How will NFTs shape the future of sport? Let us count the ways.
Firstly, however, a little necessary techno-background. Non-fungible tokens, or NFTs, are unique, non-interchangeable digital assets represented on a blockchain. Their invention allows content creators to limit the number of owners of an asset to as few as one, thereby creating an element of scarcity. NFTs are expected to underpin value exchange in Web3, a decentralised version of the internet that may provide the structure for the metaverse — a physical/virtual new world where users can transition seamlessly across multiple experiences.
PwC US’ recent Sports Industry Outlook 2022 outlines the ways that sports teams are already utilising NFTs in North America, but in Australia too, NFT use is on the rise and the experiences they could enable are beginning to be explored. Here are three ways:
1. Sports collectibles
Collectible NFTs — typically licensed by leagues, teams, clubs or individual athletes — essentially serve as digital trading cards and for sports teams, can be used to sell collectible, authenticated, limited-edition digital content.
Collectible NFTs are an exciting opportunity and are already being explored by sporting organisations around the world. In 2021, for example, the Melbourne Cup Carnival auctioned off ten rare NFTs of historically important races.1 In the US, NBA Top Shots from Dapper Labs, are another well known example of sports NFT ‘moments,’ where users can buy packs of assorted video moments, of which some may be quite rare.
The next step in the digital trading card evolution could be in ‘before they were famous’ cards, featuring NFTs of rising stars. In the US, this could be in the form of cards for minor league players and college prospects. In Australia, this could extend to potential AFL draft picks, or up and coming stars in junior rugby or soccer leagues or local and state cricket teams.
It is likely that professional-looking fan videos are poised to boom in value. Sooner than we think, fans will be able to create and sell their own NFTs with the click of a button. Videos of crazy plays, gravity-defying speckies and miraculous hail-mary’s will be able to be authenticated and limited. Imagine that there are exactly five authenticated versions of a basketball prodigy making the winning basket for the championship game, or the cricket-obsessed kid-next-door who scores a hat-trick in a friendly and goes on to be called up to play in a test match? How much might those original videos be worth in 5 years? In ten?
Teams and ticket vendors are also getting in on the action, turning ticket stubs into NFTs. Soon, digital tickets may serve as a hype video — then a highlight reel — from the game you were at. Think about traditional memorabilia – the paper ticket stub for the greatest scoring NBA player is already selling for a quarter of a million dollars.2 For the next generation, perhaps that ticket stub is digital, authenticated and features exclusive content. Maybe fans display it in the metaverse like they would proudly frame the original and hang it on the living room wall. Also on the horizon are FNFTs (fractionalised NFTs) where ownership could be split between multiple fans at a much lower price barrier. Owning the NFT of the Ashes might be out of reach for most, but what about a speck of ash?
2. Season ticket or member NFTs
Many teams have already started to consider how tickets could become digital tokens, providing ticket holders — especially season ticket holders — access to special content or special reserved areas within stadiums. In Australia, where season tickets aren’t common, NFTs could be used for memberships to clubs in the AFL, rugby or soccer leagues. This could include special VIP areas of the stadium, discounts at concession stands or on merchandise or other traditional benefits of season tickets or membership.
Exclusive stadium-based memberships like the Melbourne Cricket Club or Sydney Cricket Ground, where membership is often a matter of decades-long waitlists, NFTs could be a natural fit, easily allowing for guest use or restricted, but still exclusive, transferable ownership. Or, tokens could provide an opportunity to keep those on the waitlist satisfied (and bringing in revenue) with exclusive content. For a small annual fee, waitlist members could receive the same digital perks as season pass or membership holders.
These NFTs could become a verified pass to whatever special content a team can dream up. For example, in 2022, the Australian Open created NFT art tennis balls linked to areas on the physical courts that, upon a winning shot landing on them, uploaded its own metadata, stats and highlights of the game, and granted the owner extra benefits – such as access to exclusive branded merch. If the shot was a championship one, the owner received one of the physical balls from the match.3
Tokenised versions of memberships or season tickets will allow organisations to go even further. Soon, it is likely that season ticket holders or members of a club could receive special edition collectible NFTs for the games they attend. Within a few years, these could become a standard part of their membership, and such tokens a way to show off their fandom.
For sponsors, tokenization presents a great way to align themselves with a team or league and create unique activations that build equity for both brands. By using blockchain technology, teams can make it so only sponsors can verify and ensure that customers don’t lose their added benefits if they misplace their physical ticket — creating value for both sponsors and fans.
3. Virtual access tokens
Collectible NFTs and membership/season ticket tokens are, in some ways, just evolutions and enhancements of traditional loyalty programs. But combining the metaverse with digital assets enables a whole new market for even more fan segments. Virtual access tokens could allow special access during or after games, plus new forms of social experiences and opportunities to engage with teams, athletes and other fans within the metaverse.
Within games, tokens could enable a different viewing experience for fans who are willing to pay more or who can’t attend games in person. Fans could interact with players during the game in a virtual setting, or with other fans in virtual worlds. Athlete access will be critical for reaching the next generation of fans, and while social media enables this in some measure, the metaverse could significantly expand the opportunity. Going further, token owners could receive access to unique video content, such as player cams or locker-room access. Some teams are already selling tokens that give fans the right to influence non-strategic game-day decisions, such as walk-up music.4
This virtual access could logically be extended to membership and season ticket holders as well. For instance, for most away games, metaverse tokens would enable members to still feel like VIPs and get access to unique content. For games they attend, they could feel like part of the team by virtually sitting in on the halftime speech or seeing the game from the coach’s viewpoint.
The accessibility and potential to create scarcity makes a virtual access token extremely valuable. Further, each fan who purchases a token leaves a data footprint. By knowing so much about which fans have these tokens, sponsorship could also become a major revenue stream for teams or leagues. Put another way, digital assets and the metaverse provide a whole new world where teams’ brand equity can be leveraged for both ticket sales and sponsored events.
So what does it all mean?
Digital assets could fundamentally alter how fans interact with their favourite teams. There will be more ways to meaningfully connect with teams and athletes than ever before. If executed effectively to help enhance the customer experience, fans would be able to form even closer bonds with their teams. But the opening siren has only just rung when it comes to the potential of NFTs. Going forward they could be used as part of player contracts, for media rights or even sponsorship deals – providing significant revenue opportunities for sports organisations.
The challenge will likely come from organisations’ ability to build the infrastructure that allows digital assets to thrive. To be successful, teams and leagues will need sophisticated tech stacks that connect their new digital sales data with existing customer databases. Further, they will need to anticipate and mitigate legal risk and tax implications in an evolving landscape.
Sport has always responded well to shifts in customer behaviour, and with NFTs, Web3 and the metaverse on the horizon, it’s time to prepare for a reimagination of the game.