Had Caty Tedman not moved to Vancouver in 2014, maybe collectible music clips or Marvel superheroes—rather than NBA highlights—would have introduced millions to the concept of a blockchain. Maybe you wouldn’t have heard the acronym N-F-T at all. (Maybe you’re starting to wish she’d stayed in New York.)
After doing marketing and social media work for ESPN, the NHL and the NFL, and getting an MBA at the University of British Columbia in 2016, Tedman, now 38, was ready to embrace more of a startup culture. That set the stage for her to become Dapper Labs’ head of partnerships in 2018, one of numerous behind-the-scenes dominoes that needed to fall before Top Shot rose to sports business phenomenon status.
Top Shot was not the first sports project built on the blockchain, but its explosive success, with more than $1 billion in sales to date, established entirely new lines of business for sports leagues.
Two years ago, player organizations generally had three major sources of licensing revenue: trading cards, video games and physical merchandise such as apparel. NFTs, which at times can feel like digital versions of all three, have changed the equation.
The NFLPA, for instance, is already up to four new NFT partners. The union has its own Dapper Labs-created product called NFL All Day; an NFT fantasy game made by DraftKings; plus two video game products expected to launch in the next year. And it’s not done. OneTeam Partners head of product Henry Lowenfels said he’s still got his eyes on multiple new potential partnerships.
The NBA has expanded its offerings, too, launching its own NFT set during last season’s playoffs and debuting a new fantasy game built by Sorare for this year.
Top Shot enters its third season in a vastly different crypto climate, with the price of bitcoin 69% lower than it was last year and many NFT values falling with it. Global NFT sales volume was down 80% YoY in September, and marquee projects like CNN’s Vault have folded up shop. Star players seem to be “Aping in” a lot less frequently than they once were. And yet, new sports projects continue to emerge.
At the seeming end of one era in the history of sports and crypto, it’s worth going back to understand where Top Shot came from, and how it caught on and shaped a new industry, before deciphering what might come next.
When Tedman first began telling friends about what would become NBA Top Shot, she understood their doubts. She’d once been something of a skeptic herself.
Tedman joined Vancouver-based innovation studio Axiom Zen as a senior strategist in 2017, working specifically on a soccer content project that had nothing to do with crypto. Then the company launched CryptoKitties, an experimental line of unique, “breedable” digital cats that lived on the ethereum blockchain. “I was just off of working for the NFL and was like, ‘I just don’t know if I can do pink cats,’” Tedman said. “It’s a bridge too far for me.”
Post-launch, however, Tedman saw the enthusiasm generated by the project, as well as the potential of the underlying technology to provide digital ownership to existing communities of followers. “Something clicked in my head,” she said, “and I was like, ‘This is perfect for—really fans of anything.’”
Dapper Labs, led by CEO Roham Gharegozlou, spun out of Axiom Zen in 2018 as a new entity, recruiting roughly half the company’s 100-person workforce, including Tedman, to focus on CryptoKitties and future blockchain projects. At the time, the group didn’t necessarily have its sights set on sports. Another early Axiom project, for instance, was focused on real estate transactions. As they looked for an IP partner for a new set of digital collectibles, Dapper execs spoke to dozens of organizations of various sizes—music companies and cartoon brands and art creators.
Then Tedman connected with the NBA.
During a casual coffee chat in early 2018, a former NFL colleague recommended Tedman talk to Adrienne O’Keeffe, then a senior director for global partnerships at the NBA. Tedman remembers their first call clearly; she was on vacation, talking to O’Keeffe from an Amsterdam hotel.
To start the call, as Tedman remembered, “I basically mansplained CryptoKitties to her,” walking through the project and the realization Tedman herself had about its potential application in sports for 10 or 15 minutes. Then O’Keeffe interrupted. I own several CryptoKitties, she said. She had set up a MetaMask crypto wallet to store her NFTs. As she would recently describe it, O’Keeffe was already “down the rabbit hole.”
“I was like, ‘Oh my god, I’m so embarrassed,’” Tedman said.
O’Keeffe had been responsible for the NBA’s video game business since 2016, and in that capacity, she had seen the growth in digital items such as skins, shoes and power ups. In her off time, she was studying up on crypto, confident the tech would soon disrupt the sports landscape.
“The minute I learned about ETH and smart contracts, I thought this category, and this type of product, was inevitable,” O’Keeffe said.
By the time Tedman had reached out, NBA leaders across departments had already spent months looking at potential blockchain applications and discussing possibilities on an ad hoc basis. Even if the broader crypto category was entering a multiyear lull, they were ready to move forward.
“They were so committed to moving fast that that almost became an obvious path of least resistance,” Tedman said. “I’m not sure Roham watched a ton of basketball before we started with Top Shot… but he said, if you think this is a good route, go pursue it.”
Inside Dapper, a joke circulated that Tedman, after spending years at sports leagues and media companies, was trying to turn the blockchain startup into a sports one, too. She basically did.
A Whole New Category
It would take more than a year from that initial conversation before a deal between the NBA and Dapper was hammered out. “It was relatively easy for us as a startup to say we’re going to try something in the crypto space,” Tedman said. “For them it was a lot more of an arduous road to get everybody on board.”
O’Keeffe and Matt Holt, the NBA’s SVP for global partnerships, brought in media teams to provide their perspective. The league’s fantasy game experts were consulted. So was finance. And treasury. And “multiple lawyers,” as Tedman recalled.
The NBPA got on board, too; a year prior, the players had taken back their group licensing rights in the collective bargaining agreement. Josh Goodstadt, the EVP of licensing for Think450 (formerly National Basketball Players Inc.), was just a few months into the job in 2018, spending half his days dealing with the business and a full other half “going down the vortex” of blockchain tech and cryptocurrencies.
While many of the entities—”I don’t even want to call them companies”—pitching Goodstadt on potential partnerships seemingly came from nowhere, Dapper jumped out with its CryptoKitties track record, as well as its vision of making NFTs accessible to the masses. Goodstadt was sold.
The NBA worked to differentiate Top Shot from its other offerings, sitting somewhere between collectibles and content. Even the length of the video clips Dapper Labs would be able to put on the blockchain had to be negotiated. Without sharing financial details, O’Keeffe said the first partnership agreement was of the “test and learn” variety, with a more substantial multiyear agreement coming after Top Shot’s 2021 explosion.
“Our intention was not to create a whole new category—I don’t think we envisioned that occurring,” Goodstadt said.
Internally, O’Keeffe said the biggest hurdle was getting everyone to grapple with the concept of digital ownership that would be core to Top Shot. They needed to think of it the same way they thought about physical products, she said. “Consumers are going to use them. We’re not ever going to take them away. That’s the idea here. Once we unlocked that parameter, that made it a little bit easier.”
Meanwhile, others were focused on what the product would actually look like. Eduardo Gueiros, now an NBA senior manager of global partnerships and media, remembers the group quickly deciding on the concept of a cube to display the highlights (after a more triangular pattern was dismissed).
The goal was to create a digital object that felt tangible, that could seem at home among posters and jerseys and balls, even if it never left the digital world. The cube shape also allowed for the sense of unboxing each “moment,” as they were to be called, and created flat sides where additional information like scores and runtimes could live.
“It’s not just a picture on the internet,” Tedman said. “How do you make it feel that way?” Tedman credited Dapper Labs creative director Courtney McNeil as the cube’s ultimate creator.
From the beginning, the plan was for the moments to also be used in a mobile game Dapper Labs was developing. Top Shot head of product Arthur Camara said the game was “tested extensively,” both internally and among beta users, but it never created a captivating enough experience and was ultimately shelved. Launching a new category of products on a global marketplace would prove enough of a challenge, and to fully create its vision, Dapper Labs decided it would need to build its own blockchain—the Flow platform—to host the product.
Then there was the issue of a name. Several were considered. “Dream Team” was Tedman’s choice, for a time. Gueiros had personal favorites, too, though “the fact that I can’t remember them probably tells you we made the right choice.”
“Top Shot” had the advantage of being converted into a verb, entering the vernacular thanks to trash-talkers saying Top Shot this or Top Shot that.
Of course, none of that prevented NBA Top Shot from also becoming an object of derision—from the very start.
Even before Dapper Labs and the NBA established the cube, Tedman began running the concept by friends, including many sports fans who weren’t digital natives. “That was just painful,” Tedman said, “for them to be like, ‘I don’t get it and I hate it.’” She began to appreciate the small bright spots—a card collector who’d say that even if the product wasn’t for them, they could see how someone else might be interested.
For O’Keeffe, the memory that comes back is Thanksgiving 2019. This isn’t going to work, her loved ones told her. This is weird. Why would you own digital collectibles?
When Jacob Eisenberg joined Dapper as a community lead in the fall of 2020, as the product launched in public beta, one of his friends’ most common bits of feedback was that the digital image of the Top Shot packs looked like condom wrappers. And yes, that they were confused by the overall concept, too.
But by February of 2021, those conversations had changed. Suddenly, friends were asking why they hadn’t been invited to the beta (in many cases they had been) and what inside info they could get on when the next packs would drop (none).
One (*ahem*) moment, entrepreneur Jonathan Bales was writing an influential blog post explaining why he “spent $35,000 on a video you can find all over the internet”; the next, hundreds of thousands of people were waiting in seemingly endless digital queues for their chance to buy packs. Individual NFTs of prized players—LeBron James, Zion Williamson—were selling for more than $100,000 each. A combination of a novel product, a wider collectibles craze, and some COVID-19-induced boredom had sparked a frenzy.
Inside the league office, O’Keeffe, Holt and Gueiros went on something of an at-home roadshow, meeting with yet more departments to explain what they’d built and how it might continue to grow. Before the 2021 All-Star Game, the league decided to announce its Rising Stars roster on the platform.
“You couldn't avoid it,” Eisenberg said. “If you went onto Twitter, it was all anyone was talking about. It was just a perfect storm.”
When the user base first ballooned, Dapper Labs had one full-time customer support rep. Its head of product was also managing fraud checks and compliance issues. Midway through the 2021 Super Bowl, Eisenberg opened up Zendesk to find 7,000 support tickets—and counting.
Top Shot’s site couldn’t handle the onslaught of interest, and its outages only seemed to further fuel the fire. When it was online, the platform hosted more than $200 million in total sales in February, and another $200 million in March.
Dapper Labs announced a $250 million raise at a $2 billion valuation in February 2021, then turned around and nearly immediately brought in another $300 million, this time at a valuation north of $7 billion. That growth, in the span of a couple months, is equal to two times the average NBA team valuation, according to Sportico estimates.
The enthusiasm didn’t last; it couldn’t. Video clips of Bismack Biyombo turned out not to be worth hundreds of dollars (though mine is still for sale if you’re interested). According to CryptoSlam! data, the average NFT sale on NBA Top Shot spiked from $27 in December of 2020 to $80 in January of 2021 and $181.81 the following month, before falling to $157, $65, and eventually $30 over the next three months. So far this month, the average Top Shot NFT has gone for less than $14.
The total number of unique marketplace buyers was more resilient than overall sales tallies, but it still dropped from 184,000 in March 2021 to 41,000 this March. And yet, despite those declines, the impact of Top Shot’s explosive popularity is still being felt.
NBA Top Shot was not sports’ first NFT project. In 2018, MLB and MLB Players Inc. teamed with Lucid Sight to launch MLB Champions, a collection of bobblehead-inspired NFTs. The project was one of the top-selling releases in the nascent category that year, but struggled to expand beyond crypto natives. The license expired a little over a year later.
In another world, maybe that’s where things would’ve ended. Instead, MLB Players Inc. managing director Evan Kaplan said, “[Dapper] established the market, but they invested so much to build the market and make it a market.”
Following Top Shot’s success, baseball finalized a deal with Fanatics’ Candy Digital, pushing the space further with Play of the Day NFTs and more recently experimenting with ticketing integrations.
“In the hard goods category, there are fads,” Kaplan said.
He’s seen them, from Beanie Babies to bobbleheads. “This is not the same thing,” he added. “This is a new technology.”
Every major league (and lots of smaller ones) now has its own collectible NFT deal, each experimental in its own way. Top Shot set the standard of using video to separate the digital product from physical alternatives, but other products, including other Dapper initiatives, have iterated further on what the NFTs can do. On Thursday, NFT fantasy game Sorare beat out Bored Ape Yacht Club as the top grossing project over 24 hours, with $1.5 million in sales.
It’s possible Top Shot was too successful, too quickly for its own good. Topps wasn’t the first to enter trading cards, after all, and what have you heard from Tecmo recently? Top Shot now has a wide swath of existing collectors it has to please, many of whom lost significant amounts of money as the market collapsed.
Andrew Barefoot doesn’t see himself getting back in. A 25-year-old New Yorker, he was among the many who got into Top Shot early enough to snag a pack for roughly $15, pull a Zion NFT, and then sell it for closer to $600.
“I’m sitting at work at 6 a.m. and… I could not understand how somebody just bought that—at 5:30 a.m.—for $600 dollars,” Barefoot said. “So I was all in, as you could imagine.”
Barefoot took his early profits and reinvested, grabbing some Knicks players he liked and watching his portfolio value reach $2,000. Over time though, he felt like the product was no longer made for people like him—everyday collectors who weren’t going to pony up hundreds of dollars to buy an NFT. “I think it’s dead,” he said.
As for whoever bought the Zion from Barefoot, “I think about those people all the time,” he said. “Every single portfolio of mine, it just gashed in half at such a rapid pace.” He tried getting into more recent NFL and UFC drops, but similarly felt he wasn’t getting value from the product.
While other NFT projects that emerged in 2021 seemed solely focused on generating excitement and maintaining exclusivity in the name of improving values for holders, Dapper and the NBA had their sights set on more—aiming to make NFTs accessible to more people, and engaging more NBA fans (e.g. releasing packs for new users).
“Some people left Top Shot and bought a bunch of cats and apes and stuff and became millionaires,” LG Doucet, the founder of sports/crypto news brand The First Mint, said earlier this summer. “And the people that stuck to Top Shot lost money. There’s no easy way to say that.”
Barefoot still sees a world where Top Shot bounces back. He loved the anticipation of getting into those early queues, the back-and-forth in his group chats as they all opened their packs. “But there's just the realistic side of it to me,” he added, “where I just can't trust it the way I did, and especially with its relation to the blockchain and crypto, and just how intangible those things are.”
It may prove impossible for Top Shot to regain its initial luster. Doucet recently halfheartedly suggested the company buy back moments to support collection values and destroy 90% of the existing supply—a full-on Sam Hinkie rebuild, basically. Others have said it might be for the best if those in it for profit are weeded out, allowing Top Shot to focus on entertaining true NBA fans.
“People like me and a lot of other people, even people who've quit, they want to see Top Shot succeed,” Doucet said in an interview. “At the end of the day, like, we want this to be the thing that they say it's going to be.”
This week, Dapper announced its updated roadmap for the project, focusing on managing moment supplies and increasing community engagement this season, with events in cities across the country and proto-fantasy games (known as challenges) to keep people using their NFTs.
Tedman, O’Keeffe and their respective organizations care deeply about Top Shot’s health, though there are countless new projects—real and potential—to consider now too. Such is life as an early mover.
If Top Shot proved anything, it convinced just about every sports rights holder to develop an NFT strategy. Even if 2021's boom was largely built on hype, it was enough to fund another round of ideas that could change the way people experience fandom.
“What happens, always, is that something works and then there are fast follows, and then you have to actually figure out how this product or how this industry can be sustainable, and we’re in that part—the painful part but also the fun part,” Tedman said. “I think we’re still just at the precipice of doing something really interesting and really cool.”