Nike Invests in Virtual Sneakers Is About Gaming
By Betsy Burton
This week, Nike announced it is buying RTFKT Studio for an undisclosed amount of money. Based on the company size and current product line, we would guess that the purchase was approximately $3-5 million.
RTFKT was started by three friends in 2020. The company is focused on merging gaming, blockchain, game engines, NFTs, blockchain authentication and augmented reality to create virtual products and experiences.
For Nike, this is an opportunity to expand its brand in terms of perceived innovation and gaming. However, we don’t see a real revenue impact as of yet.
Right now, this looks like more hype than a significant product line. For a $40+ billion company, this investment is a nothing investment, even if it is just for a bit of market attention.
Merging Gaming and Sneakers
I get it. The online gaming industry is big; it is estimated to be USD $300 billion by 2026. In addition, according to Data Bridge Market Research the global athletic footwear market is expected to reach USD $100+ billion by 2028.
And, this is just for the footwear. The “sneaker culture” fuels additional product sales (i.e. clothing, jewelry, music , media, cultural experiences, etc.).
So merging sneakers and gaming, even if it just for branding purposes looks like an interesting venture.
Let’s get Real. Or not.
We have seen this before. Some of us remember the Second Life hype. Companies like IBM, Microsoft, Nike and many others jumped into this metaverse. Most of the larger companies bailed due to issues relating to managing customers (e.g., garner leads, identities, ongoing information).
However, there is a real market for virtual goods and services in Second Life, where people can buy clothing, cars, real-estate, home goods, etc. for the avatar. Note, these are only available in the virtual world, to be purchased with virtual currency which can then be converted to Euros, USD, etc. Today the revenue for the marketplace in Second Life is estimated to be about US $300 million.
It’s About Gaming, Not Real Digital Business
Today, this deal is primarily about gaming. While Facebook/Meta’s Metaverse may be targeted to adults collaborating in work and sharing in their personal life. The reality is that it is more likely to get picked up by teens and young adults for gaming purposes.
Now, it would be interesting if one could design a sneaker in the metaverse and then purchase it in the real world. This would actually be getting to a digital business for Nike. But that is not where this deal is at this point.
Nike’s purchase of RTFKT Studio is largely a marketing play to help their brand; it helps them look innovative and edgy. There may be some revenue in this, but in the grand scheme of Nike revenue this is nothing.
If you are an online gamer interested in Metaverse, this is just more fun toys you can buy for your avatar.