Sky Mavis Valued at $3B, LeBron James’ SpringHill Sells Stake at $725M Valuation, and Coinbase Enters NFT Market

October 18, 2021 by  wearerockwater

What We’re Reading

5 articles + RockWater analysis to make you a better investor and operator.


Andreessen Horowitz Values Developer of NFT Game Axie Infinity at $3 Billion
The Information, 10.4.21

  • In Axie Infinity, users battle, trade and breed cartoon pets which are unique, blockchain-based NFTs
  • Players can also earn crypto tokens that are customized to the game and then exchange them for other currencies
  • Since its launch three years ago, there have been more than $2 billion worth of Axie NFT sales, making the game one of the most successful NFT projects of all time, according to NFT data provider CryptoSlam

The RockWater Take by Michael Booth

After reading up on Axie Infinity, the Web 3.0 vision has never been clearer to me. Traditional game distributors (Roblox, Steam, iOS / Android) are taking a 30-75% cut of in-game transactions; whereas Axie Infinity takes 5%. How can they afford that margin loss? It’s simple — because every user acquired increases the value of its cryptocurrency, which is why they are on track to do $1 billion in revenue this year.

More fundamentally, this brings into question how platforms will be structured in the future. For the past decade, all consumers have flocked to different social platforms, creating billions in enterprise value, but were not rewarded with any of that upside. What crypto unlocks is an easy ability for platforms to grant its users equity, and reward them for building the community to a critical mass. Which as a business model is far more compelling to consumers than what already exists. The IP those communities create then further appreciates its users equity, which has me thinking — will the next great cinematic universe spawn from a crypto community?

There will be a lot of inertia to get there, but the web 3.0 vision is coming.



Coinbase is Launching its Own NFT Platform to Take on OpenSea
TechCrunch, 10.12.21

  • According to Coinbase, “Coinbase NFT will make minting, purchasing, showcasing, and discovering NFTs easier than ever…We’re adding social features that open new avenues for conversation & discovery”
  • Coinbase has already debuted a user waitlist for the desktop product
  • The NFT marketplace is set to launch by the end of the year

The RockWater Take by Chris Erwin

Our team is increasingly seeing market datapoints that signal how Defi and web 3.0 are on a path to mainstream adoption, and that the growth headroom is immense. The Coinbase and NFT announcement is another great example (and is in addition to what Michael Booth shares above on Axie Infinity!).

Coinbase made crypto investment easy for the masses. Now, Coinbase’s support of NFTs will significantly increase NFT market supply and demand. And as a recently public company, expect both Wall Street and Main Street support to help Coinbase’s NFT vision become a highly successful reality. Therefore, we expect massive flows of capital and team time from operators (not just investors) to flow into this space. The focus will be (1) how NFTs can power different industry and company biz models (fashion and media co’s will move extra fast here), and (2) catering to new online behaviors of their millennial and gen z consumers.
We’ve heard lots of NFT chatter amongst execs over the last 12 months, but that chatter will turn to action in 2022. So our RockWater team is increasing our research and advisory efforts here to help our clients navigate this space.



Report: Fanatics Could Enter US Regional Sports Network Market
Sports Pro Media, 10.12.21

  • Regional Sports Networks (RSNs) are an important revenue stream for many major league franchises but such broadcasters have struggled in recent times due to a vicious cycle of increased transmission fees and declining viewership
  • Subscriber numbers have been impacted by ‘cord cutting’ and disagreements with distributors that have seen some RSNs taken off certain TV platforms

The RockWater Take by Andrew Cohen

Since Fanatics launched in 1995, it steadily grew to become the most dominant force in sports merchandising and e-commerce. But its growth in 2021 has been staggering. And its plans for (sports) world domination are just getting started…After raising $325 million at an $18 billion valuation this past August (roughly tripling its value YoY), it’s leveraging that value to create a one-of-a-kind flywheel for the sports world, including expansions into:

  • Trading cards: Won exclusive licenses form the top 3 US leagues — and raised a $350 million Series A, which valued its trading card business at $10.4 billion
  • Sports betting: Reportedly in acquisition talks with Rush Street Interactive ($3.61 billion valuation) and Betsson ($1.3 billion valuation)
  • NFT’s: Launched a new venture called Candy Digital

And now the company is reportedly in talks to begin acquiring RSNs. Although the RSN model is flawed due to its reliance on the traditional pay-tv bundle, and many media companies are seeking to exit the RSN space and pivot to streaming, it could be an interesting strategy for Fanatics. Unlike traditional media companies, Fanatics’ success in the RSN space wouldn’t be dictated by subscription fees alone. These networks could function as a top-of-funnel, which would allow Fanatics to acquire local sports fans and push them products like their sportsbook, trading cards, team merch, or NFTs.

Fanatics has spent the past 26 years building relationships with top leagues, and more importantly, a database of 80 million sports fans. Now it’s leveraging that value to create a one-of-a-kind flywheel for the sports world.



Netflix Teams Up with Walmart to Sell Merchandise Online
Axios, 10.11.21

  • Netflix partnered with Walmart to sell branded merchandise across a new online retail hub pegged to some of its biggest hits, including “Squid Game” and “Stranger Things”
  • The new Netflix Hub at Walmart will bring Netflix-branded gadgets, clothes, music and games to Walmart’s online store exclusively
  • The Netflix Hub will also include programs meant to bring Netflix fans together, like a crowd-sourcing feature called “Netflix Fan Select” that allows fans to vote on which merchandise they’d like to see from their favorite shows

The RockWater Take by Michael Booth

Netflix just announced a merch partnership with Walmart. In combination with Netflix Shop (which launched last summer), they are making serious moves to build consumer product lines around their IP. The ambitious vision is all starting to come together — Netflix has historically had flash in the pan content moments, but were ill-equipped to monetize via vertical revenue lines (see Tiger King, Queen’s Gambit, Bird Box). By the time they could build out product lines, the zeitgeist moment was gone. Flash forward to now, and Netflix already has fully built out apparel lines for Squid Game on the Netflix Shop. While the near term revenue opportunity for Netflix consumer products is small, the marketing is valuable + Disney provides a benchmark for what it could become. And with Netflix diversifying their content spend with many small bets + nimbly double down on the big winners; they may just become a capital lite version of Disney.



LeBron James’ SpringHill Company Sells “Significant” Minority Stake to RedBird Capital, Fenway Sports, Nike & Epic Games
Deadline, 10.14.21

  • Deal valued SpringHill at $725 million
  • Maverick Carter and LeBron James will maintain their controlling interest
  • In addition to helping fund an international expansion, SpringHill says it will use the infusion of cash on “acquiring valuable new IP, pursuing synergistic M&A and investing in emerging creators”

The RockWater Take by Eric Kenigsberg

SpringHill added Nike, Epic, and Fenway Sports to their cap table, signaling an ambitious growth plan, by lining up the key strategic partners they will need to fully accelerate their IP via omni-channel distribution. Through Nike, SpringHill will strike more licensing deals in fashion and commerce. Through Epic, SpringHill will foray into the metaverse via Fortnite. Through Fenway, SpringHill will expand internationally via collaborations with Liverpool FC and other Fenway assets. We’ve seen many teams and leagues create behind-the-scenes content (e.g. Formula1 Netflix show) that were extremely successful at driving new awareness and fandom.

Additionally, LeBron James may even be employing a “pay-to-play” strategy, with preferential access to his IP being given to SpringHill investors, who will in turn build content that drives revenue for the company. We expect that SpringHill will use the new capital and partnerships to quickly scale its library and capabilities before exiting in several years at a multi-billion dollar valuation.



If these insights are relevant to projects you are thinking through, ping us here. We’re always excited to riff through ideas!

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