DraftKings Aims to Disrupt the Fantasy Sports Landscape with NFT Deal
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Executive Brief: Today's newsletter discusses DraftKings’ recent deal with the NFLPA to bring NFL player gamified NFT’s to their mobile and desktop marketplace. I discuss the partnership, the foundation DraftKings has built to innovate with this new partnership, and discuss the likely competitor companies in the market.
DraftKings Inks New NFT Deal
Last week, the $12 billion Boston-based fantasy sports and gaming company DraftKings announced an official partnership with the NFLPA providing DraftKings with the intellectual property (IP) of all 2000+ active NFL players via a licensing deal.
The NFL Players Association (NFLPA), DraftKings Inc. (Draft Kings) and OneTeam Partners (OneTeam), the group licensing partner of the NFLPA, announced their partnership this week. Their announcement revealed their plans to launch gamified NFT (non-fungible token) collections that will debut on DraftKings Marketplace during the 2022-2023 NFL season. The agreement grants DraftKings licensing rights for active NFL players, including the authentic use of their name, image, and likeness. The partnership will coincide with DraftKings’ existing NFL designations that include it being an official daily fantasy and sports betting partner of the league. With the deal, DraftKings hopes to grow its consumer base which had 1.1 million monthly unique paying users, according to its 2020 earnings report. Their unique monthly paying user numbers are up almost 300% from 2019 after adding nearly 300,000 users. Monthly revenues also grew 27% over that period.
The partnership is one of the first of its kind to integrate gamified NFT’s into an online sports and entertainment competition marketplace. So, it makes sense that the partnership is between one of the world’s most powerful athlete unions, the NFLPA, and the only U.S.-based vertically integrated sports betting operator, DraftKings.
The Future of Sports Fandom
Many experts, and non-experts including myself, believe that the future of sports fandom will be NFT-related within Web3. Since the pandemic began, the adoption of NFTs and investment in the same and Web3 have accelerated significantly. Realistically, the future of sports fandom is currently developing right before our eyes.
DraftKings leadership, the forward thinkers they’ve proven to be, know this and are investing in the area in hopes they’ll create a first-mover advantage in the market. DraftKings, a publicly-traded company, has not escaped criticism for its ventures into the space. Still, leadership is deepening their convictions, and this partnership shows its commitment to the potential breakthrough technology.
DraftKings CEO Jason Robbins confirmed his convictions on Twitter earlier this month:
DraftKings is likely more equipped than many other companies to capitalize on the increasing intersection between sports and NFTs. The convergence continues to drive forward to becoming the cornerstones of engagement and entertainment within Web3.
DraftKings’ Foundation
At its core, DraftKings could be the best company to merge NFT utility with its present offerings. DraftKings is a digital sports entertainment and gaming company created to fuel the competitive spirit of sports fans. The company offers regulated gaming and digital media products to its users.
I think it will have the most success integrating NFTs in its fantasy sports betting services. DraftKings is the official daily fantasy and sports betting partner of the NFL, NBA, MLB, NHL, PGA Tour and the UFC. DraftKings will integrate the gamified NFL player NFTs by allowing customers to use these collectibles within games against others on the platform. They will likely run daily fantasy leagues using the NFL player gamified NFTs, and multiple incentives will likely flow from that to provide more utility.
In August 2021, DraftKings launched DraftKings Marketplace, a digital collectibles ecosystem designed for mainstream accessibility that offers curated NFT drops and supports secondary-market transactions. DraftKings worked with Polygon Studios, a gaming and NFT software developer that builds layer two products on top of the Ethereum blockchain, to develop its marketplace. DraftKings will likely use its marketplace as a location for customers to buy and sell the gamified NFL players’ NFTs. In terms of how it will work, existing DraftKings users will use their DraftKings wallet to buy NFTs in fiat currency using the company’s platform.
In addition to the NFLPA/DraftKings partnership, I expect the MLBPA to potentially engage in a similar collaboration with DraftKings if they don’t with their current upcoming memorabilia partner, Fanatics. The company that coordinated the DraftKings deal between the NFLPA and DraftKings is OneTeam, a joint venture between the NFLPA, MLBPA and RedBird Capital Partners. OneTeam focuses on maximizing player name, image, and likeness rights by facilitating interactions between athletes and businesses across licensing, marketing, content and investing. OneTeam also represents the MLSPA, USWNTPA, WNBPA, and U.S. Rugby PA. Keep an eye out for other deals between DraftKings and these player associations.
DraftKings’ Competition
DraftKings will need to outcompete several other early adoption companies to succeed in the space, including Dapper Labs, OpenSea, Fanatics and Electronic Arts (EA).
The Canadian company behind NBA Topshot, Dapper Labs, allows fans to pay for NFTs in fiat currency (e.g., CAD, USD, etc.). NBA Topshot enables users to pay for video moments of actual NBA plays on the blockchain. Users unpack virtual packets of video moments, and they can buy and sell the NBA moments. Dapper Labs is growing quickly and will look to compete with DraftKings in the market after recently signing a deal with Spain’s top professional soccer league La Liga.
Open Sea is the world’s largest NFT marketplace thanks to its massive hits, including Bored Ape Yacht Club and CryptoPunks. Fanatics, the sports merchandise company backed by Jay-Z and the MLB, also aims to be a significant player in the blockchain fantasy sports space. The $18 billion company already holds an IP deal for player cards and collectibles with the MLB beginning in 2022. Then, there is EA, the leader in video game licensing with major sports. Leadership at the company has dubbed the blockchain gaming space as the industry's future, and they expect to start allowing purchases of NFTs in-game sooner than later.
While it is still early, many of these companies are moving quickly to research and invest in the space. Like any new industry, there are inherent risks involved with investing in it. However, the opportunity to be the first mover is more than enough incentive for all of the billion-dollar companies discussed above to start making significant plays. There will likely be considerable competition in the market in the years to come, and it will be incumbent on each of the firms referenced above to grow, scale and innovate to reach the top.
Thank you for reading. Have a great day, and we’ll talk next week!
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Kendal
Question of the Day
Would Draft Kings’ new model incentivize you to play fantasy sports?
Games of the Week
NBA
Thurs, December 16th: Philadelphia 76ers @ Brooklyn Nets at 7:30 pm (E.T.) – Watch on YES, NBCSP, and NBA League Pass.
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NFL
Thurs, December 16th, Kansas City Chiefs @ Los Angeles Chargers at 8:25 pm (E.T.) – Watch on DAZN, TSN, Fox, NFL Network, and Amazon Prime.