Nike Joins the Metaverse by Acquiring an NFT Company

• Nike is expanding into the Metaverse by acquiring RTFKT Studios. RTFKT specializes in producing items with a mix of culture and gaming elements in the digital world.
• The Metaverse is a virtual reality platform that allows users to link their crypto wallets to purchase virtual items, which they can equip to their avatars, similar to how people buy items in the real world. 
• This expansion could benefit Nike as they are one of the first companies to expand into the Metaverse, but the move also has its risks.

The technological world is rapidly changing, and an increasing number of items are making their way into the digital world through the use of NFTs and the Metaverse. As one of the first companies choosing to expand into the digital apparel market, Nike announced the acquisition of RTFKT Studios. RTFKT is a company that specializes in creating digital artwork containing a mixture of culture and gaming. 

What is the Metaverse?

The metaverse is a virtual reality world where people can interact with others. This is similar to today’s massively multiplayer online (MMO) games. These MMOs provide a virtual space where people can interact with each other. Facebook popularized the metaverse most recently when the company announced that it would be changing its name to Meta.

However, not everyone is jumping on the metaverse bandwagon. Former Twitter CEO Jack Dorsey recently mocked the Metaverse and agreed with a tweet that stated the metaverse could be a “dystopian corporate dictatorship.” 

How Does the Metaverse Work?

In simple terms, the metaverse is a virtual world where people can do things that reflect the physical world. Similar to the movie “Ready Player One,” the metaverse allows users to connect with each other in similar ways humans connect in person. In the movie, people use VR headsets to play video games in a dystopian society. Players can also customize their avatar by buying digital items, such as sneakers, hats, or jewelry. 

Image Credit: Shutterstock.com

The process is similar to walking into a Nike store or visiting their website to purchase a pair of Air Maxes. In the virtual reality of the Metaverse, a similar principle applies as people can link their crypto wallets, using the Ethereum blockchain associated with the Metaverse, to buy NFTs, real estate, digital art, and many other types of digital assets through smart contracts. A smart contract is a contract that is executed once predetermined conditions have been met.

For example, if two users of the Metaverse platform wished to exchange a commodity for crypto, a smart contract would be needed, which would outline the criteria that both parties must meet for the transaction to take place. Furthermore, members of the Metaverse can use their digital assets as trading cards and exchange them with other players to obtain items they desire with similar value.

Nike Expands into the Metaverse

The Metaverse is a relatively new concept right now, similar to the internet when it was first getting started. Therefore, early comers to this new platform hold a significant market share, meaning that they can gain and maintain a higher stream of revenue if the metaverse goes mainstream. However, those who choose to expand into the new market years after its development may not have access to a larger market share of the metaverse world.

As a result, Nike is now one of the first apparel companies to compete in the virtual reality market. Thus, leading them to acquire RTFKT Studios, a company specializing in producing products intended for use in cyberspace.

Pros of Expanding into the Metaverse

Nike expanding into the Metaverse is a risky yet ambitious move that could pay off. The main benefit of expanding into the virtual space early on is the low level of competition. A low level of competition means most people looking for apparel have a minimal choice of companies to choose from. As a result, the limitation of competition early on allows the company to retain a higher consumer base, positively affecting their income and customer loyalty levels. 

Cons of Expanding into the Metaverse 

With Nike expanding into the Metaverse, there are certain risks involved which could negatively affect their investment and acquisition of RTFKT Studios. 

NFTs Potentially Losing their Value

The first con of expanding into the Metaverse is the risk of NFTs losing nearly all of their value. For example, earlier this year, when NFTs were initially being introduced to the public, the gradual hype surrounding them caused their prices to skyrocket. In today’s market, the lowest price for a Bored Ape NFT is 52 Ethereum or 210,000 USD. These high prices for pictures and videos indicate that they are in a bubble, meaning that their value does not match the price they are selling for. 

Grimes, a Canadian musician, sold $6 million worth of NFTs on Nifty Gateway earlier this year. However, some of these items are being resold at a lower price than what the buyer paid for. The lowering of price indicates that some NFT holders realize the value of these digital items does not match the price they are being sold for. Thus, sellers are selling them at a lower price to get some of their money back if the NFT market collapses. 

Poor Execution of the Metaverse

The Metaverse is a virtual reality platform. For the platform to acquire a significant number of users, it must retain the users’ attention to continue using it. Therefore, if it is not created to continue engaging its users to use the platform, people will stop actively using it, which could negatively impact Nike’s investment as not enough people would be purchasing their digital items.

All in all, the expansion into the Metaverse is an ambitious and uncharted one that could potentially provide Nike with an adequate return. However, Nike is taking an enormous risk as their acquisition of RTFKT Studios is contingent on the Metaverse performing well. Otherwise, their investment will not provide its desired returns.

What are your thoughts on Nike acquiring a company to expand into the Metaverse? Let us know in the comments below.

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