How Blockchain Improves the Sports Industry?
Blockchain is an open and distributed ledger of digital transactions, which gets efficiently recorded in a permanent and verifiable way. It stores the information blocks that are identical throughout its network. So, it cannot be controlled by a single entity and has no single point of failure. Blockchain in sports can help resolve a lot of problems that the industry is facing currently. In this 10 min read, we discussed the various area on how Blockchain improves the sports industry.
Transparency is maintained for the data that is embedded within the network as it is made public without revealing the identities of persons who have sent and received it. Blockchain is incorruptible because if you need to alter any information unit on a blockchain, you must use a large amount of computing power for overriding the complete network. This may seem possible in theory, but it is unlikely to happen in practice.
Challenges Faced by the Sports Industry
It has been analyzed that in 2018, the attendance at Major League Baseball games dropped to its lowest average in 15 years, down 8.6% from its overall numbers in 2017. This is estimated to cost the league $355 million on ticket sales alone. And the National Football League has seen a steady of 2% annual attendance decline, a 10% rating decline in 2017, and registered favorably with only 44% of one survey’s respondents.
Likewise, the rise in eSports, in which people compete through digital, video game-linked representations of themselves, has seen a conversely precipitous increase in popularity, with an anticipated increase in regular eSports viewers of 124 million between 2016 and 2020. These are all signs of significant generational differences that decision-makers in the traditional sporting sector must account for by finding ways for the user to feel more invested in clubs, athletes, leagues, and individual match outcomes, while also making the overall in-venue experience more affordable.
We can say that innovation has transformed the modern world of sports in a sequence of increasingly tech-driven phases. Initially, new technologies like radio and television enabled greater viewership. The early 1990s through the late 2000s brought another burst of technological innovation in sports, most notably, radar (ball speed), virtual imaging (pitch curves), the Internet (buying tickets, checking scores, getting highlights), social media (Facebook, Instagram, Twitter), and ubiquitous data collection and analysis (optical tech like Statcast, wearable tech like Zebra).
However, all of these technologies and more enabled athletes to increase their skills, helped coaches win more games, permitted rights holders to drive viewership, allowed anyone to produce 24/7 commentary, and created a more compelling narrative around sports. Now, with the advent of blockchain technology, a new paradigm emerges to once again change the sports industry.
Let’s take a look at the potential opportunities for blockchain in the sports industry, which include anti-doping, cultivation, and utilization of big data, fan engagement, and so on in detail:
Anti-Doping: In recent years, many scandals have broken regarding this subject. During the Rio Olympics held in the year 2016, the Russian hackers leaked several medical files of U.S athletes which claiming the evidence of doping by them. This included several top-performing and highly regarded athletes. The blockchain technology provides us with an opportunity not only to safeguard these files from being leaked to the public but also for fairness in the world of sports making sure the federations do not manipulate data for hiding doping cases. With the help of blockchain, a more structured system for recording test results and prescriptions can be contemplated as the answer. This is because once the data is present in the system, it will be checked for its accuracy in accordance with the preset protocols before being definitely logged into the blockchain and making it impossible to change.
Fan Engagement: Businesses need customers to make money. Fans are needed to monetize sports. Fans who watch games on television and various other platforms, spend money on merchandise, and buy tickets to matches, will boost advertising revenues and TV rights. Sports clubs have embraced the utilization of social media for harnessing the engagement of fans, but blockchain technology could take this one step ahead. Sports clubs can introduce their own virtual tokens/currencies specific to the club which the fans could spend on merchandise, tickets, and food and beverages at matches. This leads to operational efficiencies which means more profit for the clubs. The system could enable peer-to-peer ticket exchange which can be popular among fans and enable the ticket re-sales market to be fairly administered between fans and clubs as well as avoid dealing with the fake-ticket markets. Loyalty schemes run by blockchain are being explored in other sectors and organizations and sporting clubs could also get benefited from this technology to engage fans all over the world.
Performance Metrics and Statistics: The sports world produces a massive amount of data that is yet to be utilized to its full potential. The athletes’ performance metrics can be incredibly beneficial for setting up of training and coaching plans. They help sportspersons attain better results by understanding their abilities. The blockchain serves as a reliable data bank of race data gathered from trusted sources and biometric measurements and logged directly into ledgers. For example, BraveLog was launched in January 2017 with strong support from the Microsoft Azure platform. It creates a credible and an immutable record of biometric and race data. Data like biometric measurements, pulse rates, and race metrics can be added directly to the database from devices and verified as credible. The idea behind this is to enable the sportspersons to clearly understand their abilities and coaches to handle personal training plans effectively with the help of big data.
Management of Sports Broadcasting Rights: You may be knowing that sports broadcasting rights are a huge business these days. As per reports, BT paid £1.18bn for renewing its exclusive broadcasting rights for the Europa League and the Champions League. As our viewing habits are being changed every day with the advent of new technologies, the rights market is getting increasingly divided. Fans are digesting LIVE streams over social media and clip-form content on their smartphones along with traditional TV viewing. The rights holders can make use of blockchain networks for tracking rights they have licensed so that they can identify the unexploited rights and also utilize the blockchain network to enable automatic rights payments through smart contracts.
With all the advancements in blockchain, it’s amazing to see various industries making use of it. Blockchain is a buzzword in various industries. This will enable complex smart investment contracts, various types of detailed sponsorship smart contracts as well as donations where another sports organization, a club, or an athlete will provide a deal for a long period of time for a share of another stream of revenue or the future income in exchange for a capital investment ahead of time.
This will also provide the capability to address many issues related to liquidity present in today’s sports industry. As stated by SportyCo, it has received endorsements from various professional footballers with high-profile, such as Ronaldinho.
Smart Contracts for Funding Athletes
Smart contracts also enable us to create complex arrangements for funding up and coming athletes which was hitherto impossible. SportyCo, a London-based blockchain startup, allows investors to invest in professional athletes with the help of smart contracts and distributed ledgers. For instance, if a young athlete needs USD 50,000 per year for 3 years for getting access to world-class training, the athlete can set up an arrangement with SportyCo investors. According to the arrangement, the athlete will give away, say, 25% of their entire income for the next ten years. Now, when the athlete excels in their sport and earns money to the tune of a million USD annually due to sponsorships, the investors would be able to recoup their investment in almost no time. SportyCo has been endorsed by the likes of legendary football players like Ronaldinho Gaúcho and Roberto Carlos.
Smart Contracts for Big Data and Media Rights
Blockchain can be used as reliable data banks and can be used to log everything from athlete statistics to world records and biometric measurements. The information can be automatically stored in the ledger using distributed oracles eliminating the chance of getting faulty data. TV channels pay billions of dollars to the Europa League and the Champions League for exclusive access to broadcasting rights. Blockchain can be used to set up a pay per view streams that are popular in sports like Ultimate Fighting Championship. Cryptography involved in blockchain can help authenticate users online without going through cable providers who act as middlemen.
Use Cases in Sports Industry
Crypto Sponsorships: The many forms of sports sponsorships are undeniably effective ways for a brand to get their name out, and that’s why they tend to be so expensive. In 2014, Chevrolet reached an agreement with Manchester United; in exchange for $80 million per year over seven years, the club would display a Chevrolet logo on the front of their uniforms. On the other hand, Chelsea takes in $57 million per year for a similar agreement with Yokohama Rubber. Total revenues for soccer jersey sponsorships in Europe were set to hit $930 million in 2016, and other leagues around the globe have taken notice. In 2016, the NBA followed suit, agreeing to sell a small space near the collar of teams’ jerseys to sponsors, and not for cheap. While 2017 was the first year in which viewers saw a GE logo adorned on the jersey of their favorite Celtic or a Goodyear logo on LeBron James’ (former) Cavalier tank top, the totality of NBA jersey sponsorships could generate at least $100 million per year.
Tokenizing Aspiring Athletes: One 32-year-old former Major League pitcher for the Philadelphia Phillies has become the first to embrace a potentially revolutionary investment strategy, and it is predicated on investing in the athletes themselves. Michael Schwimer knew the perils of minor league baseball all too well; while the minimum salary for a Major Leaguer is $545,000 per year, the starting salary for a minor leaguer is just $1,100 per month, with the high end being $10,000 for a roughly 7-month season. Nobody in the minors is striking it rich, and in the case of injury or unexpected hardship, they can actually end up quite poor. So Schwimer founded Big League Advance, a business that invests in minor leaguers in exchange for a percentage of their future earnings. Typically, the initial payment of $350,000 purchases 10% of that minor leaguer’s future earnings. Armed with innovative research techniques, it’s a win for Schwimer, especially considering that ten players are currently earning over $25 million per season. And for minor leaguers, who know that injury can strike at any time, it’s a no-brainer that, even if they come to hand over $2.5 million of a $25 million salary each year to Schwimer, they can’t justify regretting. It’s a hefty insurance policy with no hidden strings. This is a model that is being utilized in other sports, including younger athletes, with a little help from blockchain technology.
Smart Tickets to End Scalping: Ticket scalping in professional sports has become such a problem that one former New York City DA said, “The average fan has no chance to buy tickets at face value.” Though he was directing his ire at the exorbitant cost of concert tickets thanks to predatory ticket-purchasing bots, the same can be said of professional sporting event tickets. It’s no secret that sites such as StubHub can make killing purchasing tickets at face value, saturating the market with their reach and influence, and then profiting from the resale of those tickets. But at least with online vendors, there is some guarantee that the ticket will not be a knockoff.
Decentralizing Ticket Resale/Sharing: Members of the National Association of Ticket Brokers offer a 200% return if a ticket or set of tickets do not arrive on time to the purchaser, but what if this issue could be resolved through blockchain technology? A hefty refund will not replace the experience of seeing Manchester United play during a week-long trip to England, and unfortunately, snafus, shipping delays, and other logistical issues can easily get in the way of you and your once-in-a-lifetime experience. For example, StubHub offers to provide updates on your ticket, but depending on your time of purchase, there is no guarantee that the ticket will arrive on time. In 2015, Heidi Van Boven awoke on Super Bowl Sunday to find that, nearly two weeks after purchasing four tickets for a total amassing more than $12,000, she would not receive the tickets. As a result, she was forced to return to the secondary market, and this time she had to snag two pairs of tickets from two different vendors — for a startling total of $50,100. It was an astounding price gouge, and the Van Bovens’ complaint was only one of 111 filed with the Washington State Attorney General that year over undelivered Super Bowl tickets. If tickets could instead be transmitted immediately upon purchase by using smart contracts and the data-sharing capability of blockchain platforms, these nightmare scenarios could be largely avoided.
Recording and Sharing Performance Data Securely: Utilizing a platform that allows data to be shared between coaches, trainers, general managers, and the players themselves without being potentially hacked, duplicated, or extracted without authorization will provide easy insight without allowing defectors to take critical algorithms and data along with them when they depart for a new club. The very concept of performance recording and sharing is important from the perspective of the players and sponsors. It is important for the recorded information to be stored and shared over the blockchain to limit and streamline the accessibility of player performance recordings. This would ensure that there is no illegal access, scrutiny or replication of the game data other than individuals like coaches, general managers, trainers, and franchise owners. The game recordings, especially with the ones focusing on individual performances, can be used by the players for future reference to improve their performance. The usage of blockchain to regulate key player data would result in the minimization of data thefts while players would be migrating from one club to another.
Decentralizing Fantasy Sports Participation, Payments: Fantasy sports, and fantasy football, in particular, have become more mainstream than the games’ founders ever imagined. The industry is pegged at roughly $7.22 billion, including money spent on ancillary activities, such as draft parties, food deliveries, fantasy-related memorabilia, etc. Offices, schoolyards, and group chats have all become the domain of fantasy sports players, who enjoy the competition amongst friends and the ability to make virtually every game more interesting. According to a Forbes contributor, one high estimate suggests that the sum of all tangible and intangible revenue created from fantasy football alone could be as much as $70 billion. There are ICOs pushing decentralized fantasy sports tokens, but the blockchain could function as an even simpler enhancer for various fantasy sports platforms. A blockchain-enabled platform linked to a league could ensure that no player’s team is unlocked until they have paid their dues, and such a platform could also allow players to take over another’s team by exchanging funds or tokens. There are several promising possibilities for blockchain technology to improve the already massive fantasy sports landscape.
Transparency for Drug Testing: At the 2014 Winter Olympics in Sochi, Russia, the host nation absolutely dominated the medal count, with many of its 232 athletes taking home some kind of hardware. And while the International Olympic Committee ultimately cleared nearly 400 Russian athletes to compete in the 2018 Winter Games in South Korea, they were forbidden from sporting any sort of Russian paraphernalia — the nation had been banned after a systemic, complex, state-sanctioned doping scheme was uncovered in 2016. Even with these bans, a Russian curler was still banished from the 2018 Winters when he failed a test for a performance-enhancing substance. But, Russia is far from the only nation with an athletic doping problem. Steroids all but changed the nature of professional baseball forever when several high-profile athletes were brought before Congress to testify about steroid use in Major League Baseball, and superstar pitcher Roger Clemens was eventually indicted in 2010 on charges of making false statements to Congress. Track and field, the NFL, tennis, and countless other sports have also grappled with how to implement drug policies. Even with policies in place, you get cases like Ryan Braun’s, a baseball player who accused a sample handler of tampering with his failed drug test, only to come up positive in a subsequent test and be exposed as a fraud. The blockchain could provide an unassailable chain of custody for drug testing, handling, and storage that would seriously diminish the amount of hearsay that can create a false positive or cause unwarranted suspicion over a legitimately failed test. A more universally accessible system of failed and passed tests may reduce the amount of trust in a system where teams or nations have plenty of incentive to conceal positive tests, from college to professional ranks.
Fan Revenue Sharing: Professional sports franchises represent one of the most fast-rising value assets. Between 2011 and 2016, the American sporting landscape has seen extraordinary growth in the value of its franchises. While many clubs do not need to rely on outside funding from fans to sign players, build new facilities, and compete, there are professional leagues throughout the world that can use all of the cash flow they can get their hands on. Spanish soccer club Leganes is worth approximately $5.25 million and is the sort of club that could be ripe for an outside investment model, both to gain a greater following and for genuine financial support. Several blockchain-enabled services are utilizing tokens and smart contracts to promise fans future revenue shares in exchange for immediate funding. This allows fans an even greater stake in their clubs and allows clubs to reward that loyalty with results thanks to the additional capital.
Rewarding Fan Interaction and Content Creation: Sports fans are known for being die-hard. The most ingenious leagues and clubs find novel ways to tap into this rabidity. Though GoPro is not technically a sports club, its viral advertising campaign very much reflects the spirit of ingenious sports marketing. Through its “Be a Hero” campaign, it allowed customers to become the potential stars of their advertisement, and the company has become synonymous with user-generated content. Campaigns launched by sports franchises seeking greater fan input and interaction is not new. When the now-San Jose Sharks first became an expansion hockey team in 1991-2, they solicited entries from future fans for potential team names. They received 2,300 suggestions, and though they didn’t ultimately become the San Jose Rubber Puckies, their willingness to reach out to the public shows proactivity that can help provide a spark in the community for any club, new or old. There are countless other campaigns and contests and promotions that, however dumb, remind us that valuing the fan is first and foremost in remaining a relevant franchise or league. Some interesting concepts for the blockchain include rewarding fans for interacting with clubs’ sites, sharing content and liking posts, racking up unique tokens that can eventually be exchanged for merchandise or other worthwhile rewards — a sort of loyalty program for sports fans. Clubs can also hold contests on blockchain platforms, tying unique identifiers to fans who can purchase tickets to the club’s events and, as a result, be entered into contests or giveaways. Additionally, clubs can use a blockchain platform to compensate fans who, for example, illustrate an original Twitter avatar for the club account, with redeemable tokens for merchandise and other club-related swag.
Sports Streaming Services for Individual Events/Matches: There’s no doubt that the major networks are not going anywhere, especially when it comes to sports programming. There are countless millennial sports fans who would be willing to pay for individual sporting events but are unwilling to pay a year or two-year contract with DirecTV or a cable service simply to watch the World Series, Super Bowl, or Thursday Night Football at home. These fans will typically go to a local bar or a friend’s house to watch these events, which represents lost revenue for the networks and rights owners who miss out on a potential sale simply because no single-event platform exists. Additionally, even pay-per-view sports services require a DirecTV membership. The concept of on-demand service for individual sporting events crossing sporting lines, underpinned by blockchain smart contracts that release the content once payment is received, holds much promise for viewers, leagues, and networks alike.
Unprecedented Data and Information Sharing with Fans: It has been analyzed that sports fans are generally 3–5 points happier an hour after their team wins, but if they lose, they are, on average, 6.5–10 points sadder. Making matters worse, when a fan expects their club or team to win, the agony is far worse if they lose, while the respective serotonin from an expected victory is fairly minimal. But the fact that fans continually come back for more agony in exchange for a minimal boost in happiness shows just how fanatical fanaticism is. And contrary to many narratives and perceptions, millennials are just as in tune with watching and consuming sports as prior generations, and their embrace of tech makes it likely they would leap at the chance for even more sports-related content. While many clubs would never go for it, a subscription platform that hosts in-house updates, proprietary metrics, visual media, and other forms of team-centric content could easily convince diehard fans to hand over twenty bucks a month to access it. Fans, especially in the age of fantasy sports, are always looking for more content, a greater edge, and tidbits that can help them prove their fandom amongst friends. This has become increasingly difficult to do in the age of the 24/7, free sports news cycle, but paywall-linked blockchain-enabled platforms filled with non-replicable, unique content could further separate the true fan from the Bleacher Report-reading bandwagon imitators.
Why is the Sports Industry interested in Blockchain?
In an increasingly digital world, sports franchises are trying every play in the book to attract and retain fans. While marketing and digital revenues are increasingly important, event ticket sales – and season ticket sales in particular – are the largest source of revenue for the sports industry.
With the challenge to enhance fan engagement both on and off the field, sports entertainment companies are turning to blockchain technology to –
Increase Fan Loyalty: Engage fandom by increasing involvement and digitally augmenting the fan’s experience. This includes both attracting the younger generation and retaining the interest of older generations.
Digitizing collectibles & exclusive content
Organization ownership & voting
Find New Revenue Streams: Finding opportunities to earn revenue outside of the sporting event. This includes both entirely new revenue streams and the optimization of digital ventures.
Verified authentic merchandise and collectibles
Games that leverage brand assets and IP
Digital rights management for exclusive content
Strengthen Brand Trust: Meeting the expectations of fans for secure, error-free experiences and collecting reliable information about brand engagement.
Secure, reliable, mobile-first experiences (especially ticketing)
Transparent rules, votes, and results for games/contests
Granular marketing analytics & insights
Why are sports entertainment companies turning to blockchain to achieve these goals? In general, blockchain technology has a few unique capabilities that unlock new opportunities:
Unique Asset Tracking: Blockchains can be used to track more than just cryptocurrency transactions. Tokens on a blockchain can represent both physical and digital assets, allowing sports companies to:
Create an official, limited supply of digital assets
Store authentic merchandise records
Create digital marketplaces to exchange these assets
Payment Options: Sports companies can build a blockchain that uses an existing digital currency (e.g. Ether) or an entirely new one. Using tokens on a blockchain, these companies can:
Accept a wider, modern variety of payment options
Create a highly traceable loyalty rewards program
Create digital currencies for voting & representation
Identity: All transactions on the blockchain are tied to specific accounts, making transactions – be it a currency, digital asset, or real-world item – fully traceable. The sports industry can use this specific account information in many ways including:
Combating ticket fraud
Easily distribute rewards & content to selected accounts
Build more-accurate profiles of fans
Voting: Blockchains update with new information after certain chain members or majorities agree the updates are legitimate (consensus). While the voting rules vary greatly from one blockchain to another, this capability allows sports companies to give fans opportunities for representation, such as for:
Fan-favorite votes (e.g. All-Stars)
Sweepstakes and contests
News on Sports Industry
In September 2019, Atlético de Madrid, a Spanish Football (Soccer) Team, partnered with Chiliz, a platform for giving their fans a special approach to team merchandise, information and experiences.
On December 2, 2019, Juventus, the Italian professional soccer club, has released its own token to enable fans to participate in voting and polling.
On November 19, 2019, the Royal Dutch Football Association (KNVB) trialed a new blockchain-based ticketing app during the Netherlands-Estonia European Championship qualifying match.
On January 23, 2020, Chiliz launched a cryptocurrency exchange for sports and entertainment tokens.
On February 13, 2020, FC Barcelona has teamed up with fintech platform Chiliz to create a blockchain-based token for the sports franchise.
On January 28, 2020, Paris Saint-Germain (PSG), the French top-tier soccer team, has launched fan token, which is available for sale on the blockchain platform Socios.
On January 24, 2020, Lancashire Cricket Club sold tickets for all domestic and international fixtures at Emirates Old Trafford in 2020 through a blockchain-based platform.
On January 15, 2020, the National Basketball Association’s (NBA) Sacramento Kings reigned over again and tip off a LIVE auction for gear with a blockchain-based app.
The beauty of sports is a constant evolution. Athletes get faster, records are broken, new legends and fans are born, sports businesses and organizations should follow suit, processes can be improved, fan engagement can be enhanced, organizations need to adopt not only new technologies, and what’s not?
Thus, blockchain has found adoption in the sports industry, which looks promising as it is yet to reach its full potential.
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