Why every major entertainment company will get into NFTs, according to the VC behind NBA Top Shot

• NFTs are digital assets exploding in popularity and value right now.
• David Pakman is a VC backing NBA Top Shot, one of the most successful mainstream NFTs.
• Pakman says fans of IP like Star Wars are built-in NFT customers.

Non-fungible tokens, or NFTs, have jumped into the mainstream recently.

NFTs are digital assets that have been around since 2017, and in 2020 they became a $250 million market. Creators are already realizing the potential to make millions in the relatively new space. Grimes sold her digital collection for $5.8 million in a 20-minute auction. A Miami art collector sold a 10-second video for $6.6 million.

The NBA Top Shot online marketplace has done over $65 million in sales in just the last week.

Venture capitalist David Pakman is a partner at Venrock, an investor in the company behind NBA Top Shot. Pakman told Insider that consumers should expect to see other brands selling crypto-collectibles too.

Read more: Here are 4 NFT startups transforming the way we buy art and sports memorabilia

"I'm sure you'll see Star Wars, Harry Potter, all super popular global IP," will eventually get into digital collectibles. "Those brands have touched hundreds of millions of people" he notes, and as long as they have internet access they're all potential customers.

So far this is already starting to come true. Taco Bell just became the first fast-food restaurant with NFTs, and several athletes including Patrick Mahomes and Rob Gronkowski have jumped in too, and Lil Pump and Kings of Leon are bringing NFTs into the music world.

For fans, digital collectibles can have more staying power than physical objects like a plush toy or trading cards. Because NFTs are software, they can change and improve, Pakman says. Pieces can evolve and change based on factors like who the owner is and where they're located.

Right now, NFT owners are limited to buying, selling, and displaying their collectibles, but as more companies enter the space and build new technology, their utility will increase, Pakman says.

"You could have hundreds or thousands of other companies creating experiences around a collectible," for example, he says there are up to 50 games in development right now that would use NBA Top Shots moments.

Creating digital collectibles is a smart money decision, too. Digital collectibles, compared to analog items, are software, so the creator can continue to make money as it is resold.

"In the physical world, you get a percent of revenue when the plush is sold the first time, but if it goes up in value and people sell it at a flea market, you don't get anything on downstream sales," Pakman said as an example.

Creating digital scarcity like NFTs then becomes a compelling business model to giant companies like Disney, so more of them will create in the space. Creating an ongoing economic relationship, rather than a one-time sale, is very interesting to companies with popular brands.

"You'll get paid forever," as Pakman puts it.