Crypto — The Future for Football Clubs?
Crypto has left its mark on the sporting world. From the naming of huge arenas in the USA and appearances on the most expensive jersey fronts in Europe to clubs launching their own blockchain-based fan tokens, the sports industry has been a sphere revolutionized by blockchain brands and foundations. The unique capability of sports to bring people together is an appealing factor for newly emerging technologies seeking mass adoption and global influence. Such partnerships allow for crypto exchanges and blockchain foundations to gain access to a new market of influence, all the while creating opportunities for football clubs for new touchpoints with their fans.
This influence can be seen in FTX and their $135 million acquisition of the naming rights of the home arena of Miami Heat, which is to be called the FTX Arena for the next 19 years. The 2019-born cryptocurrency exchange platform has also run various marketing campaigns worth millions in seeking to lure sports fans to its exchange and NFT platforms.
The largest cryptocurrency exchange Binance, has announced a front shirt sponsorship deal with S.S. Lazio worth €30 million for two years with an option to extend a year. Binance has also become the official fan token partner of S.S. Lazio and FC Porto. Fans of both clubs can use Binance to purchase the respective fan tokens and have a say in certain decision-making aspects of the club. They may also use their fan token holdings to acquire special merchandise and fan experiences. While Binance’s founding CEO Changpeng Zhao has openly stated the company’s intention to refrain from costly marketing endeavors, the company has seen the value of investing in the sporting world, becoming a heavy investor in the European football market.
Another landmark partnership was the one between Inter and Socios.com. On top of launching Inter’s fan token, Socios.com became a main shirt sponsor of the club, ending a 26-year-long partnership between Inter and Pirelli. While it is evident that shirt sponsorships have become useful tools in the promotion of virtual currencies, this does not even begin to scratch the surface of the potential of the progression of cryptocurrency in the sporting world. The inception of fan token economies also exhibits a new window opportunity for clubs and exchanges alike.
Fan tokens
Fan tokens are blockchain-based digital assets launched by sports teams to create a new connection between fans and their supported organization. We first heard about fan tokens when Chiliz launched as a blockchain platform for sports and esports fans to crowd-manage their favorite teams, games, leagues, and events. Since then, they have emerged as the leading platform for fan tokens of various sports teams worldwide. Recognizing its potential, it was not long before dozens of other competitors joined in on the trending market and began targeting football fans. Some of the ways clubs are attracting individuals to purchase fan tokens are by allowing them to vote on certain decisions, giving access to exclusive experiences based on token holdings, and inviting fans to VIP boxes — sometimes alongside club legends. Thanks to the transparency of blockchain technology, it is a seamless process to offer something in return for sufficient token holdings.
Some platforms are already taking this a step further. Binance has started offering VIP game day experiences in exchange for fan tokens of Lazio, Porto, and Santos. Furthermore, Turkish cryptocurrency exchange Bitexen runs token burn auctions for over a dozen Turkish football club fan tokens available on the platform. Although this approach does not allow for an economy to form around the token, it allows for tokens to be taken off the market forever. Usually, token burning is strategically done by project teams to increase the market valuation of holders, but in this case, Bitexen allowed fans to burn the tokens themselves in exchange for VIP experiences, signed merchandise, or other digital assets.
A slightly different approach can be seen in Fenerbahçe’s fan token. Although it was originally launched in collaboration with a major blockchain stakeholder, Paribu, the club directs its fan token holders to the Fenerbahçe SK mobile app for access to $FB Token utilities like VIP Box tickets, invitations to signing ceremonies, and early access to seasonal tickets. This differs from other fan tokens which generally offer utilities through the launching platform’s own applications. While most clubs and platforms prefer to prioritize functionality over decentralization through choices of blockchains such as BNB Chain (Binance Smart Chain), Chiliz Chain, or Polygon; Fenerbahçe Token is an Ethereum-based ERC-20 token. While more mainstream chains offer transactions at a much faster and cheaper rate, Ethereum sacrifices transaction rate and cost to secure the integrity of the blockchain’s decentralized nature. This approach has made Ethereum the more trusted and adopted chain among the aforementioned blockchains. The trust in the Ethereum network was a major factor in Fenerbahçe raising a record $52 million on the launch day of $FB Token. In comparison, Lazio and Porto only made $4 million, PSG made $2.5 million, and Barcelona made $1.3 million. Fenerbahçe’s more patient approach also led to the sale of over 20 million fan tokens. In this regard, Lazio and Porto offered 4 million, PSG offered 1.3 million, and Barcelona offered only 600,000 fan tokens. The bigger bunch of the revenue to come from token sales will be from the remaining fan tokens to be minted.
By looking at the numbers, we may deduce that fan tokens have become a helpful tool for football clubs to heal the wounds from COVID-19 and promise to be one of the most profitable revenue streams for clubs. While the direction in which crypto will go is still to be settled due to uncertainties and shortcomings such as crypto’s under-regulated and the barriers to entry to the technology, it cannot be denied that fan tokens have allowed clubs to bridge the gap with their fans by providing fans of the sport with special memories and opportunities for unique experiences.