Nike (NKE 2.12%) is wasting no time getting into the metaverse. The footwear and apparel giant recently launched a virtual environment on the Roblox (RBLX 4.34%) gaming platform.
In this video from "The Virtual Opportunities Show," broadcast on Nov. 30, Motley Fool contributors Demitri Kalogeropoulos and Rachel Warren and Motley Fool analyst Asit Sharma discuss how the move fits with Nike's broader goals and what it means for other companies looking to monetize experiences in the metaverse niche.
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Asit Sharma: I am going to share my screen. Let's see if this works. I know there's some viewers today who are wondering, I keep hearing about the metaverse. What is it? This is one expression of the metaverse. This is actually an environment in Roblox, which is a publicly traded company, we've mentioned quite a bit, that was created by Nike. They want to play in the metaverse space.
Basically, one part of the metaverse is being able to grab an Avatar that represents yourself like this young gentlemen here who's racing up the stairs and playing with his friends. You can move around in that space. You can interact with people, you can play games, you can have experiences, you can watch a concert. This is an easy to grasp expression of the metaverse. Now, the metaverse is other things as well. It's virtualization as it relates to technology, it encompasses building virtual worlds just for the purposes of architecture and engineering, as I was mentioning last week.
But I wanted to walk through this Nike announcement of their space on Roblox because I think it draws together some themes just in what Nike is trying to sell us. We should mention here that Nike is one of the biggest brands on the planet and they've been a successful brand since the company was introduced. They spend a lot of their money to understand how to sell more of their products. In fact, guys, correct me if I'm wrong. Demitri, you may remember this, but I don't even think they've got like operating expenses on their income statement. I think they have like demand creation expense as a big line item.
Demitri Kalogeropoulos: Yeah, that's what it's called demand creation expense.
Sharma: When you think of part of your overhead is this, and you have a different label that you create in your culture. You come up with savvy ideas like this. There is a new place on Roblox for Nike fans to connect, create, share experiences, and compete, NIKELAND. I thought we were living in NIKELAND. Anyway, it's almost impossible to buy other products without having to consider Nike's products. There's peer pressure if you're young.
There's an economic pull if you are a little older, and there's trust in the product. But anyway, they have created a de facto NIKELAND. They created this bespoke world with the backdrop of the world headquarters, so that we'll see glimpses of that inside Roblox's immersive 3D space. [inaudible 05:27:15] thinks know about NIKELAND and Roblox. We're just going to look at four of them. Nike's world headquarters has transformed into NIKELAND, a place where competition and creativity are abundant for all. Now, we'll take that with a grain of salt, but I do find it interesting that they are latching onto Roblox environment, which is tailor-made for people to meet and play friendly competitive games with each other. T
hey have designed all these experiences that you can sit at home and experience. I have myself not tried out this space. NIKELAND is enhanced by real life movement, encouraging visitors to get more active. This starts to get into the world that Facebook, formerly Facebook now Meta is trying to sell the idea that you're going to use potentially third-party AR or VR headsets and other appurtenances you can put on your body and participate physically in these spaces. I think that's probably good in some ways.
But we see how the metaverse can evolve. There is a big picture point here that if you haven't grasped this already, the fact that Nike is plowing into this space gives us some sense of the viability of the idea of the metaverse and how it's becoming mainstream, how retail is monetizing the opportunity. A digital showroom allows you to outfit your NIKELAND Avatar with special Nike products. Now, I don't know if Nike charges to do this, but if you've been on Roblox, you can outfit yourself with some really cool swag. It'll cost you in Robux, which is the currency of Roblox.
You obtain Robux primarily through fee-out currency, US dollars. Again, I don't know if Nike is doing this, but this is certainly the future. For those of you who are of a more traditional bent and feel that it's ridiculous, you might be surprised at how easily the younger demographic has adapted to the idea of paying for virtual swag. Just as we as consumers who grew up in a non-digital world, at least if you're roughly my age, you'll remember buying swag that was physical. It's the same impose that drives us all. It's not that hard a bridge to cross when you think about. But I thought that was very interesting because this signals a potential future monetization for Nike if they can start selling their gear.
Think of Air Jordans, a sneaker franchise that exists on brand dominance, it exists on the mythos of Michael Jordan, and it exists on rarity. The oldest Air Jordan pairs are rare collector's items, they sell for thousands and thousands of bucks. Translate that to a virtual space with no distribution, no overheads. You can see how profitable this could be for some companies in the future. This also starts to get into the world of NFTs, non-fungible tokens. But I need to keep moving so we can move on to our next part of the show. Finally, the fourth one I want to show. NIKELAND is free for anyone to visit and experience on Roblox breaking down one of the biggest barriers to support access. I really like this part, guys. I like the idea that you don't have to buy a ticket to participate in this. My sons will all be home at Christmas and they are already talking about the professional sports games that they want to participate in, maybe a Carolina hockey game, and then the three of them are going to take a trip together to Chicago and they're now talking about Black Hawks game or maybe picking up a Bulls game.
That costs money just to buy halfway decent tickets in this day and age. Not everyone has that access. As students, many times they've sat in the nosebleed seats. But I like this idea of making it accessible to everybody so your financial status isn't a barrier, you just need access to the Internet. But anyway, I thought this was very, very interesting from a brand perspective, curious on your thoughts, guys.
Kalogeropoulos: I really like that page too, it's cool how can you can see exactly how it looks in motion there. I was struck too, last point I like a lot because one of Nike's missions is to democratize sport, I guess, to try to bring it to as many people as possible. It's clear from the way this is launching that they at least believe that this is going to be a big way to do that. I can see it's not hard to see how that's possible.
If maybe you don't have a track and field anywhere near your house or some of these things, you can at least digitally experience something similar to these things. Nike can help get people excited about whatever it is about jogging or any one of these athletic, some of those cool games I saw on that video. I think that's definitely a win for them and it fits right in with one of their missions. I can see now a little bit more about why they're so excited about it.
Rachel Warren: This is a wild concept. Serving you when I look at all this, I think it's very cool. It was interesting when you mentioned NFTs, non-fungible tokens because it's exactly what I was thinking of. You have people buying digital art, so why not buy designer cutting-edge digital sneakers or something of that sort? But I think another thing that's interesting about this is I think one of the criticisms that has been out in society as our worlds become increasingly digitized has been the loss of wonder and use of our imagination because we're staring at screens every day and everything is still automated.
I feel like in some ways, this metaverse where you can go into the digital world, whether it's running a digital track or some cool place that Nike has spun out, it just help you rediscover I feel like that aspect of yourself that has that imaginative side and you can go into the space and just enjoy yourself there and reawaken some of that childlike wonder. That's maybe a different way to look at it, but that was one of the things that struck me when I was looking at this.
Sharma: I like both of those points, guys. I struggle with this myself. Someone who feels for himself the ultimate expression of creativity is writing in a journal, analog with pen and paper. Watching what happens when not just me but as a society, we become a custom to the dopamine hits that jerk us around, the loss of the sense of self because we're in this communal environments all the time, it can be destructive sometimes in social media. But it can also be wonderful.
That simplistic environment we saw didn't strike me till you said that. Rachel, I like that idea. The ability to poke around had a sense of wonder. Be yourself in a different environment is very stimulating to the imagination. Maybe that's what the future looks like for people who are going to exercise part of their creativity online.