Fanatics is selling its stake in NFT startup Candy Digital to an investment group led by Galaxy Digital, which co-founded Candy along with Fanatics and Gary Vaynerchuk in early 2021. The news was first reported by CNBC, citing an email from Fanatics company.

In October 2021, Candy raised $100 million in a deal valued at $1.5 billion, co-led by Insight Partners and Softbank Vision Fund 2, with participation from Peyton Manning and Connect Ventures, the joint venture between sports agency CAA and New Enterprise Ventures. Notably, Softbank also participated in a $700 million funding round for Fanatics in December 2022 that valued the company at $31 billion.

“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a stand-alone business,” Fanatics CEO Michael Rubin wrote in the email cited by CNBC. “In addition to physical collectibles (stickers) driving 99% of the business, we believe that digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors.”

While there is no doubt that NFT prices were inflated by speculation, it is also hard to deny the transition from entertainment to a digital experience. Particularly for the younger generations. Brands continue to embrace the concept, though many opt for the term ‘digital collectible’ to avoid associations with scams.

Fanatics’ commitment to physical collectibles is not surprising given its significant investments in rights acquisition. Shortly after launching Candy Digital, Fanatics obtained collecting rights for the MLB Players Association, the NBA, and the NFL. Topps had held the rights to MLB for 70 years and was forced to drop a SPAC roster. Fanatics later acquired it for $500 million.

Candy Digital owns the digital collectible rights to MLB, as well as a variety of other rights, such as with NASCAR teams through the Race Team Alliance. Until recently, Candy couldn’t wear NASCAR branding, but her most recent collection, released in December, featured the iconic brand front and center.

In November, Candy was reported to have cut a third of its staff. Sports NFT company Dapper Labs (NBA Top Shot, NFL All Day) also cut staff by 22%, and the Galaxy made a similar proportion of layoffs.