Football: Rebuilding revenues using blockchain
Few sectors have escaped disruption during the Coronavirus pandemic. Football is no exception. According to Premier League chief executive Richard Masters, by the end of the 2020-21 season, English clubs will have lost about £2bn in ticket sales and broadcast income since the start of the pandemic. The impact is just as serious in other countries. One of the main arguments put forward by some clubs involved in the ill-fated European Super League (ESL) was that their financial survival depended on a new competition and media model.
The ESL debacle also highlighted the challenge faced by clubs as they try to engage with fans who can no longer attend matches and promotional events. This has had a marked effect on revenues, including an estimated 15-million-pound reduction in replica shirt sales. Many clubs are also casting envious eyes at innovations in other sports including the NBA’s Top Shot venture which has already logged $550m in transactions as fans buy and trade video clips of their favourite basketball stars. No wonder football clubs are exploring digital avenues, including cryptocurrencies, blockchain and NFTs (Non-Fungible Tokens) to boost their income.
Although it’s still early days, here are a few of the projects where clubs are exploring the world of digital ledgers and other financial tools to engage with fans and raise revenues; and lessons that apply to other sectors.
Auctioning digital artwork
On the eleventh of May this year, Turkish defender Caglar Soyuncu headed the winner as Leicester City triumphed over Manchester United, ending the Red Devils title challenge and handing the Premiership Trophy to local rivals Manchester City.
As well as popping the corks of hundreds of champagne bottles, the game also gave Manchester City the green light to announce a limited range of animated digital artworks that were auctioned on digital auction site MakersPlace. One of these, The Champions Celebrate, sold for USD 27,000 (10 Ethers, the native cryptocurrency on the Ethereum blockchain) Sounds crazy? Not if the market has anything to say about it. At the time of writing, the owner was receiving bids twice the original purchase price.
But while the project shows how simple it is for established brands to commission digital artworks and collectibles, there are downsides. Not least the negative impact that NFTs have on the environment, and the ensuing reputational challenge for any brand with a sustainability policy. (By the way, Manchester City donated a portion of its proceedings to a project that supports the mental health of young people in Manchester).
Opportunities for club ownership?
Want to buy an NFT-backed stake in your favourite club? The opportunity is there if you support Club Necaxa, one of the 18 teams in the Mexican first division (Liga MX). At the end of May, Investor Al Tylis purchased a 50% stake in the club, with a bit of help from the actress Eva Longoria, Olympic gold-medalist Bode Miller and a clutch of other celebrities from the world of modelling and sport.
At time of writing, you are invited to bid for the token on the OpenSea marketplace. As long as you have $1.2m to spare that is. Bear in mind that if you choose to sell at any time, Tyler and his investors will get 10% of the sale.
But there is a serious point. Club ownership is under greater scrutiny than ever before, especially since the demise of the ESL. English fans look with envy at the German model where teams must own at least 51% of shares protecting the club against the majority influence of external investors.
Right now, it’s too early to say whether or not NFTs could help club ownership to become more democratic, but as the following example shows, there are still ways that brands can drive engagement with their audience with tokens and blockchain. In the meantime, Club Necaxa are languishing at the foot of the table.
Picking the team – and building engagement
In October last year, fans of Apollon FC of Cyprus voted for the player line up in a friendly match. This season fans can choose the design of the new kit. Bigger clubs are also getting in on the act. Juventus outsourced a motto for the team bus. Similar decision-making surrounds logos, song playlists for warmups and limited-edition playlists.
All this is made possible by Socios, a fan token platform based on the Chiliz blockchain infrastructure and currency ($CHZ). Clubs issue a finite number of tokens – FC Barcelona has 40 million for example. AC Milan raised more than $6m in digital revenues in a matter of hours after its launch in February. English clubs are also getting involved, with Manchester City joining in March this year.
The numbers are impressive, but many supporters are less than impressed. West Ham United cancelled its participation following a fan backlash, while the English football supporter’s association has also raised concerns with the Premier League. Any business should carefully consider the interests of its customers, the potential impact of new regulation and seek advice before taking a plunge into the potentially turbulent waters of blockchains and tokens.
Cautious, but smart. Burnley explore the NFT possibilities
Burnley may be one of the oldest clubs in the English football league, but the team is also one of the most forward looking when it comes to digital technologies. In January, it became the first Premier League club to launch a global open talent search for new academy players using artificial intelligence, powered by mobile phone app AiSCOUT. Now it is partnering with NFT marketplace YellowHeart.
The announcement was only made at the end of May, so at time of writing, information from the club’s website is sparse, talking of using the platform for ‘engaging and connecting with fans’. But YellowHeart itself is an interesting choice of partner. Unlike Socios, which is dedicated to football, YellowHeart has its origins in the entertainment and ticketing industry and is most famously associated with the innovative launch of the latest Kings of Leon album.
The Burnley press release does mention ticketing as an area where NFTs can play a role. For example, NFTs can help enforce ticket ownership, helping the club to clamp down on ticket touts (scalpers). But there are other possibilities. As NFTs, tickets can turn into proof-of-attendance badges, which can be shown off online or even traded. It can also help identify fans who may not be season ticket holders, but who can earn exclusive content or other offers through regular attendance.
But the most important lesson here is that the club is ‘importing’ knowledge from another sector. While other clubs rush into deals with Socios, Sorare and others, it makes sense for a smaller club such as Burnley to find a partner that can help it to differentiate itself from the bigger teams.
Any business that wants to explore the opportunities of blockchain, tokens and NFTs must make sure it gets advice from an organization with broad sector knowledge. Not just financial – and not just sports. This is where Upstart can help. Our experts understand blockchain and its potential as a new economic and transactional model for sectors from healthcare to logistics . This means we can help you cut through the hype and start exploring the opportunities in financial tokens, blockchain and NFTs
Not sure what to do next? Then Start Here and get in touch with the team at Upstart today. We’re here to help you deal with digital disruption.
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