Reason to Believe in Blockchain and Sports: John Kosner’s Guest Column in Sporting Crypto
Original Article: Sporting Crypto, by John Kosner, September 23rd, 2024
Sports Business - Braced for Change? ⚖️
In person, I pay almost every expense using my Apple Watch. A wireless technology called Near-field communication (NFC) allows devices to communicate when they are within a few centimeters of each other. I do so even though my physical wallet is itself only a few centimeters away. That’s how emerging technologies take root – they enable something better by being fast and easy; we use them and don’t even know their names. The sports business is always in pursuit of incremental revenue. In the U.S., the NFL and NBA’s most recent media agreements are worth $111 billion and $76 billion respectively both over 11 seasons. Streaming has begun to usurp traditional pay TV. Yet the Leagues’ respective revenue sources still look pretty familiar: it’s Media (TV and now Streaming) plus Advertising and Sponsorships, Consumer Products, Data & Betting, and of course, Ticket Sales.
Despite decades of work to gather certain fan information and create better fan data platforms, pro and college leagues, Teams and events still know relatively little about their fan bases. It has been less than a decade since bar codes and scans first replaced paper tickets. Personalization in the industry remains rudimentary. Meanwhile, MLB, NBA and NHL Teams face significant financial challenges as the once-bountiful local and regional U.S. sports pay TV business continues to melt. Across the Atlantic, many key football media deals are stagnating and some, like France’s Ligue 1, have actually decreased from 2016-2020 highs.
Nonetheless:
Sports leagues, Teams and events own extremely valuable IP;
The opportunity to reward fans with – and benefit from – their intimate relationships with the Teams, players and events they love is there;
Younger fans are digital-first and value ownership of virtual goods from video games
and
Sports tends to be a copycat business (one solution can populate throughout).
This helps explain why Blockchain technology has long been suggested as a next big thing for Sports. Is ‘next’ coming now or soon? I think so. If you are a decision-maker, it’s probably time to take a fresh look. If you’re building new products, it’s worth thinking bigger. The sports industry needs a breakthrough.
For the past several years, Blockchain technology has largely failed to do that in Sports. Yes, there have been several significant sponsorships (the L.A. Lakers play at the Crypto.com Arena; Coinbase is a big NBA and WNBA Partner), Dapper Labs’ NBA Top Shot was a COVID comet but largely forgotten since; Sorare excited Soccer, MLB and NBA fantasy players, generating an industry-leading valuation yet it has consolidated to just a hardcore active customer base, while growing its free-to-play product. Globally, Teams have launched multiple “Fan Token” programs utilizing the Blockchain, but fans have gotten relatively little in return (e.g. choosing pre-game music). And, of course, the entire industry has labored under the accompanying, self-inflicted fraud, corruption and speculation of Cryptocurrency companies and bad actors.
Today, many Sports decision-makers remain confused or ignorant about the merits of Blockchain ... “How is it different from just a database?” ... and view it as an unnecessarily risky proposition. If phase one of Blockchain was about cryptocurrencies and speculation and phase two, NFTs and Tokens that ultimately meant little to nothing, what’s next is about data – and that’s potentially quite compelling. In the shadows of scandal, important infrastructure work is improving the technology’s speed and capabilities. It is beginning to come of age. Blockchain’s "immutability" is critical in finance where transactions need "finality" and tamper-proof security, but the nature of its decentralization is a more important factor for sports because that's the aspect that allows for our industry’s rightsholders (leagues, Teams, events) to set the rules, allowing their many providers to work better together on their behalf -- in real-time. Best of all, this data phase requires no new action by fans – nothing to buy, download or a new website to visit; the technology lives in the background.
Is Blockchain Ready for Prime Time? 🤔
Six years ago, the entrepreneur Sandy Khaund sold his Blockchain ticketing firm, UPGRADED, to Ticketmaster. Sandy then spent two years at Ticketmaster and now has a new startup, Credenza, a modern customer data platform focused on sports and media built atop the Blockchain. The NHL’s St. Louis Blues are an early client. For the Blues, Credenza is assigning Blockchain wallets to fans, gathering data from various touchpoints, and using that data to deliver fans real-time, hyper-personalized experiences beginning this season. The Blues’ product is aptly called "Passport."
With his background both at Blockchain startups and at Ticketmaster, an established Sports U.S. ticketing giant, Sandy offers three key reasons why the technology is getting ready for prime time:
Blockchain enables a synchronization of our identity that is not owned by digital goliaths like Google/Facebook/Amazon and contains no personally-identifiable information. I can be John Kosner with an unrecognized, consistent digital identity on ESPN, the Knicks, Ticketmaster, Fanatics, etc. To date, sports leagues have avoided integrating their fan identity services with Google, Apple, et al. We rarely see “Sign in with Google” as an option. Instead, most leagues have built complex identity infrastructures, such as NBA ID. Blockchain has the potential to make fan identity more interoperable between the major leagues (NFL/MLB/NBA/NHL/MLS, etc.) should that become a goal of one or more Leagues. Additionally, Teams in the same city or part of the same ownership group across multiple sports might want to share fan data. Fans could be OK with that because they can be far better served without their actual identity being known thanks to the privacy protections afforded by the technology. On a more prosaic level, the tech could shorten League ID development cycles and connect currently siloed data points.
The newest generation of Blockchain “smart contracts” are more sophisticated and effective. Now, a rightsholder like the Blues can set different rules for sharing data with its various licensees – with the biggest, or most strategic, getting a certain level of access to the smallest getting less.
The combination of “1” and “2” is that Blockchain allows authorized partners/vendors/sponsors to “listen for” data updates, making possible real-time offers that create a more personalized experience for fans. Imagine you’ve purchased tickets to take your son to the Warriors opener on Oct. 27 and that morning you get a message from the in-venue merchant that says, "Hey, can't wait to see you at Chase Center for the Warriors. Can we set you up with a new Steph Curry jersey for your son? His old Klay Thompson jersey isn't the same now that he's in Dallas. Does he still wear a medium?" That example takes the trigger of a ticket purchase, reviews what is knowable about the fan, and lets the merchant responsible for the sale create a relevant message – almost immediately after the fan bought the ticket and while basketball is still on his or her mind. Too frequently, the current practice is either a generic game-day offer or a follow-up email the morning after the game, when the urgency of being there has passed. Making possible the right offer to the right person at the right time creates more value—that thing that sports organizations need.
If this all sounds familiar, it is: that’s how video games operate today. But those games are closed systems. Considering the ever-escalating cost of sports rights, the Sports media giants of the future will likely offer a combination of live rights (to generate and sustain subscription, ad and sponsorship revenue) and entice this funnel of customers into sports betting, tickets, merchandise, collectibles and video games. Being able to better understand and then instantly serve fans will become more and more crucial.
As mentioned, NBA Top Shot got off to a breathtaking start in 2021 as hundreds of thousands of fans collected unique digital video highlights. Alas, demand collapsed, disappointing speculators. Meanwhile, mere collectors found relatively little to do with their digital highlights. But this idea – the modern virtual trading card – will rise again; likely, with digital and physical capabilities and experiences built in.
The Opportunity 🔮
The biggest opportunity for Blockchain might be in identity. For the past two years, Reddit has seen great success with its successful Avatar Collectible program and OneFootball has just launched OneFootball Club. Today, none of the major league registration programs, such as “NBA ID,” are built on the Blockchain but in time they might migrate there. Fans want the ability to signal their fandom and document it; and then, in return, get various rewards and access from the League and Teams and potentially players. In time, that could be a big business. Apple created a global network of iPhone users and then built a massive services business around it. To create a similar (albeit much, much smaller) model, Sports Leagues, Teams and Events will have to take the fan benefits much more seriously, correcting the failure of the multiple recent “Fan Token” programs. NBA Commissioner Adam Silver has made the point that 99% of the League’s fans will never attend an NBA game in person. But these emerging technologies enable the NBA and others to engage much more closely and derive a lot more value from that 99% of their fandom.
Indeed, there’s reason to believe.
Think about what’s happening in digital identity outside Sports. According to a Reuters report, California's Department of Motor Vehicles (DMV) has digitized 42 million car titles using Blockchain in a bid to better detect fraud and improve the title transfer process. The DMV worked with Oxhead Alpha on Ava Labs' Avalanche Blockchain. It is anticipated that in the first quarter, 2025, California's more than 39 million residents will be able to claim their vehicle titles through a mobile app, the first such move in the U.S. Digitizing car titles is a potential win/win – reducing the need for in-person DMV visits and serving as a deterrent against lien fraud because Blockchain creates a transparent and unalterable record of property ownership. Important to note: the California DMV will use a private, “permissioned” Blockchain providing its required security and controls.
Even more significant, with the DMV, in addition to titles, we can move to licenses. One of the most valuable reasons to do that is that a driver's license not only allows you to drive on the roads in California but also to drive in 49 other states and elsewhere. It serves as identification with TSA at the airport, it notifies medical personnel if you are a donor in case of an accident.
Shift that to Sports: the ubiquity of a license is similar to this concept of synchronous, anonymous fan identity across ticketing, sponsorship, concessions, merch, content, betting, etc. It’s a potential, “Hello, World!” moment for the technology, according to Khaund. “It’s where Blockchain shines.”
Since Sports is global and connected, when that “Hello, World” moment comes for our industry, it will be game-changing. In tech and life, you can have the right idea, but timing is everything. Earlier brilliant plans for online food delivery, personalized short-form video and live event streaming came too early and collapsed in red ink. New technologies tend to break through when you don’t even know you’re using them, you just appreciate brand-new functionality. You don’t know or care what they’re called or how they work.
Pay attention to Blockchain for Sports. Mainstream moments are closer than you think.
