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NFTs and the iteration of football fandom

A version of this article will also appear in the 2021 Annual Review of Football Finance due to be published later this summer

Non-fungible tokens (NFTs) intrigue as they blend new technology, speculation and abstraction of existing behaviours. They are novel, tantalisingly lucrative, yet accessible to everyone.

In 2021, NFTs have been associated primarily with two industries: art and sports. In March 2021, the art world was enthralled by the biggest ever sale price of a digital art-work: $69.3 million for a digital collage, sold at Christie’s, thus placing NFTs firmly at the centre of the traditional art establishment.

Amidst the frenzy, value is being created by NFTs in sports

The immensity of this price further cast the spotlight on the Top Shot phenomenon - the NFT-enabled digital makeover of NBA sports collectibles – which saw $219 million in sales in February, a further $200 million in March, but only $41 million in May. As of mid-2021, most of the NFT revenue activity in sports has been driven by the NBA’s NFT platform; football has yet to experience an equivalent league-wide marketplace, but the NBA’s success is driving a rush of interest from participants in the game including multiple clubs, leagues and players.

In the first half of 2021, news and social media focused on NFT’s positives: the surge in sales volume, instant riches, the involvement of celebrities, and an intrinsic association with blockchain. The second half may see a focus on their negatives: a decline in sales, potential environmental impact, the opportunity for fraud and a reliance on blockchain.

When the dust settles, a process which may take a couple of years more, NFTs are likely to become regarded as an important application of technologies that, overall, enhances the business of sports and embellishes the sports fan experience. Within that period, say by 2023, it is likely that most major football leagues in Europe will have launched multiple NFT related products. But as of mid-2021, NFTs are still in their infancy for almost all sports, with only the NBA having a comprehensive offering.

Technology has historically commoditised media: NFTs enable uniqueness to be added to digital media

Understanding the appeal of NFTs to the sports industry requires a quick primer on the historical impact of technological progress on media assets. Technology has enabled the creation of increasingly complex and sophisticated media. It has also facilitated commoditisation of a widening array of media content with increasing degrees of fidelity. The printing press enabled the manufacture of replicas of books; photography did the same for portraits; photocopying for books; cassette tapes for music and the list goes on.

Technology has enabled media to become increasingly fungible, that is replaceable or substitutable by something identical. Coins, common shares and brand-new smartphones are perfectly fungible. Technology has enabled fungibility at ever-lower marginal cost: copying, sharing and distributing content is low-friction given the calibre of devices available today.

A 30 second video of an iconic sports moment – such as a Messi dribble fast five defenders ending in a goal – captured by an array of 4K cameras costing $100,000 each, operated by highly skilled camera people – can be replicated and shared within seconds by a fan at home.

NFTs, conversely, enable the application of scarcity, to digital as well as analogue content. In a sports context, the major application of NFTs so far has been to enable scarcity in video clips of sporting moments. A fan could become the unique owner of a thirty-second dribble, or for a lower price, one of a hundred. The NFT contains price, ownership, including number of copies, and a link to the media file. Each NFT is unique in the same way that each limited run of prints is individually numbered yet otherwise identical. The NFT is fully tradeable, but will likely include a contract, whose terms are applicable indefinitely. This contract may include a commission on trades, enabling a share of all transactions to flow back to the platform owner.

Sports collecting gets a digital makeover

For fans, NFTs offer a digital upgrade to printed sports cards that have existed for decades. The most coveted of these have sold in recent months for millions of dollars per card and it is worth noting that the most valuable cards have little intrinsic value aside from their scarcity1. In the US, eBay alone reported sales of all cards were up 142 percent in 2020, four million more than in the prior year2. For the wealthiest collectors, sports memorabilia form part of their portfolio of assets, alongside more traditional financial assets, classical art or classic cars3.

There are hundreds of millions of adults whose childhoods included periods of collecting, swapping and trading cards. The digital makeover of trading cards swaps still images for video, blockchain based authentication for third party authentication agencies4, digital displays (mostly smartphones) for binders, online trading platforms for collectors’ fairs.

Acquiring a sports NFT confers ownership, but typically does not include copyright5. The owner of the NFT could display the content publicly, but not generate revenues from its display. So, for sports leagues, or individual teams or athletes (at any stage of their career), NFTs represent a potential additional source of revenues at a time when one major revenue pillar, matchday attendance, has been largely shut down by COVID. In the short-term, revenues will be predominantly from the sale of new content generated by each week’s games. In the long-term, as the stock of NFTs steadily increases, trading volumes should rise, generating rising revenues from commissions.

For fans, the success of NFTs relies on their willingness to value the specific type of uniqueness that ownership confers. There appears to be a paradox in that a NFT of the build-up to a goal, purchased for, say, £10,000, offers ‘ownership’ of a clip that anyone could watch on their own device, or indeed which the royalty owner could license to any TV broadcaster or social media platform.

Fans of all types are becoming ever more comfortable with digital first assets

But whilst this type of ownership may feel unfamiliar to those used to physical ownership, tens of billions of dollars per year are now spent on virtual currencies within video games which are then used to purchase artefacts and capabilities which only exist virtually, and of which there is typically infinite stock. These include weapons, seeds, clothing, dance moves and doubled points for video games. Many of these digital assets can be used to enhance a player’s performance, but clothing and dance moves are often only ornamental, with the reward to the owner including the reaction from others.

Similarly, a benefit of owning digital sporting collectibles in the form of sporting moments is that they can be shown off – on a smartphone, a zoom background, or an online album – and that they may confer a degree of status, or even a sense of belonging. That benefit, as well as the possibility of making a profit, has been sufficient allure to convince 500,000 fans to have started their NBA Top Shots collection as of May 2021, up from 4,796 at the start of the year6.

Football has the biggest fan base of all sports, and NFTs and football could be a very compelling combination. As of mid-May, the most extensive digital collectible platform in Europe was Sorare, which had signed up 135 football clubs around the world, including a few Premier League teams. Sorare offers a mash-up of collecting cards and fantasy football, and as such may appeal to fans that enjoy building teams within environments like EA’s FIFA 20217. It is worth considering that fantasy football is a major industry already, and NFTs could readily be incorporated into a new or existing league. As of May 2021, whilst there had been sporadic high-value sales of individual cards, usage of Sorare remained modest (under 1,000 sales over the course of May 11)8, and it may require entire leagues to join before take-up starts to soar.

Italy’s Serie A has also dipped its toe into NFTs. Various NFT collectibles are being made available to celebrate the final of the Coppa Italia. Items for sale will include NFT versions of the official trophy and match highlights9.

NFTs can also add value to ticketing and physical collectibles

NFTs can also be applied to other aspects of sports. E-tickets could be sold as an NFT, with programmable features that could stipulate that a percentage of any resale value flow back to the issuing club. This approach is being considered by the Dallas Mavericks NBA team, as way of capturing a share of resold tickets10.

NFTs could also be applied to physical elements, starting with collectibles. A major challenge with memorabilia is authentication. NFTs can be applied to physical colleting cards, match balls and other mementoes, using techniques pioneered for the art market. Over time the range of applications of NFTs should steadily grow.

But the 2021-2022 season could be the first in which NFTs start to make a major mark, from a revenue perspective - on the football market. And if the experience of early adopters proves positive, the market should continue to grow, and be part of the digitisation and hence globalisation of the fan experience.

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