Professional sport is a ruthless industry where teams are constantly battling out to outrank their competitors, determining revenues such as prize money and sponsorship. Poor on-field performances can bring huge indirect consequences to the business model which can include laying off staff or closing facilities. A recent case is Southampton FC’s relegation from the Premier League where an email was sent to more than 340 staff, warning a restructure would be taking place and various roles would be at risk of redundancy. That’s why off-field operations are just as important to provide a diversified range of revenue streams that don’t rely on where the team finishes at the end of the season. A heightened approach to this will not only maybe boost the playing budget for the manager to go and sign that marquee striker but will provide a sense of security and stability for the club.
Driving key performance indicators such as ticket and merchandise sales, sponsorship revenue, and customer satisfaction, and fan engagement is vital for providing off-field revenues. On top of meeting business targets, building an affinity with the fans can breed an optimistic and forward-looking mindset where both the club/organisation and the fans act in unison.
However, due to the immense popularity of some sports leagues/clubs, it can be easy for fans to feel like just another fish in the ocean. The difficulty and expense of obtaining tickets to games can often leave fans disheartened especially the young demographic. Fortunately, the Web3 digital revolution has provided a plethora of applications for sports clubs/leagues to leverage in order to maximise engagement.
Part I of this two-part article will consist of an overview of how Web3 tools are being employed across different sports and an exploration into several practical cases which are currently being used.
Digital Collectibles
One of the largest examples of Web3 technologies being currently utilised in sports are NFT trading cards, a digital renewal of the traditional tangible trading cards we grew up with. The most popular case of this is NBA and Dapper Labs’ brainchild, NBA Top Shot.
1985 Star Michael Jordan trading card
2019 NBA Top Shot Lebron James moment
NBA Top Shot is a marketplace, allowing basketball fanatics to buy, sell and trade NBA video clips called moments in the form of NFTs. Like any trading cards, there are different quantities of each moment released, therefore the scarcity of each one is the main determinant of its value. According to NBA Top Shot top sales, a moment of a Lebron James slam dunk against Miami Heat fetched a whopping $230,000 in February 2021. Other than a poorly implemented flood of supply which caused the market some turbulence in 2021, the breakout of Web3 technology can be seen as a great success. Data from DappRadar indicates over half a million moments had exchanged a total volume of $1 billion since the launch of the platform.
As well as the NBA, Dapper Labs has put pen to paper with other popular sports organisations such as the NFL and UFC to also release NFTs on their Flow Blockchain. Meanwhile, French unicorn Sorare is leading the way in the football NFT collectibles, securing a four-year deal earlier this year with the world’s most-watched sports league, the Premier League. As we continue to transfer more parts of our lives to virtual environments, the same way we loved to flaunt our precious shiny gold cards in the school playground, the next generation can be expected to do so in the digital world. By illustrating their allegiance with the players and teams they love, they will feel involved in each of their online communities.
Ticketing
The capability of blockchains to verify proof of individual ownership brings huge benefits to ticketing systems throughout the world of sports. Setting it apart from its barcode and QR code counterparts, blockchain’s decentralised and distributed system means no one individual can edit its records. This completely cuts out the possibility for records to be faked and issues a timestamped ledger of ownership, tracking exactly who owns what and when it switches hands.
Whilst attending a Euro 2020 match at Wembley Stadium, I noticed that mine and my dad’s tickets were only activated once we reached the vicinity of the stadium a few hours before the game. At the time I thought that it was a smart piece of tech but I didn’t realise that this was part of the Web3 revolution. UEFA partnered with SecuTix to provide unique, secure encrypted tickets that were entirely traceable on the blockchain, removing the risk of counterfeit tickets. This solution brought other benefits such as staggering the activation of tickets in waves to manage safety and efficiency which was a high priority during this point of the pandemic. Additionally, venue managers were able to view real-time crowd analysis due to the app reporting back when a ticket is activated at the stadium entrance.
Another marketing strategy coming to light in the industry are ticket dependent on NFT collectibles. Fans are rewarded for attending games by receiving a commemorative NFT once their ticket has been scanned at the game. This can serve as digital proof of attendance for those memorable games that live on in the minds of fans whilst allowing teams to recognise their most committed supporters.
In an interview with Forty-Eight Minutes, Dallas Mavericks owner Mark Cuban explained the strategy. “Let’s say Luka has a 30-assist game. There are going to be 500,000 people that say they were there right? But the reality is, the people that are actually there and scan in are the ones that are going to get the NFT commemorating that game”.
DAO Ownership
As opposed to the traditional ownership model of a sports club/organisation in the form of shareholders owning the club and a proportion of them holding a position on the board, DAOs have recently come into play. A Decentralised Autonomous Organisation allows individuals to purchase NFTs via blockchain in exchange for a vote on how the DAO is operated. In the context of sports club ownership, fans will have a say in the strategic direction of their beloved team by giving their judgment on matters such as:
- What company will be our main sponsor next season?
- What players should we sign in the next transfer window?
- Should we develop our stadium?
Set up by software engineer, Flex Chapman, Krause House is a DAO on a mission to own an NBA team. The community of hoops fanatics has already purchased a team in Ice Cube’s BIG3 league, a popular alternative 3v3 league for basketball fans during the NBA offseason. However, the funding continues through the sale of NFTs and building their community in order to reach their north star.
A similar pursuit is occurring in the world of golf. LinksDAO has sold nearly 10,000 NFT memberships, raising over $10 million. As well as access to governance rights, members receive discounts with partners like Five Iron Golf and Ship Sticks and membership to the DAO’s first course which they bought earlier this year. Spey Bay Golf Club in Scotland was purchased for $900,000 after 88.6% of LinksDAO members voted in favour of putting in an offer. On the basis of giving fans a say in the club they love, a DAO sounds like a great model. However, a recent case has suggested that traditional industries such as sports should maybe stay away from DAOs. The U.S. Commodity Futures Trading Commission (CFTC) filed a successful lawsuit against Ooki DAO alleging that they offered unregistered commodities, bypassing the common perception that DAOs can evade legal scrutiny. Rostin Benham, chair of the CFTC, said the DAO “was hardly decentralised” and that “there were a few individuals who were very much at the center”.
The Web3 integration into the sports world is still only just kicking off. Web3 companies and sports teams are playing the field, trying out different partnerships and ventures in order to build a strategy that creates a unique affinity between the club and its fans. Furthermore, being a multibillion-dollar industry currently undergoing a digital transformation, the opportunity for growth and investment in Web3 sports implementations is staggering. Highlighted in Deloitte’s 2022 Sports Industry Outlook, they predict an acceleration in the blending of the real and digital world alongside the expanding markets for NFTs. In the second half of this article, various Web3-powered fan engagement projects implemented by one of Portugal’s most renowned football teams will be analysed.
