NFTs x Fungible Fan Tokens: Engage and Monetize (more) your Sports Fans!
Making the best of new opportunities offered by blockchain technology
By Nathan Moyse and Fernanda Rojtenberg, Colosseum Sports
In the past couple of months, the sports world has seen an unprecedented hype around so-called NFTs, aka Non-Fungible Tokens. No surprise the term NFT has seen a substantial rise in popularity on Google (between March 7th and 13th, it hit 100 on interest).
(Source: Google Trends)
What are “Non-Fungible Tokens”?
A “fungible” asset refers to something that can be interchanged with another unit of that same asset. Money is a good example of a fungible asset. A 1 Euro coin can be exchanged for another 1 Euro and still hold the exact same value.
A “non-fungible” asset, however, refers to something that has a unique value, and thus can not be interchanged with another asset, as there are no two exact same versions of this asset. An owned house, for example, is a non-fungible asset, as even in a street with 10 identical houses, each house has a different exposure to traffic noise and is in varying states of repair.
Non-fungible tokens are digital assets that run on blockchain and possess unique identification codes and metadata that distinguish them from each other. As these tokens run an open and distributed blockchain such as Ethereum, anyone with an internet connection can verify its authenticity. This means that each token contains a unique, non-transferable identity to distinguish it from other tokens.
Hence, unlike cryptocurrencies such as Bitcoin, which are fungible assets, NFTs cannot be traded or exchanged at equivalency. This completely shifts the crypto paradigm, as each token is unique and irreplaceable, thereby making it impossible for one non-fungible token to be equal to another. The consequence is that NFTs can quickly grow in value as they are unique.
NFTs in the sports industry
In sports, NFTs are pretty much the digital equivalent of collectible cards. “An NFT is not only a collectible, but it can also do something,” says John Murray from the sports marketing agency JCM International. “In this sense, it’s like a sports card but it’s better, it has more usage.”
The NBA’s Top Shot product, a blockchain-based trading card system, and one of the most famous NFTs in the sports world, has generated over $230 in gross sales so far (Source: CNBC).
Launched in October 2020, Top Shot is an online company created by Vancouver-based blockchain startup Dapper Labs and backed by the NBA. It offers limited-edition ownership rights to art and video depicting memorable moments in the NBA. Top Shot sells its “moments” from $9 to $999, and these “moments” can then be exchanged on the marketplace. The most expensive Top Shot NFT so far is a 2019 LeBron James dunk that sold for $208,000 (Source: Crypto Slam)
In soccer, Sorare is a NFT platform that has gained traction in the last few months. In contrast to Top Shot, Sorare is not only a marketplace but also a fantasy game. This gamification aspect therefore adds a utility value to Sorare’s NFTs, next to being an investment and collection product.
Users, as managers, compose virtual teams of five soccer players, from blockchain cards on the Sorare platform. Teams are ranked based on the performance of their players in real life, and attributed points, like in other fantasy soccer games.
Some of the cards are licensed digital collectibles (rare, super-rare and unique cards) that can be sold on the marketplace. In March 2021, a unique 2020–21 Cristiano Ronaldo card was bought for $289,920 on the Sorare marketplace, making it the most expensive card sold so far on the platform (Source: Twitter/Sorare).
What is the value of NFTs for sports organizations?
In the past, right holders were reluctant to invest a lot of money in content. “Business people would say: storytelling is great, art is great, but this doesn’t pay, we don’t get money out of it”, says John Murray. “Well now, it does pay. It pays directly through these [NFT] platforms.”
In fact, the game changing aspect of NFTs is that they enable sports organizations to easily monetize their content, which is something that the NBA understood early on when they partnered with Dapper Labs to launch NBA Top Shot. Especially since most sports organizations have been losing ticketing revenues since the beginning of the recent pandemic due to empty stadiums, the fresh cash generated from NFTs is certainly welcome by those that have already entered that realm.
What are (fungible) fan tokens?
Fan Tokens are digital assets that represent your ownership of a voting right and give you access to earn unique specific rewards and experiences linked to an organization.
Like NFTs, fan tokens rely on blockchain technology. Unlike NFTs, fan tokens are fungible. This means that, like other cryptocurrencies, they can be exchanged for an equivalent unit and for other goods.
The leading fan token provider in sports is Socios.com. The Malta-based company has partnerships with teams like FC Barcelona, PSG, Juventus and Manchester City. In June 2020, FC Barcelona generated US$1.3 million from their first $BAR sales after 600,000 tokens sold out in less than two hours.
When owning a fan token, you can vote on specific club-related questions such as which music to play in the stadium after a goal has been scored. Depending on the amount of token you own, you can also exchange them for VIP experiences, exclusive merchandise or even tickets.
The Socios.com fan tokens are being minted on the Chiliz blockchain platform. Chiliz’ $CHZ currency is among the top 35 cryptocurrencies in the world, reaching a market cap of $2.9 billion in March 2021.
Choosing between NFTs and fungible fan tokens
While the main difference between NFTs and fan tokens is the fungibility aspect, both concepts are based on blockchain technology. Ultimately, both NFTs and fan tokens give you the opportunity to actively take part in the sports industry, be it by owning your favourite NBA “moment” or by owning a right to have a say in your favourite soccer club.
“Ideally a sports right holder would implement both”, says John Murray. “If you’re an European football club for example, you want the whole world involved in your fungible fan tokens. You have fans in the US, Africa, South America, Asia. You want everybody involved. And once you develop that community — it’s community engagement and community development — then you can release special one-off NFTs that are not fungible and say: we’ve got 300 million people in our fan club right now, who wants to be the single owner of this one NFT.”
Hence, a great strategy would be to start with fungible tokens to grow your fan community as much as possible, before launching NFTs and capitalize on the traction you created with your fungible fan tokens.
What is next for the digital collectible and token market in sports?
As the interest in NFTs and fan tokens has boomed in the last couple of months, there is a lot of volatility around prices at the moment. In the long term though, these digital assets have a high potential of becoming very valuable.
As the next generation of fans increasingly want to have an active role in their favourite sports organizations, especially compared to the more passive previous generations, digital tokens like NFTs and fan tokens will be some of the main fan engagement tools and revenue channels leveraged by sports organizations in the near future.
With the emergence of blockchain technology, it is more than probable that the digital collectible and token market in sports is only at its infancy and will continue to grow in the next few years. For sports organizations, now is the time to tap into this market and engage their fans while growing their revenues.
Colosseum Sports is an international sports innovation group headquartered in Tel Aviv.
JCM International is a sports marketing company bringing customized content to the Chinese market.
