Decrypt’s Art, Fashion, and Entertainment Hub.
Major League Baseball is releasing new 2023 season digital collectibles with Candy Digital, the NFT startup that’s entering its third season as an official MLB partner. Candy Digital was founded in 2021 as the NFT market surged to new heights, but faced challenges in late 2022 and at the start of this year.
The firm laid off more than one-third of its approximately 100-person team in November 2021, a source confirmed to Decrypt, and then this past January, Fanatics sold its roughly 60% majority stake in Candy to a group led by Galaxy Digital.
In an email sent to Fanatics staff, Rubin wrote, “Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business.” However, Candy Digital CEO Scott Lawin told Decrypt Wednesday that Fanatics hasn't entirely pulled out of the startup.
“Fanatics was a fantastic partner and investor to get started with—they're still an investor in Candy, although at a smaller level," Lawin said. "We still believe there will be opportunities to work together in the future.”
He added that Fanatics, the sports merchandising giant, is "a physical-first business, they make physical sports memorabilia." Fanatics bought classic trading card brand Topps, which also has its own NFT initiative. "Candy was from the get-go and continues to be a digital-first business," Lawin added.
The firm quickly notched a $1.5 billion valuation upon raising $100M in October 2021 in a round co-led by Insight Partners and Softbank’s Vision Fund alongside investments from former NFL star Peyton Manning, Connect Ventures, and Will Ventures.
When Fanatics divested, Galaxy and ConsenSys Mesh swooped in and raised a Series A1 round to chart a new path forward. (Disclosure: Decrypt was incubated within ConsenSys Mesh, but spun out in 2022. ConsenSys Inc. remains an investor.)
“I think whenever there’s volatility in markets, people can have different opinions on the viability and the focus of the business,” Lawin told Decrypt. He also addressed the layoffs.
“We like many players in the space, unfortunately, did reduce some of our headcount at the end of last year—really with an eye towards an environment that could be lower for longer,” Lawin said. “At the end of ‘21 and beginning of ‘22, you had a ton of money flowing into the space and a lot of people jumping in who didn’t really have a long-term vision. They were there to try to make as much money as they could as quickly as they could."
Lawin didn't mince words about so-called "tourists" in the Web3 world that have disappeared amid the crypto bear market and diminished NFT sales buzz.
"I think those folks largely are gone," he said. "The tourists are gone and the settlers are here to continue to build.”
A new season
Ahead of Opening Day on Thursday, Candy Digital released its 2023 MLB Showstopper ICON series, an NFT collection of 43 MLB stars priced at $43 per pack with three player collectibles included per pack. That drop sold out Wednesday in about three minutes, Lawin said.
Candy’s commemorative game tickets will continue to be offered this season after nearly 200,000 NFT collectible tickets were redeemed by fans who attended games last MLB season. A #1 edition of 451 total 2022 Pittsburgh Pirates Season Ticket Collectibles sold for $400 on Candy’s secondary marketplace last year. Candy's MLB collectibles are minted on Palm, an Ethereum sidechain built for NFTs.
— Shawnthemon (@Shawnthemon) March 29, 2023
MLB fans still need to purchase a separate traditional ticket to enter the ballpark, but Lawin envisions NFT collectible tickets eventually also offering admission access to events.
“I think it’s inevitable that the collectible ticket and the access ticket come together over time,” Lawin said. “Being able to create a dynamic digital asset that's a collectible and has information—updated box scores potentially, video content, et cetera—and then being able to track that fan journey on chain and have that information available to teams where they recognize who their true fans are... we think that’s super exciting."
"There’s a lot of big, incumbent players in the access ticket space," he noted. "We do believe the access ticket and the NFT ticket become one, but it’s probably a bit further down the road.”
Last year saw Candy use 3D volumetric technology to scan real-world props from the set of Stranger Things into digital collectibles through its partnership with Netflix.
Lawin expects to expand that concept, as well as augmented reality (AR) integrations, to its other digital collectible projects—which also span deals with the National Baseball Hall of Fame, NASCAR teams, WWE, and Getty Images. ConsenSys Mesh will play a significant role in the evolution of Candy’s NFT products, he said.
Candy is joined in the sports NFT space by other major players such as Dapper Labs, which operates digital collectible marketplaces for the NBA, NFL, UFC, and LaLiga, as well as the fantasy sports NFT company Sorare that is partnered with MLB, the NBA, MLS, and English Premier League.
Candy is an “official NFT partner” of MLB through its deal signed in 2021, whereas Sorare became the league’s “official NFT baseball game partner” in 2022 and launched an NFT-based fantasy baseball game. They may be competitors with a shared MLB license, but Lawin sees a future in which they could cooperate for the benefit of collectors and fans.
“I would love to find a way to work together with Sorare to bring utility to their customers and our customers on a joint basis,” Lawin said. “One of the factors of sports licensing across any league is there are different segments of rights on what can or can’t be done with those assets. I think from a fan’s perspective and collector’s perspective, if we could find a way to work together, that would be a great outcome."