This article belongs to our series “Technology in Sports” that we introduced in this blog post and our aim is to provide a bit more insight into the impact that, in this case, Blockchain technology can have in the sports and fitness industries.
What is Blockchain?
In essence, a Blockchain can be defined as a decentralized database network. It is built up of nods (computers) at a global scale that manage that database without the need of a central body governing it. It enables consensus among the existence, state and evolution of a series of shared pieces of information.
The following video does, in our opinion, a great job in explaining what Blockchain technology is:
The Blockchain opportunity and use cases
According to PWC, this technology could account for an opportunity valued at US$1.76 trillion by 2030. Imagine its scalability considering that by 2021 it will “only” be valued at US$66 billion…
The firm also identifies 5 top uses the technology could have based on the value it could generate and we add brief examples of how they could translate into the sports industry:
Provenance: This helps verify the sources of goods and track them along the entire value chain, which could be particularly useful, for example, in the sport apparel industry, where fake items are sold regularly on global platforms, since it would help confirm the authenticity of each item.
This was the rationale behind the Sacramento Kings´ partnership with Consesys to auction official merchandising during games.
Payment & Financial Instruments: Although this could have impact across many areas, it pretty much implies payments with digital currencies.
Again, the Sacramento Kings, who are considered a pioneering organization in the adoption of Blockchain technology in the world of sport, launched a loyalty related initiative in which fans can spend tokens for rewards. Similarly, in March 2021 the Dallas Mavericks announced they will start accepting Dogecoin as a form of payment of tickets and merchandise.
Identity: This implies safeguarding either personal information or professional credentials. In the sports industry, the platform “Socios” would be the prime example since they enable fans of a given organization to participate in certain decisions of the team they support, after being recognized by their service as such.
Contracts & Dispute resolution: Thanks to Blockchain technology, contracts do not need to be signed in person and it even creates an audit trail automatically. This, in addition to saving time and reducing costs, helps remove friction to improve the flow of any commercial agreement.
The easiest example to understand in this realm is the development of smart contracts, as explained by STG in this article. Think, about the clauses of an athlete's contract in which he or she is paid for achieving certain results during the season. Thanks to Blockchain, the data around the athlete's performance is gathered in real time and as soon those incentives are met, the clause in the contract is activated without needing external parties to verify it.
Customer Engagement: In the current context, more and more customers look to spend rewards from the loyalty programs online but companies traditionally have required some form of physical interaction to redeem those points. In addition, some companies will shift towards loyalty ecosystems driven by brand partnerships, as we covered in this edition of The Ballketing Letter. Given that integrating all this information is complex, blockchain technology can simplify the process and allow consumers to store, check, consolidate and spend points online in real time.
5 Examples of Blockchain in Sports
While we can still consider the technology being in its very early stages with regards to general adoption and consequently, still have few examples within the sports industry, wel wanted to share a few additional business cases to help you understand how Blockchain could be used by sport organizations.
Ticketing for the Uefa Euro´s
For the 2020 European Football Championship, which has been delayed to 2021 due to the Covid-19 pandemic, UEFA used a Blockchain-based solution to offer tickets to fans. There are many benefits for adopting such a solution, as gathered in this article by Cointelegraph being the main one, in our opinion, the possibility to fight against counterfeit tickets for major sporting events. Another major benefit is that fans no longer need to form long queues at the stadium, which is particularly relevant for operations in a post-pandemic environment.
This is also something being considered by other major sport organizations. The Dallas Mavericks are also looking into the possibility using blockchain for ticketing in sports although they still need to define the potential business models that could derive from it.
What is remarkable about this though, is the additional revenue opportunities that blockchain can drive for ticketing. Eric Waller, CPO at SeatGeek, believes that it can lead to further royalties derived from a resold ticket or even that in the future, user generated content could be somehow attached to each individual ticket to personalize the fan experience:
“It could be user-generated content, like a video clip you took at the game, or it could be an official moment, more NBA Top Shot-style. One of the challenges in the short term is, because this is a new rights category, there’s this huge effort now at the leagues and with the players to figure out who has the rights to what and who gets paid when these things are used.”
Socios: A fan engagement platform based on Blockchain
This business, which we already mentioned above, has deals with major clubs like F.C. Barcelona, Juventus, Manchester City or PSG, enables fans to vote on club decisions or purchase official merchandising based on tokens that clubs offer them through the platform.
And now, they are looking to expand into the United States, given the emergence of blockchain based services in the country. Joseph Edwards, from Enigma Securities, had this to say about the "fan tokens" opportunity in this Reuters article:
“Fan tokens right now are just hitting the perfect itch at the perfect time - fans are disconnected physically from their fandom, and this helps bridge that gap”
Similarly, Giorgio Ricci, CRO at Juventus, believes this solution goes beyond fixing a short term problem related to having no attendance permitted in stadiums due to pandemic-related restrictions:
“(It) is not just a short-term fix to the problems brought on by the pandemic. It’s a solution to the longer-term issue of how to engage with the 99% of fans that aren’t able to watch games from the stadium or ever set foot in Turin."
Now, what seems interesting going forward is the revenue opportunities that platforms such as Socios open up for sport clubs. As of August 2021, some of the major European teams had generated $200 million in revenue from tokens sold on Socios, which definitely helps recover some of the lost ground during the pandemic.
Fan loyalty programs
As we mentioned above, the development of brand partnership programs is on the rise to foster customer engagement and blockchain technology could be a major driver behind it in the future.
For instance, consider the following potential example of a loyalty program for a fitness business and how it could evolve with Blockchain. In essence, the technology could help the gym expand its partnership network and offer their customer new services.
Official merchandising, memorabilia and digital collectibles
Consensys considers there are relevant opportunities in this segment, which values it at $5 billion.The best example can be found in the alliance we shared earlier between the company and the Sacramento Kings. In addition, the firm identifies further opportunity in digital collectibles as a way to diversify the way in which fans can identify with the team they support with three major benefits vs traditional collectibles:
Scarcity
Capacity to trade them in open markets
Verification of the asset
In fact, one of the most exciting opportunities resides in sport associated NFTs (Non-Fungible Tokens) which are defined in this Coindesk article as follows:
Non-fungible tokens (NFT) are digital assets that represent a wide range of unique tangible and intangible items, from collectible sports cards to virtual real estate and even digital sneakers.
And don´t take it from us, do so from Dallas Mavericks owner, Mark Cuban, who had this to say about digital collectibles:
“This is like the early internet days all over again, I think [NFTs and blockchain tech is] going to be huge. Gen Z value digital goods more than anything, other than maybe a house, maybe a car [and] their phone. After that, it’s digital. They’re going to respect something that’s digital before they buy something that’s physical.”
In the world of sport, NBA Top shot, created by Dapper Labs in partnership with the NBA and the NBPA, is the most promising opportunity in our view, given the recent rise of the sport cards market. Top Shot basically identifies highlights and mints a certain number of each of them with a unique blockchain identifier, offering them in "digital" packs that range from $9 to $999. As reported in this article, the platform had registered over $120 million in transactions between October 2020 and February 2021.
Similarly, ex NBA star Wilson Chandler signed a deal with Cryptockickers to design 21 editions of a virtual shoe and sell them as NFTs (priced at around $45 each). This move hopes to take the shoe design industry fully virtual and as Chandler summarized:
“I think these guys are positioned to build a Nike-sized fashion business for virtual worlds.”
Visa estimates that sport organizations around the world lost about $18 billion in revenues during the pandemic and many among the industry see NFTs as an opportunity to recover some of those losses; it will be interesting to see the moves they make going forward.
Tokenization of assets & contracts
As shared by Ledger.com, teams could potentially decide to tokenize its players and divide ownership among several parties. If at any point the organization decides to sell the player, all parties would instantly receive the corresponding part of the sale they are due.
Contracts are something that could also be tokenized. One of the most notable examples is that of NBA player, Spencer Dinwiddie, who in early 2020 announced we would tokenize his own NBA contract, with the idea of selling some of those tokens, valued at $150,000 each, to claim $13.4 million upfront from his 3 year contract worth $34,4 million.
As of July 2020 though, he had only managed to sell tokens worth $1,350,000, which is far below his $13,4 million target.
Can Blockchain bring value to your sport organization?
Finally, we wanted to end this post with a series of questions that PWC looks to tackle to identify if your sport organization could ponder implementing a Blockchain related solution. and we also add our view on how these questions could translate to the sport & fitness industries.
1. Do multiple parties share and view common data?
2. Similarly, do multiple parties update and record data?
3. Does your business need verification of certain records?
For instance, we are thinking of a large fitness business with regional divisions that depend on a central organization.
At any point in time, customers may walk in a gym, make a transaction that implies recording a new set of data against their customer profile and at that point, anybody within the organization could use that data for different purposes thanks to the automatic verification of the transaction.
4. Do you normally rely on intermediaries that add costs and complexities to a particular operation?
5. Are certain time sensitive Interactions part of your regular business?
6. Do certain transactions depend on two or more parties?
Think about the transfer market in sports in which teams, agents and athletes negotiate transfers and contract renewals constantly. Couldn´t this situation relate to the dispute between the two brothers exemplified in the video above? Will Blockchain minimize the current role of sport agents?
Similarly, transfer deadline deals would not be at risk of falling through with this technology. A few years ago, there was a situation in which David De Gea, goalkeeper for Manchester United, failed to complete his transfer to Real Madrid because the fax that confirmed the transfer was received after the midnight deadline.
If, according to PWC, you have answered “Yes” to 4 or more of them, your organization could potentially benefit from a Blockchain solution
Putting it all together: The 3 main applications of blockchain in sport
In essence, the application of blockchain in sports can be put into 3 buckets, as defined by Liam Killingstad in this article on Front Office Sports:
IP Monetization through NFTs: This is the category where digital collectibles or content pieces would fall into. The sport organization obtains revenues from its digital assets.
Digital Ticketing: The main benefit here is that sport properties can earn revenues from secondary transactions.
Social Tokens: These are the type of assets that would let fans enjoy exclusive experiences for holding a given NFT (a VIP pass, working out with an athlete, etc.)
While business cases to learn from are still rare despite the wide range of realms that blockchain can be applied to, we will try to bring you updates and expert opinions in the future to provide you with a deeper understanding of how the technology could help your sport or fitness organization.
Meanwhile, keep safe.
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