielding it from the wider market forces in that space because most of Panini’s business comes from soccer stickers and cards.


That said, Panini has no plans to exit the NFT business.

“We remain committed to the space,” Howarth said. “We’re here for the long haul.”

The company is private and doesn’t disclose its finances, but it reportedly took in $1.4 billion in total sales revenue in 2018, a World Cup year, a fat increase over their $613 million in 2017, according to The Guardian. A failed bid to go public via a SPAC deal in 2021 valued the company at $3 billion, per Bloomberg.

The shaken public confidence in speculative digital assets is reflected in how the business world is stepping back from NFTs.

For example, Facebook and Instagram corporate parent Meta recently said it’s ending the support it debuted last year for digital collectibles and NFTs on its platforms, per a Reuters report earlier this month. And Fanatics majority owner Michael Rubin opted to sell his controlling equity stake in Candy Digital, an NFT business with an MLB license, to a crypto bank.

“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” CNBC reported Rubin as telling employees in an email. “Aside from physical collectibles (trading cards) driving 99 percent of the business, we believe digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors.”

But the decline and loss of confidence hasn’t meant the end of NFT collecting. Brands and artists continue to launch new NFT products despite the end of big sales.

The difference, of course, lies in whether someone is collecting for the joy of owning a particular thing, or seeking to capitalize on its worth for profit — the speculation that’s rife not only with NFTs but a vast number of assets.

Many NFT makers have publicly said their products are for collecting and entertainment, but the inclusion of resale markets and public branding makes that questionable to some and has invited legal and government scrutiny.

It’s the speculative aspect of some NFTs, whether the makers intended them to be or not, that also casts a shadow across their future.

There’s an ongoing federal lawsuit against Dapper Labs by NFT buyers who allege that NBA Top Shot highlights are unregulated securities, and a U.S. district judge in Manhattan last month ruled that the case can move forward under the assumption they very well may be financial assets (but has yet to rule on class-action status). Currently, no federal agency has decided if and which NFTs are securities that fall under regulatory control and laws.

The court case may determine whether or not only Dapper Labs’ NFTs are financial assets that fall under the U.S. Securities and Exchange Commission’s purview, but a wider ruling across all collectable NFT products potentially adds a legal layer of bureaucracy to a market that’s already complex for much of a skeptical public.

Unlike other NFT platforms, Panini sales are in U.S. dollars rather than the more complex galaxy of volatile cryptocurrencies and related tech knowledge required to use it all.

“That’s what collectors understand better than anything,” Howarth said. Panini does make a digital wallet available for users, which immediately converts the cryptocurrency into dollars for the transaction, he added.

Other NFT products, per the judge’s February ruling, may be unaffected by the lawsuit — but everyone in the space is watching what develops.

What all of this boils down to is that it’s an uncertain time in the sports card space, particularly with NFTs, and the courts of law and of public opinion will render judgments that will have ripple effects for all involved. And who owns whom and what companies have which licenses to make certain collectable products could be different by the time Panini is scheduled to surrender its NBA and NFL licenses to Topps.

“Lots can happen in three years in the collectibles space,” Howarth said.

(Top screenshot of the Luka Doncic NFT that sold for $100,000: Courtesy of Panini America)



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