Digital Products Need to Be Tied to Physical Ones

By Brendan Menapace

Since NFT's first popped up, there's been some discussion about how digital-only products could fit into a physical space, like the promotional products industry. As companies dipped their toes into other digital-first platforms like the Metaverse or even online gaming, brands tried different ways to bridge the gap between physical collectibles and digital NFT's.

At one point, it really seemed like NFT's could be the way of the future, and could make things hard for people selling hard goods. Now, they're not so hot, and sometimes end up as the butt of jokes.

Like most things in the world, though, the real status of the NFT is really in the middle ground. They have a place, but will not replace a physical product. If anything, they will rely on a physical product in the future.

Fanatics, the sportswear brand that has been growing into one of the biggest names in the industry, just sold off 60% of its Candy Digital NFT wing, with CEO Michael Rubin giving a hint at what role NFT's can play in the branded merchandise sector in the future.

"Over the past year, it has become clear that NFT's are unlikely to be sustainable or profitable as a standalone business," Rubin said, according to CNBC. “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.”

This is pretty much what we have been hypothesizing over here. The best NFT-related promotions have been ones where the NFT is a complement to a physical product. It might even be a straight-up digital version of it. But, there needs to be something you can hold in your hand for the promotion to really land.

A lot of the mystique around the NFT was that a lot of people didn't fully understand it. So there was the "it could be the next big thing" hype. In the end (if this is the end), they're not going to be the instant moneymakers some NFT disciples would have you believe. And as other blockchain-related things like cryptocurrencies trend downward, it's pretty clear the NFT bubble probably burst.

NFT Gators reports that NFT trading volumes have declined 97% from January 2022 to September of 2022.

All of this said, there is still a demand for digital products. The way that companies have integrated their real-life merchandise into platforms like video games will probably continue. Gamers will want to wear the same shirt as their avatar, or buy the lightsaber they use in the video game when they're at Disney World.

Even with the "digital trading card" boom, Fanatics clearly saw the value of actual paper trading cards, considering it acquired Topps for $500 million.

There's certainly room for creativity in the digital space, but it needs to be anchored in reality.

To a point, it sort of mirrors the reason many are skeptical of cryptocurrencies: Their decentralized nature means they're not held to any literal gold standard. In this case, a physical product is the gold standard, and the digital product gets its value – whether monetary or purely sentimental – from that.