By Daniele Mensi, Managing Director of DigitalBits Foundation
We’ve seen how NFTs and cryptocurrencies have found their way into art, music, entertainment, and now—in a major way—sports. In a time when the relationship between sports fans and their favorite teams has fundamentally changed, top leading brands are finding new avenues of engagement through leveraging digital assets, including NFTs and branded-currencies. Such blockchain-based digital assets (BBDA) are becoming one of the key areas of importance to sports franchises’ sustainability for the foreseeable future.
Relationships between sports teams and fans have fundamentally changed through the pandemic
Over the past two years, the impacts of the ongoing pandemic have weighed heavily on many across the world. Nearly every business on the planet was disrupted and forced to make drastic changes in order to continue operating in a safe and sustainable manner. Professional sports leagues and their teams were among the hardest hit industries in terms of revenue. The biggest reason for their struggles was the loss of all ticket and merchandise profit coming from game days and a severe impact on broadcast revenue. Most adjustments were very straightforward for the world’s biggest leagues. The blueprint consisted of isolating the players and continuing the season in a bubble while maintaining a rigorous testing regimen.
While this method worked fine for the majority of sports, the nature of international soccer introduced challenges not faced by American leagues. Most teams play in various competitions that can sometimes span across their continent with a very broad audience, including mainland China, India, and the Middle East, as well as Europe and the Americas. The necessity for international travel dramatically increased the difficulties of the pandemic. According to UEFA, Europe’s top-tier clubs are projected to lose over $8B USD after Covid disrupted their 2020 and 2021 seasons, ending an extended period of steady financial growth. This is mostly due to the reach that European teams have beyond their own continent, a phenomenon that is not typically seen with North American organizations.
Another key component of international soccer that is often overlooked is the importance of matchdays. The level of passion and spirit expressed by fans is rooted in the local culture, and missing games was unheard of for some fans before the pandemic. When something so important to so many people went dark, teams were faced with another challenge: how to maintain engagement and keep their supporters connected.
21st Century Sports Fans & Digital Assets
Integrating the use of digital assets has been a very effective and disruptive strategy deployed by leagues and teams for enhancing fan engagement during COVID. Over the past year, a number of blockchain-based entities have made a big entrance into mainstream sports. The MLB, UFC, Formula One, and the NBA have all seen huge partnerships with blockchain-based initiatives.
Europe’s biggest soccer clubs have also joined this mass-adoption process with various partnerships of their own but with some major differences. Due to differences in league structure, international soccer teams are given more freedom in terms of how they can leverage partnerships. The use of fan tokens and digital collectibles like NFTs has skyrocketed with clubs fully embracing the blockchain to combat pandemic struggles. Even though fans weren’t allowed into the stadium, fans still wanted a piece of the action and to feel some type of contribution to their favorite club. Fan tokens have evolved to more product-based partnerships involving a deeper level of fan engagement, like redeeming an experience by means of a proof-of-attendance NFT.
The expansion of fan tokens through these innovative partnerships allows supporters who hold their team’s respective BBDA to have deeper interactions with the club. Some fan tokens give holders the ability to participate in decisions like choosing what song is played after a goal is scored or what picture the team’s social media account will post after a win.
Banking on Blockchain
As crypto partnerships seemingly take over the top 5 leagues, they don’t arrive without their fair share of skeptics, mostly because we are still talking about a new asset class that is now targeting mass adoption as never happened previously. We also need to continue to educate fans on the value of NFTs and how to purchase and trade BBDAs on decentralized platforms via digital wallets and other technology they may not be familiar with.
Regardless, the involvement in the blockchain community by sports teams goes much deeper than simply issuing fan tokens or NFTs. Some clubs are taking their blockchain ventures a step further by accepting crypto payments for tickets and merchandise and even offering to pay salaries for staff and players in digital currency. The financial incentives tied to these partnerships also provide clubs with an opportunity to recoup some of the recent sources of profits that have been missed during the pandemic. A report from Bloomberg estimates that Europe’s leading clubs have pulled in over a staggering $200M USD from fan token proceeds on top of their respective sponsorship obligations. Argentine star Lionel Messi, who is arguably one of the world’s most notable athletes, was even paid a portion of his signing fee in fan tokens further illustrating the beneficial aspects of crypto partnership.
No End in Sight for Crypto & Sports to Grow Together
Despite the complaints and risks associated with crypto and blockchain partnerships in sports, teams and leagues have only just begun to tap the surface of how blockchain technology and cryptocurrencies can be leveraged to enhance fan engagement and support the growth of the sport. Especially in light of more leagues discussing a potential ban on gambling sponsorships, we are far from seeing crypto leave the pitch any time soon.