Rapidly evolving world here with Sportsclubs and the Metaverse.

AFR article today

Aussie sports look to NFTs for another source of revenue

James Eyers and Jessica Sier

Crypto The AFL, Cricket Australia and NBL ponder tokens.

Collecting sports memorabilia used to involve stuffing trading cards into plastic sleeves in a folder, or hanging a signed cricket bat in the pool room. But sporting mementoes are going digital.

The shift is driven by blockchain technology that allows digital images and files to be made scarce – just like printing a limited number of physical cards, or issuing just a few commemorative bats.

Over the past 18 months, non-fungible-tokens, or NFTs, have exploded in popularity, with everyone from Disney to Paris Hilton releasing digital files that are trackable and tradable and cannot be altered.

Global sports leagues such as the National Basketball Association have been pioneers of bringing them into sports, allowing fans to trade memorable ‘‘moments’’ in games. Formula 1 is also getting on board.

Waves of NFTs are being released to give fans access to sports stars and exclusive events, while creating new collectables and digital memorabilia. Sports are also thinking about an entirely new way to engage fans; some European football clubs are using them to include supporters in governance decisions.

Australian sports are now looking at the breakthrough technology to turbocharge and diversify revenue, not just for clubs and leagues but for athletes themselves.
The Australian Football League, Cricket Australia, the National Basketball League and Tennis Australia are all determining strategies around crypto and NFTs. While speculating on digital artworks has dominated headlines, for the big sporting codes, block-chain technology offers new ways to engage with fans by providing unique experiences while helping to monetise sports’ strong brands.

It’s a growing global business. A Deloitte report says between 4 million and 5 million sports fans globally will have purchased or have been gifted an NFT sports collectable by year’s end. Deloitte reckons NFTs relating to sports media will generate more than $US2 billion ($2.7 billion) in 2022, about double the figure of last year.

‘‘It is a pretty exciting time for the industry as a whole as this represents an entirely new revenue stream for the sports,’’ said Jeremy Loeliger, a commissioner at the National Basketball League.

‘‘I think sports will use collectables as a relatively simple first step to dip their toes and understand the technology. Then I think you will see innovative, entrepreneurial sporting teams and rights holders start to flesh out a compelling strategy for what the technology can unlock in the longer term.’’

Basketball has been a trailblazer. In the US, the NBA created Top Shots in 2020, which offers NFT-based clips of slam dunks and other game highlights that can be traded in an online forum. More than $US600 million has changed hands on the NBA Top Shots marketplace; in 2019, a particular LeBron James dunk sold for $US387,000.

The partner that helped the NBA create Top Shots was Dapper Labs, the same company that created CryptoKitties in 2017, setting off the entire NFT category. It allows users to create and sell digital cats.

Other US sports are joining in. The National Football League offers fans the option of adding an NFT to create a commemorative digital ticket stub. Special offers could be made to holders of the stubs down the track.

Now crypto is extending into Australian sport. When the AFL season opened on Wednesday at the Melbourne Cricket Ground, crypto.com advertising surrounded the ground while CoinSpot, another crypto exchange, could be seen on Western Bulldogs’ jumpers. But while they’re happy taking money from crypto exchanges, sports want to do more.

At Melbourne’s Marvel Stadium this Wednesday, management from the AFL, Cricket Australia and Tennis Australia will appear alongside the NBL’s Loeliger at a day-long NFT talkfest. Their appearances have prompted speculation more will be revealed about each sport’s strategy. One of the co-founders of Dapper Labs, Mik Naayem, is speaking at the event, hosted by Blockchain Australia.

Of the group, Tennis Australia is the most advanced.

It has already sold NFTs to fans at January’s Australian Open, and was blown away by the positive response. It involved selling NFTs that correspond to a unique virtual square on the real tennis court; when a winning shot landed in the spot, the holder of the NFT won the match ball. Tennis Australia described it as a fun way to engage new fans.

One of the holders of the tennis NFTs was Greg Oakford, a consultant. He said it ‘‘enhanced the spectator experience all around the world’’ and was a fun game to participate in. He also reckons the NFT representing the spot where Ash Barty’s winning shot landed to take the women’s title could become valuable in its own right.

Individual players are also working out how NFTs could support their brands.

In the AFL, dual Brownlow medallist Gary Ablett jnr and cricket’s Adam Gilchrist are working with a company called Pickstar to create NFT collectables.

Globally, F1 driver Pierre Gasly is working with Fantom and Australian crypto advisory firm Trovio, and last year dropped some NFTs redeemable for exclusive merchandise including signed helmets or VIP access to meet the man himself.

Former Wallabies coach Michael Cheika is an adviser to Trovio, where he will work with athletes to help them create NFTs to enhance their brands.

Mr Loeliger said the NBL had gone to tender to find an NFT partner and was preparing to select them. He said the natural place for Australian sports to start was collectables – like the NBA – to create the digital equivalent of a trading card.

He expected sports would then add ‘‘fan tokens’’, which could allow supporters to participate in some club decision-making, and other ‘‘utility tokens’’ that give NFT holders special access to special experiences with clubs both physical and digital.

‘‘I think you are going to see a huge amount of innovation in terms of what NFTs can unlock, not just in the physical but the digital world as well,’’ Mr Loeliger said. ‘‘The blockchain is about so much more than the ability to mint an NFT; there are compelling uses around loyalty and gamification going beyond a utility token.’’

Global sports are thinking about other NFT use cases, including creating digital skins in video games, or to allocate remuneration to owners of rights in an automated way. The emergence of ‘‘decentralised autonomous organisations’’ could also allow token holders to vote on decisions in clubs.

Barcelona Football Club, for example, is experimenting to allow token holders to submit and vote on designs for the walls of its dressing rooms. In the US, the Krause House DAO, named after a former boss of the Chicago Bulls Jerry Krause, has been created with the goal of buying an NBA team that would be managed by holders of the tokens, although many see this as a step too far.

Sports are preparing for some blowback from community groups already concerned about the influence of gambling companies in sports. The Reverend Tim Costello told The Guardian in January that crypto deals were ‘‘corrupting and compromising’’ sport. He said he was suspicious about the AFL working with crypto.com.

There is also a lack of consumer protection given the whole area is unregulated. Fans may not be aware that their NFTs, while conveying ownership of an image or clip, don’t typically provide rights to the underlying asset itself.

And while NFTs are supposed to be scarce, they can so easily be minted so large volumes could flood onto exchanges and saturate markets.