Todd Erkis is a visiting professor of finance at St. Joe’s who writes weekly columns answering students’ financial questions.
My friend told me about how she is buying NBA videos and making real money off of them. Is this real? – John A. ’22, marketing major
John, yes, it is real, the buying NBA videos part anyway. It’s called NBA Top Shot. The NBA Top Shot website (www.nbatopshot.com) describes itself as “NBA Top Shot, officially licensed digital collectibles. A new era in fandom has arrived-beyond repping your team, or loving your favorite player. Now, own basketball’s greatest MomentsTM with NBA Top Shot.”
To understand what is going on, we first have to get a bit technical. Likely everyone has heard of Bitcoin and cryptocurrency. Bitcoin and the other cryptocurrencies work due to the blockchain. The blockchain can be thought of as a public database spread out all over the internet containing the history of who owns something, called a token. With a cryptocurrency, the token is “fungible,” meaning that all are the same and interchangeable. For example, paper money is fungible since it does not matter which specific dollar bill I have, it can be used like any other dollar bill.
However, a token does not need to be fungible, it can be unique and attached to basically anything. These nonfungible tokens (NFTs) have been attached to many digital things. People have attached them to cat memes, tweets and, most famously, art. You may have heard that on March 11, 2021, Christie’s, a very real auction house, sold a digital artwork by the artist Beeple for $69,346,250. No, that is not a typo-$69 million for a JPEG! Really, it’s for the NFT attached to the picture. If you are interested in the backstory of this sale, I encourage you to listen to the fascinating NPR Planet Money podcast from March 12, 2021 on this subject.
The NBA videos and Top Shot use the same NFT concept. The basic idea is that you can own a video highlight of an actual play that happened in the NBA. You can’t stop others from viewing that highlight or even own it like you can copyright it or anything. But you own the NFT attached to that highlight and can sell that NFT to others-although at this point, you need to sell it on the NBA’s platform with the associated fees and expenses.
What is the NFT that is attached to an NBA highlight worth? My answer is that the long-term value is not known at this time. I suspect that many highlights, like an average play during the season from a well-known player, will have little or no long-term value. But I did see that there was a dunk by LeBron James that went for more than $200,000. And the $69 million for that Beeple artwork is certainly eye-opening. Those are their current market values, but this is now when this technology is new.
I would like to remind my readers that a pristine Beanie Baby© used to be worth thousands of dollars too, but the hundreds of them that I am holding on to in my attic for my kids are not worth nearly that much now! That is the problem with something that has value as a collectible. In the moment, it seems like it’s really rare and worth a lot. This is especially true when the market is telling you it’s worth a lot by its current price. But in the long term, most collectibles end up being close to worthless. Of course, Pokemon© cards are starting to interest people again. If I had only kept that mint, holographic, first edition Charizard card my son sold years ago.