This week, the NFT community gathered in New York City for its largest conference of the year. While the event happened in the midst of an unprecedented crypto crash, attendees had much to be enthusiastic about. On Thursday, eBay acquired NFT marketplace KnownOrigin; on Friday, the National Hockey League (or NHL) partnered with Sweet, a NFT distribution platform that specializes in collectibles for fans. These two announcements reflect two broad trends. First, NFTs are moving towards mainstream adoption. Second, the start-ups accelerating this transition do not position themselves as competitors to existing institutions, but as essential partners. Operating in two industries, KnownOrigin and Sweet point to a single strategy — using NFTs to build novel forms of community, and doing so in a way that is disruptive but friendly to incumbents — that other players in the web3 space are adopting.
One such player is the Montreal-based start-up Lipsweater. Lipsweater is building an NFT community that lets hockey members rally together, get their voices heard, and reap upsides as owners. Using a collaborative approach with the industry’s traditional organizations, Lipsweater is creating a complementary community to broaden hockey’s reach and revitalize its brand. If successful, the Lipsweater NFT will act as the digital passport to the hockey metaverse. As founder Thomas Sychterz, a former NCAA goaltender at Princeton, puts it, "We're not just an NFT collection. We're laying the foundations for the future of hockey’s digital identity.” For now, the start-up has just signed a strategic partnership with the agency CAA Hockey, which is working with Lipsweater to introduce players to the metaverse. Disruptive but friendly to existing institutions, Lipsweater’s strategy provides a model for web3 start-ups working to revitalize and generate growth within pre-existing communities in sports and beyond.
The Hockey Industry: Perceived as “Expensive, Gated, and Old-School”
As a sport, as an industry, and as a community, hockey faces key challenges that Lipsweater hopes to address. First, hockey is working to attract younger generations. In 2000, the median age for an NHL fan was 33; by 2016, it was 49. Second, hockey has become an exclusive sport;. 93% of all NHL players identify as white, compared to 27% for the NFL, 18% for the NBA, 59% for MLB, and 38% for MLS. Similarly, a survey of over a thousand hockey parents found that nearly 60% pay more than $5,000 per year, 41% spend between $5,000 and $10,000 a year, and 16% spend over $10,000 a year for their kids to play the sport. The same report found that 35% of parents took on personal debt and 23% got a second job or worked overtime so their kids could play; 90% added that they were worried about the financial impact of the sport on their families. All these statistics point to a single, broader problem: Hockey struggles to attract young people, diversify its membership, broaden its community, and provide access to all.
There is nothing new about this diagnosis. In fact, when the NHL, the NHLPA, and 17 hockey organizations from around the world issued a Declaration of Principles in 2017, the league itself identified these challenges as obstacles to overcome – and has since launched a series of inclusion initiatives. What has changed, however, is the opportunity to disrupt the hockey industry from within. Beyond the Declaration of Principles, North American hockey has struggled to address these issues despite numerous initiatives such as embracing street hockey, promoting girls hockey and so on.
This state of affairs, combined with metaverse opportunity, motivates Sychterz and his team. As he puts it, “We’re here to help change the perception that hockey is expensive, gated, and old-school, and to build with the community on its strengths."
Each Lipsweater NFT serves two functions. First, it consists of a digital 3-D asset that will be used in augmented reality and virtual reality settings that Lipsweater will help create. Second, the NFT provides an access-pass to a variety of online and offline experiences. Among other future offerings, Lipsweater’s members will join a global fantasy hockey pool, participate in a real-life beer league tournament, and manage a pro minor league hockey team — using a DAO to give input on key decisions, from scouting new players to merchandise design and fundraising. Each of these activities contributes to a new form of community-building whereby bottom-up, fan-led initiatives shape the future of the sport.
Scottie Upshall, a former NHL player and early supporter of Lipsweater, emphasized the start-up’s community-driven approach: “Their mission is to build a community that makes you feel like you are on a hockey team.” By allowing members to manage a pro minor league team, own digital assets, build virtual marketplaces, and participate in online and offline experiences, Lipsweater turns being a fan — hitherto a passive activity — into an active activity. There, Upshall believes, lies the real value-add of web3.
Lipsweater’s work also has an aesthetic dimension. To re-imagine and revitalize hockey’s brand, the start-up is creating NFTs that blend Pixar-like cartoon design with high-quality 3D texture and realism. Every avatar is a 3D wolf whose fur is digitally hand-combed by experienced artists working under a creative director who helped Adidas develop some of its most high-end 3D pieces. The avatars come with unique features, and all NFT owners will get access to a virtual shop where fans can buy wearables for their avatars. The dynamic and visual dimension of the project aims to attract younger fans and facilitate the community’s transition to the Metaverse.
These two pillars — community empowerment and aesthetic rejuvenation — underpin Lipsweater’s strategy. The start-up hopes to benefit from two trends. On the one hand, tremendous investments in the NFT & blockchain space are fuelling the adoption rate of digital assets; in the first quarter of 2022 alone, VC firms invested $7.4B billion into NFT businesses. On the other hand, hockey is gradually getting into the metaverse rather than speed skating into it. Where the NBA has already harnessed NFTs and virtual reality to amplify its reach, the NHL has not. If successful, Lipsweater will fill this gap and build the infrastructure that the hockey world needs. As Sychterz put it, “our business model is decentralized: value creation won't be controlled by us but rather flow through us. We'll build the infrastructure that hockey people will use to authenticate, interact, and engage in a trusted manner.”
The Blueprint: Building A New Layer of Community
To ride the metaverse wave and accelerate hockey’s transition to web3, Lipsweater has already convinced dozens of current or former high-profile athletes to join their membership. Asked about Lipsweater’s strategy, Upshall praised the start-up’s ability to attract key NHL players and influencers. Once on board, these players will attract fans, who will attract friends, and so on in a virtuous cycle of network effects that benefit the NFT owners and the group as a whole. Sychterz understands the magnitude of the challenge that he is taking on. In his words, "The hockey world is notoriously puristic and somewhat weary of novelty, so rallying the community around a new concept is not an easy feat." But he believes that Lipsweater will succeed by educating community-members and providing high-quality experiences that convince the most reticent of fans.
For those who seek to understand the role of community-building in the Metaverse, Lipsweater provides a fascinating case-study. Instead of creating a community out of thin air, or replacing an existing community with a virtual alternative, the start-up offers a complementary layer of community. Ultimately, Lipsweater’s strategy — revitalizing a community by accompanying its transition to the Metaverse in a way that is disruptive but friendly to existing institutions — may represent a blueprint for other players in the sports industry and beyond.