Tokenization in Sports: Impact on Clubs & Investors

The entire sports industry is tied to the fan movement. Representatives of sports leagues have long since learned to monetize their fans, but are constantly looking for new ways to do so.

The growing interest in tokenization can become a new source of revenue for sports teams and investors. Today, Info-Polus explains exactly how.

The Role of Tokenization in Sports

The main aspect of SportsFi (the mix of Sports and DeFi) is tokenization, which plays a rather important role. Tokenization of sports assets involves converting sports-related assets into digital tokens. These can then be used to perform a range of actions, such as trading on different platforms or confirming ownership of an asset. Everything can be tokenized, from tickets and signed items of your favorite players to stadium seats and shares.

Tokenization in sports reduces the barrier between the world of fans and the world of athletes, bringing them closer together with the help of blockchain in the sports industry. It also reduces the risk of counterfeiting and fraud by ensuring the authenticity of tickets and merchandise. In addition, tokenization can be particularly useful for clubs looking for alternative sources of funding.

Transforming Fan Engagement and Revenue Models

Tokenization does not stop at one field only. By purchasing tokens, fans can participate in the success of their favorite club and even have a say in the outcome. Sports cryptos give them a financial stake. Various types of assets are being tokenized, showcasing the versatility and potential of blockchain in reshaping the sports experience.

• Player Contracts and Future Earnings: Tokenization allows fans and investors to buy a stake in an athlete's future income. By purchasing tokens tied to a player's contract, fans not only support their favorite athletes but also gain a financial incentive as the athlete's career progresses. This innovative approach has turned athletes into investable assets, enabling them to fund their careers while giving fans a closer connection.
• Tickets and Memberships: Blockchain technology has revolutionized ticketing systems by offering NFT-based tickets. These tokens ensure secure, fraud-resistant transactions and simplify resale or transfer processes. For instance, returning tickets, - traditionally a hassle for fans and sellers - is streamlined with NFTs, which maintain transparency and authenticity. Memberships are also tokenized, granting holders unique perks like premium seating, exclusive content, or early ticket access.
• Collectibles and Memorabilia (NFTs): Iconic sports moments, player cards, or virtual merchandise are now immortalized as NFTs. Fans can own unique digital assets, such as a legendary goal or a championship-winning moment, creating a new frontier in sports memorabilia. These NFTs serve as collectibles and can be appreciated over time, offering fans emotional and financial rewards.
• Fan Tokens: Many sports organizations now issue fan tokens that provide exclusive privileges, including voting rights on club decisions. These tokens empower fans to influence kit designs, stadium upgrades, or player signings. For example, fan tokens issued by significant football clubs allow supporters to participate actively in their favorite team's decision-making, fostering a stronger sense of community and involvement.

From tangible assets like tickets to intangible fan experiences, tokenization bridges the gap between sports organizations and their audiences, creating a more dynamic and interactive ecosystem.

Benefits for Everyone

Believe it or not, tokenization has a positive impact on every participant. Fans, clubs, teams, investors, and start-ups are already diving into it. 

Sport Clubs & Teams

So far, the tokens have been a worthwhile source of income for the clubs. FC Barcelona sold its cryptocurrency within 20 minutes and raised around 1.3 million US dollars, much to the delight of the banking fintechs involved. Similar to an IPO, clubs use the proceeds to finance themselves. This is sometimes desperately needed, as the coronavirus crisis meant that a lot of revenue was lost between 2020 and 2021. The manager of Juventus Turin, Giorgio Ricci, told Reuters that cryptocurrency is a longer-term solution. And one that not only serves to bridge the lack of income during the pandemic. 

Players and Sportsmen

Every year more and more players and sportsmen are creating their NFT collections. Some of the most prominent examples are Cristiano Ronaldo, David Beckham, and Michael Jordan. Except for the NFTs, the value of tokens is subject to market forces and fluctuates depending on the athlete's performance, potential, and public perception. 

Investors

At up to 6.5 percent, football fan bonds appear to offer very good interest rates. However, they involve a considerable risk for investors. Fan tokens, which more and more clubs and Formula-1 teams are issuing, on the other hand, are a mixture of cryptocurrency and shares.

The value of these tokens can fluctuate depending on team performance and demand, which brings with it a speculative aspect similar to share trading. This became clear when Juventus' token value skyrocketed after signing Cristiano Ronaldo. 

Start-ups

Start-ups have found fertile ground in sports tokenization. They are creating platforms that facilitate the issuance, trading, and management of these digital assets. The Socios platform is a great example, becoming an important partner for many football clubs with their fan tokens. The various club cryptos can be bought and resold here. When a new football token is launched, the clubs use Socios as a platform for their “Initial Fan Token Sale” (FTO). The success of such platforms can be proved by Binance entering the game. The world's largest crypto exchange supported Socios and the Chiliz platform at the launch of the FC Barcelona token. Since then, some fan tokens can also be purchased on Binance with Bitcoin, Tether (USDT), or Binance USD (BUSD).

Fans

In contrast to a share, token holders do not only receive returns. They also receive several privileges. These include:

• Special voting
• Participation in exclusive events
• Meet and greets or live chats with the players
• Exclusive merchandise and discounts in the fan store

For example, owners of the PSG token were able to vote in December 2020 on which message should be written on the captain's armband (the choice was: “ICI C'EST PARIS”). At Juventus, it was up to the token holders to decide which songs should be played as the victory anthem. They chose two pieces of music by the British band Blur. With these and other votes, the supporters of their club have the opportunity to actively influence the team's public image and put their stamp on it. It works similarly with Formula 1 tokens.

Nowadays Challenges

However, tokenization in sports brings many opportunities, but it’s not without its challenges. The main issues are typical for the blockchain fields things:

• Token price volatility: Tokens are known for their price volatility. Their volatility is heavily influenced by crypto market trends, market sentiment, and broader financial factors that need to be analyzed and studied with particular attention.
• Regulatory uncertainty: As we discussed above about complying with securities laws, regulation is still in a state of uncertainty in many countries. Or conversely, the rules governing the sports blockchain in some countries are so strict that they could potentially limit the scope and scalability of initiatives.

Conclusion

The integration of tokenization in different sports is not without its challenges, such as regulatory hurdles and the need for comprehensive digital literacy among fans. However, the potential for a more inclusive, engaging, and financially robust ecosystem is clear. The future promises a game that is more connected and accessible than ever before thanks to the pioneering spirit of sport tokenization.

F.A.Q.

Q1: What are examples of tokenization?

A: Tokenization in sports includes fan tokens, NFT-based collectibles, tokenized player contracts, and blockchain-powered ticketing systems. These innovations enhance fan engagement, improve transaction security, and create new revenue opportunities for teams and athletes.

Q2: What is tokenization in football?

A: Football clubs use tokenization for fan tokens, NFT merchandise, and blockchain-based voting rights, allowing fans to participate in club decisions. It also enables clubs to generate additional revenue while strengthening their connection with supporters worldwide.

Q3: Is tokenization the same as NFT?

A: Not exactly. NFTs are a type of tokenization focused on unique digital assets, such as player cards and iconic sports moments. Tokenization covers a broader range of assets, including fungible tokens like club memberships and digital shares.

Q4: How to do tokenization?

A: Tokenization involves selecting an asset, ensuring regulatory compliance, and creating blockchain-based tokens for distribution. Successful implementation requires a secure infrastructure, a straightforward utility for the tokens, and a strategy for adoption and engagement.

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