Are tokens the answer to a corona-savaged football industry?
Every crisis gives birth to new solutions. The current Covid-19 crisis will be no exception. All over Europe football clubs are suffering. Match-day fees are off, and the probability of sponsors and partners withholding their money for the coming seasons is undeniable. Player wages are cut as well, in some cases up to 20%.We do not yet know how significant the economic damage for the industry will be. But it will be severe — no doubt about that.
In some way, this is old news. Football has never been a good business. A closer look at the numbers shows that the industry is always losing money, crisis or not. Revenue-data from 700 European top-division clubs from 2006 to 2016 shows that a negative net result — every single year. Yet, revenue, transfers and player wages keep rising, cause most of the time along comes a wealthy investor or loyal fans ready to pick up the bill.
The New Corona-crisis is a global phenom, and it will be fair to assume that it will affect all markets. So who will pick up the bill now that oil prices are down, the Chinese tech market is down, and betting companies are struggling with harsher regulations and social acceptance?
Crypto tokens, is a unique kind of virtual currency token that represents an asset or utility.
Since the introduction of the blockchain technology in 2009, the creation of a cryptocurrency or token has been more accessible than ever. Today there exist more than 6.000 cryptocurrencies, and the number is growing.
In lay-man term once could say that you can now take practically everything, divide it into x-amount of tokens and sell it.
For example, one can have a crypto token that represents customer loyalty points. There can be another token that gives entitlement to the token holder to view 10 hours of streaming content.
In the old days, the gold reserve in Fort Knox became the token we know as the US Dollar. Today the trust in blockchain technology is represented by its token, BitCoin.
If you can tokenize trust, you can tokenize everything.
That thought must also have crossed Spencer Dinwiddie’s mind. In January he became the first NBA player to tokenize his three-year contract with the Brooklyn Nets.
Dinwiddie turned his three-year, $34.4-million contract with the Nets into an investment vehicle called Dream Fan Shares. Even though it might sound like any Nets fan’s dream come true — to be a part of that deal, most of them had to keep dreaming. The tech-loving forward only divided his contract into 90 tokens, each costing 150.000 USD each. The outcome for the 90 token owners is forecasted to pay out 4.95% base interest every month, with the entire principal dispensed at the end of the period upon maturity in a bullet payment. Dinwiddie, on the other hand, claims $13.5M of his contract upfront as a sort of business loan.
But this is just the start. Why not tokenize, e.g. IP-rights?
Imagine a player such as Matthijs de Ligt. He is one of his generation’s most promising players, but his branding value is still far from reaching its full potential.
Let say he divided his IP-rights into 1.000.000 tokens. Kept the 800.000 for himself and sold the last 200.000 for the price of 100 Euro (approx the price of a football shirt).
For de Ligt it would mean a 20.000.000 Euro income that could be excellent security should he get a severe injury or loos his form.
The token holders would get a share in his future success. If he does well and lands a deal with Adidas, the Token value goes up and everybody is happy. And the chances of that happening would increase dramatically as de Ligt can present 200.000 token holders with a strong motivation for being his brand-ambassadors, sharing positive vibes and stories about de Ligt on all their platforms.
But there is more to it. Let’s say de Ligt is in transfer negotiations with a new club. His agent spreads the rumour, and the token value rises due to rising demand. That would mean that the fans approve the match and both de Ligt and the new club can see an additional business model by making the transfer happen.
On the other hand, if the demand for token declines de Ligt knows it might be a wrong economic decision and can argue for a higher sign-off fee as compensation for his loss in IP-value.
The mechanics behind this is not much different from when Beckham signed for Real Madrid and rumours would have it that the shirt sale with his name on it almost paid for the transfer itself (I have not come across any reliable source on the exact numbers). But still.
In a similar case, some marketeers could argue that Ronaldo did not join Juventus, but Juventus joined Ronaldo. Explamplefied by the Portuguese superstar 82.8 million twitter followers, compared to the 1.8 million that follow the club. If the social following is a commodity these days, they certainly do have a point.
With the token model, the data would be more reliable and just as easy to read as the performance of a stock listed company.
We do not know what strategy Socios.com presented for the Juventus FC board. But we know it worked. In the last month of 2019, Juventus FC became the first football club to tokenized voting rights at the club.
Through Socios’ platform fans of football clubs such as Juventus, FC Barcelona, Paris Saint-Germain, Atlético de Madrid, Galatasaray, AS Roma and West Ham can buy a fan token that provides them with voting rights on fan matters. Examples could be casting a vote on which player should take over the clubs Instagram feed or what song will be the clubs new official goal-anthem.
For die-hard fans this is cool, but the mere 6000 sold tokens suggest that it has not been a complete success. But this was before Corona changed the world. The idea is not bad and could gain even more traction with a few tweaks.
How much would you pay to be a part of transfer voting right? Let’s say the Head of Recruitment at a given club has targeted two centre backs that could strengthen the team. Now all token owners can vote on who to buy through a simple app. The benefits are easy to see.
The player would be sure to get a warm welcome — after all, the fans where the one who ultimately brought him to the club.
Let’s say the club is in a financial hard spot. Well, that might incline people not to vote for any of them. If the team keeps losing the coach would not have to deal with to many screaming fans as they had chosen financial stability over three points.
All-power-to-the-fan clubs is not a new concept. Avant Garde Caennaise in France and London FC United were some of the best known. None of them has made it very fare — the London FC United webpage has changed into a gaming-site these days.
But what there is a middle ground between the trivia voting rights in the Juventus model and the ultimate fan power approach.
With some legal regulations and loop-holes, it might also soon be possible for clubs to tokenize transfer right to a player, naming right to their stadium or the stadium itself could be tokenized and sold off. Tottenham Supporter Ground would be a cool name for the new Tottenham Stadium.
If the corona-crisis has damaged the financials of clubs and players hard enough some of these scenarios will become reality within a foreseeable future.
The possibilities are unlimited and the platforms to enable this already exists. The only question left is who will be first and who makes the best tokenization model and gain the most.
Author: Tobias Ambs-Thomsen, firstname.lastname@example.org