Sports retailer Fanatics has lost its taste for NFTs and is unloading its majority stake in Candy Digital.
The company plans to divest its 60% stake in Candy to escape what Fanatics Executive Chairman Michael Rubin called an “imploding NFT market,” CNBC reported Wednesday (Jan. 4), citing an internal email.
“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” Rubin wrote. “Aside from physical collectibles (trading cards) driving 99% 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.”
The email says Fanatics will sell its interest to an investment group led by crypto merchant bank Galaxy Digital but presumably far less than the $1.5 billion it was valued at after raising $100 million in funding in 2021.
PYMNTS has reached out to Fanatics for comment.
Fanatics, recently valued at $31 billion, launched Candy Digital in 2021 to authenticate sports memorabilia and, in turn, validate valuations.
The company described Candy as a “next-generation digital collectibles company that brings together world-class digital artists, designers, and technologists to develop a broad range of official NFTs.”
Fanatics’ divestment comes during what PYMNTS described late last month as a “stark and financially punishing” decline for the NFT industry, with monthly spending on digital offerings plunging by 87% to $442 million in the month of November.
At the same time, the volume of “minted” NFTs has plummeted by 60% and the volume of active buyers and sellers is a third of the levels seen at the start of last year.
PYMNTS has noted the parallels between NFTs and Beanie Babies, collectible stuffed toys that were a popular item in the early 1990s before enthusiasm cooled by the end of the decade. NFTs were first created in 2015, became higher in profile two years later, and now seem more like a fad than a commerce disruptor.
“The staying power just isn’t there, as evidenced by the drastically muted activities on the exchanges in the aforementioned stats,” PYMNTS wrote. “The shelf lives of the NFT and Beanie Baby cottage industries have been roughly five to seven years.”
Still, NFT advocates continue to champion their future. Speaking to the Financial Times in December, OpenSea CEO Devin Finzler said he thinks consumers will continue spending money on digital images they can show off in virtual spaces or at home.
“It is not necessarily the case that NFTs will always be bought and sold denominated in cryptocurrency as they are today,” he said. “There are a variety of reasons why that makes sense in the current ecosystem, but as we get broader and more accessible, there is no reason that NFTs could not at least be denominated in U.S. dollars.”
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