Funko CEO: Collectibles Giant Taps This NFT Niche to Fuel Growth
Giant for pop culture collectibles Funko (FNKO) is betting that non-fungible tokens (NFTs) are here to stay, despite the dramatic drop in market value. The company behind Funko Pop! vinyl figures has an ambitious goal of doubling revenue to $2 billion by 2026. And Funko plans to expand its NFT offerings to reach that goal.
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CEO Andrew Perlmutter says younger people today are more interested in digital investments and assets. “My kids always want the latest Fortnite avatar skull or gun,” Perlmutter said. “So the way they look at digital assets is different than how we dinosaurs look at them.”
Perlmutter admits he is no real expert in the field, but says there is value in expanding the fan base.
Last April, Funko acquired a 51% stake in TokenWave, the developer behind NFT’s display and tracking platform TokenHead. TokenHead’s app allows users to view their NFT holdings, track their value and has a variety of features for buyers and sellers, including authenticity verification.
“We knew it just made sense for our brand to be in the NFT business … There are people who collect digital assets,” Perlmutter said.
Dive into NFTs
Funko launched its first lines of NFTs last August when the total market volume was around $3.6 billion. While high-profile NFT collections like Bored Ape Yacht Club and CryptoPunks have made headlines for eye-popping prices, Funko took the trading card approach. Funko sells NFT packs for $9.99 that include five digital collectibles, or packs of 15 for $29.99.
But the market for NFTs fell dramatically this year as the price of cryptocurrencies fell. Monthly NFT market volume fell to $501 million in August from peaks of $5.6 billion in January 2022. And it only fell further in September, totaling just over $202 million halfway through the month.
That hasn’t hurt Funko, though, thanks to the company’s strong fan base and reasonable price.
Funko has had a strong reception for its NFT launches. Many of their NFT series are redeemable for physical Funko Pops!, their flagship segment of vinyl figures. Collectors have been snapping them up for limited edition “chase” sets. They’ve also seen an influx of customers who have never bought a Funko Pop! but is interested in NFTs, Perlmutter said.
“Twenty straight drops, 20 straight sellouts,” said owner and Chief Creative Officer Brian Mariotti at Funko’s press day on Tuesday. “[We’re] the only company in the world that truly takes the digital meets physical strategy, taking digital NFTs and putting real, rare physical products together with them.”
Funko had a waiting list of 500,000 people for its first DC Comics NFT release. And last week’s release of the DC Comic Series 2 line marked Funko’s biggest grossing day for NFT sales. About 35% to 40% of NFT sales come from outside the US, further advancing Funko’s international expansion goals. The company also wants to increase its presence in China, Asia, South and Latin America.
Digital direction
Funko is exploring different ways to expand its marketplace, expand its licensing brand, gamify products, add utility to its NFTs and bring them to market. “Whether it’s through open sea and open auction, experience meets (sic), meets physical (sic),” Mariotti said. He did not clarify whether open sea referred to cooperation with OpenSea, the largest NFT market platform. Funko NFT collectibles are currently purchased through the Droppp platform, built on the WAX blockchain.
Funko did not respond to confirm whether it was working on an OpenSea integration at the time of publication.
“We have some more innovation in this area, including a new strategy we’re very excited to bring at the end of the year,” Mariotti said. “Again, early days in that space. We’ve been hyper-successful so far, but tons of innovation [is] ongoing on the back end as we continue to invest in that business as well.”
Find the fans
Funko’s mantra is about meeting customers where they are and fulfilling their interests, says Perlmutter.
Funko has found success through strategic acquisitions of strong brands that have an overlapping customer base.
The company acquired lifestyle and apparel company LoungeFly in 2017. LoungeFly revenue grew from $17 million in 2017 to $208 million over the past 12 months. And in June, Funko bought high-end memorabilia company Mondo for $14 million. Perlmutter says there’s a big audience for exclusive posters, art, vinyl records and other memorabilia.
The same mindset led them to launch their line of mobile games and an upcoming AAA action platformer. And Funko is seeking ways to expand its IP across different content platforms.
“We’ve been researching ‘is it a movie, is it a streaming TV show, is it a video game?’ And I think the answer will ultimately be all of the above,” Perlmutter said. “But this is a truly unique opportunity for us to bring the Funko license of IP, which our fans around the world love, into the video game space.
He mentioned that Funko is in talks with some major streaming services, but could not reveal more information at the time.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
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