Lots of ink has been spilled about NFTs (non-fungible tokens) and other digital assets — what they are, how they’re used and their potential. Here we focus almost entirely on that third bucket: the vast potential for NFTs and how they will likely shape the future of sports. Keep in mind, these use cases could easily be expanded to the broader realm of entertainment.
|What are NFTs?|
|A non-fungible token (NFT) is a unique, non-interchangeable digital asset stored on a blockchain. NFTs allow content creators to limit the number of owners of an asset to as few as one, thereby creating an element of scarcity that has never existed in the digital world. Along with many other forms of digital content ownership (including cryptocurrency), NFTs are expected to underpin value exchange in Web3, a more decentralized version of the internet under development that’s featuring interoperable platforms. Web3, in turn, may provide the structure for a metaverse or a series of metaverses — landscapes of virtual spaces where users can transition seamlessly across multiple experiences.|
NFTs can be used to sell collectible, authenticated, limited-edition digital content. NBA Top Shot from Dapper Labs is perhaps the best known, but today there are thousands of sports NFTs that can be bought and sold on platforms such as OpenSea, a secondary market for digital assets. Quarterback Tom Brady's NFT startup, Autograph, recently raised $170 million in Series B funding, according to Fortune. Collectible NFTs — typically licensed by leagues, teams or individual athletes — essentially serve as trading cards for the digital world. For sports organizations that are serious about digital assets, collectible NFTs are a good opportunity.
Trading cards have been popular for decades and with multiple organizations already collaborating with NFT companies to build their own digital trading cards, this is more than just a passing fad. The next step is “before they were famous” cards, featuring college NFTs, minor league players and college prospects. This phase is already starting, and it will quickly reach high schools, where professional-looking videos are poised to boom in value. Within the next 12 months, creators will likely be able to create and sell their own NFTs with the click of a button. Think of all the people posting videos on social media of a top high school recruit making a crazy play. Soon, those videos will be able to be authenticated and limited. Imagine that there are exactly five authenticated versions of a basketball prodigy dunking on a 6-foot-10-inch center in a high school championship game. In five years, when that prodigy is an NBA MVP candidate, how much will the original video be worth?
Teams and ticket vendors are also getting in on the action, turning ticket stubs into NFTs. Soon, your digital ticket 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 million dollars. For the next generation, perhaps a digital stub is authenticated and features some exclusive content. Would someone pay $1 million for it?
Finally, all of this will be displayable in the metaverse. In fact, assuming content can be shared across platforms, it will be available in multiple metaverses. Do you have a sports-specific digital hangout where you want to hang your prized possessions? Great. An office setting to display your $50,000 NFT like you would wear a fancy watch or hang a signed photograph? No problem. Your NFT is yours to share in these virtual settings.
Learn about different types of digital assets, including blockchain-based digital assets, cryptocurrencies, NFTs and what these mean for businesses
As mentioned, many teams have already started to consider how tickets could become digital tokens, providing ticket holders — especially season ticket members (STMs) — with access to special content in the real world or around the stadium experience. Importantly, this could also provide teams with an opportunity to serve their season ticket waitlist. For a small annual fee, waitlist members could receive the same digital perks as STMs.
STM NFTs are a verified pass to whatever special content a team can dream up. This could include special VIP areas of the venue, discounts at concession stands or other traditional benefits of season tickets — with full confidence in their authenticity.
But tokenized season tickets allow organizations to go even further. Soon, STMs will likely receive special edition collectible NFTs for the games they attend. Within a few years, an STM can expect these as a standard part of their membership, and they will want special tokens 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. Local stores have been doing this sort of thing for ages, but 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.
Collectible NFTs and STM tokens are, in some ways, just evolutions and enhancements of traditional loyalty programs. But combining the metaverse with digital assets — including both fungible and non-fungible tokens — enables a whole new market for even more fan segments. Virtual access tokens can allow special access during games, plus new forms of social experiences and opportunities to engage with teams, athletes and other fans within a metaverse. Athlete access is critical for reaching the next generation of fans, and while social media enables some access, the metaverse can significantly expand the opportunity.
These tokens may have implications both within and outside of games. Within games, they could enable a different viewing experience for fans who are willing to pay more but can’t attend games in person. A limited number of token owners could receive access to unique video content, such as player cams, bench cams or even locker-room access. Essentially, it’s a new version of season tickets. Fans could interact with players during the game in a virtual setting, or with other fans in virtual worlds. Some teams are already selling tokens that give fans the right to influence non-strategic game-day decisions, such as walk-up music.
The special access available to virtual access token holders could logically be extended to STMs as well. For instance, for most away games, metaverse tokens would enable STMs 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 and seeing the game from the coach’s own viewpoint.
Beyond the boundaries of a live game, virtual access tokens can allow the sorts of authenticated, limited access that digital natives have shown a willingness to pay for. A team could sell tokens that allow fans to listen in on proprietary conversations with coaches or players. Imagine a velvet rope conversation that anyone can watch, but only a limited number of tokenized fans are able to ask questions and interact directly with the team. In many ways, this could democratize the press relationship, but established sportswriters could benefit as well if their credentials (or that of other VIPs) are tokenized and prioritized, allowing them premier authenticated access to team members.
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.
Digital assets can fundamentally alter how fans interact with their favorite 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 can form closer bonds with their teams. Correspondingly, digital assets should provide a significant revenue opportunity for sports organizations. Traditionally, ticket sales, media rights and sponsorship form the three largest revenue streams for teams and leagues. All three could see significant growth due to tokenized tickets, NFT media rights and sponsorship of digital or metaverse events. In fact, it wouldn’t surprise us if in the next five years, digital asset sales become one of the largest revenue streams for many teams and leagues.
The challenge will likely come from organizations’ ability to build the infrastructure that allows digital assets to thrive. To make this a success, teams and leagues will need a sophisticated tech stack that connects their new digital sales data with existing customer databases. Further, it’s essential for organizations to anticipate and mitigate legal risk and tax implications. Much like NFTs, the regulatory landscape surrounding blockchain technology is evolving.
This industry has always responded well to shifts in customer behavior, and Web3 is almost certainly going to be a major one. Teams should prepare for a sports world that is about to embark on a reimagination of so much of how fans consume sports.
This ninth edition offers 10 predictions about the latest issues facing the sports industry
Read PwC’s report on NFTs and uncover the legal, tax and accounting considerations you need to know