Reflecting on the combination of Web3 and sports: Who needs whom?

Introduction: Web3 Company’s passion for sports is perfectly reflected in FTX. Previously, they spent US$135 million to buy the naming rights of the Miami Heat’s home stadium for 19 years, and let Curry invest in FTX to become its brand ambassador. Coinbase, FTX, Crypto.com, etc. even directly launched at the American national event-the Super Bowl. advertise. In recent years, fan tokens, star NFTs, and Web3 sports games have also been talked about by some fans.

However, as a series of Web3-related scandals such as the FTX thunderstorm followed, the honeymoon period between the sports world and Web3 seemed to be over soon . Sports stars who have been associated with FTX have been implicated. The Heat have also terminated their naming cooperation with FTX, and the Super Bowl has directly banned any cryptocurrency-related company from advertising in 2023. The dismal record of Crawley Town Football Club, which introduced Web3 governance, has made the sports world question Web3 itself.

Investigating the origin, do sports events need Web3, or does Web3 need sports events? Does the combination of Web3 native products such as cryptocurrency and DAO governance with real business scenarios such as sports really make sense? This article written by DefiOasis will launch a critical discussion on this topic and use objective facts to explain why the “torsion between sports and Web3 is not sweet.”

The collision of sports competition and Web3

Throughout history, humans have an instinctive yearning for confrontational sports activities, which is even reflected in the Bible when talking about the origin of “Israel” (Jacob, the ancestor of the Jews, wrestled with the messenger of God and was recognized , so he was given the name “ Israel”, which means “the one who fights with God” ). In modern times, sports have gradually become a mainstream form of entertainment and have a huge market.

In 2022 alone, the NBA’s revenue exceeded US$10 billion, and the NFL’s revenue reached US$18.6 billion; according to the “2023 Football Financial Report” released by Deloitte, the five major European football leagues Annual revenue exceeds 17.2 billion euros, and the World Cup cycle financial report released by FIFA shows that the revenue of the 2022 Qatar World Cup reached 5.769 billion U.S. dollars. The event attracted more than 5 billion viewers, accounting for 62.5% of the global population.

The strong appeal of sports has naturally attracted the attention of many Web3 companies. From OKX’s courtside grass paint at Manchester City’s Etihad Stadium, to the naming of Crypto.com Arena, home of the Lakers, to the partnerships between Messi and Bitget, Suarez and Binance, all of them show that Web3 company hopes to cooperate with sports. Determination to build connections between celebrity fans. But in addition to cooperation methods such as inviting celebrity endorsements, Web3 has also derived unique scenarios such as fan tokens and star NFTs.

Sports Fan Economy: From Collection to Gamified NFT and Fan Token

It can be said that NFT is one of the best ways to put sports IP on the chain. The mainstream sports NFT is mainly collectible and gamified, and its native social and trendy attributes are widely loved by young people. The well-known accounting firm Dele once optimistically predicted that the transaction volume of sports-related NFT will exceed US$2 billion in 2022. However, according to data from LG Doucet, founder of TheFirstMint, the transaction volume of sports NFT in the primary market in 2022 will be approximately US$100 million. The secondary market is about $700 million, which is less than in 2021.

The decline of collections towards NFTs

(Among the sports platforms with the highest transaction volume in the first half of the year, gaming NFTs represented by Sorare and collectible NFT platforms owned by DapperLabs are still the main ones)

Collecting NFT is the first step for Web3 to enter the sports circle. Previously, football star Cristiano Ronaldo has cooperated with Binance to issue multiple personal series of NFT. Today we can still see the influence of collections on NFTs in the traditional sports world, such as star cards. Whether it is a collection of NFT or physical cards, as well as star cards focusing on stars, their value depends on the popularity of the stars.

Among the physical star cards that have been auctioned for more than $1 million, there are many big-name stars from all walks of life such as Mickey Mantle, LeBron James, and Patrick Mahomes. The rarity and aesthetic design of the card are bonus points. And when the collection is presented in the form of video, whether it is a famous scene of a star will also determine its value.

(Bonus points for the star’s famous scenes: The highest price of the shot when LeBron James became the number one scorer in history sold for nearly $20,000)

In the field of sports collection to NFT, DapperLabs is the undisputed leader. Its cooperation with NBATopShot, NFLAllDay, LaLiga, UFCStrike, etc. covers the needs of fans of different top sports leagues. It can be said that DapperLabs and its cooperative products are the master of Panini-style card collection gameplay.

Among them, NBATopShot is the most popular. With the official endorsement and fan base of the NBA, NBATopShot’s daily transaction volume reached more than 40 million US dollars at its peak, and it has remained in the top five in the NFT trading market. But the good times did not last long, and NBATopShot soon declined due to the excessive supply of star cards in a short period of time, the limitation of exciting moments to active players, and the parent company being sued by the SEC.

(NBA is a league with high attention to sports NFT)

It can be said that the decline of collection to NFT is inevitable. Similar to niche collectibles such as stamps, most players of sports collection NFTs are the intersection of sports fans and Web3 users. When the NFT market cooled down, without the influx of outside players, the trading market fell into a situation of price but no market. With the downturn in the NFT market and the operations of project parties, NBATopShop’s activity has been at a low level after reaching its peak in 2021.

(With the cooling of the NFT market and the project side’s frivolous operations, NBATopShop activity has been at a low level since reaching its peak in 2021)

Gamified NFTs for Fantasy Sports

Although the activity of sports collections towards NFT has declined, sports themselves still have a huge fan base, especially the world’s top sports leagues. With the entry of DraftKingsReignmakers, Sorare, etc., the sports NFT gameplay has been upgraded and more game elements have been injected. From the slump in collecting to NFTs to the boom in gamified NFTs, sports fans only need one tipping point to fall into a frenzy.

According to CryptoSlam data, in the month before October 24 this year, NFT transactions showed a significant trend of PFP turning to gamification NFT. In the top five of the list, two sports event game NFTs appeared, both exceeding CryptoPunks, MAYC and other well-known NFTs.

Sports games are usually dominated by realistic simulation competition and business simulation gameplay. However, the current mainstream Web3 sports games focus more on the “fantasy sports” business simulation gameplay with NFT as the core. This is a type of game in which team management operations are conducted from the perspective of a club manager. Part of the reason for choosing this approach is because immersive simulation games such as EAFC and F1 developed by sports game giants are already very mature. These games have been recognized by the majority of sports players in terms of cost investment, picture presentation and model maturity, and have established strong market shares on PC and mobile terminals. Therefore, Web3 sports games are starting from scratch, and it is relatively difficult to get a share of the pie in this field.

(The changes in gaming NFTs represented by Sorare and collectible NFTs represented by DapperLabs in the past two years reflect the trends of these two: https://thefirstmint.substack.com/p/the-state-of-nft-sports )

The “fantasy sports” gameplay chosen by Web3 sports games such as DraftKings, Sorare, and Ultimate Champions is just right. It combines real games with NFT elements. Players can predict the status of players and teams to select appropriate lineups for simulated games. This model is not new in the field of sports games. Similar to FM (Football Manager) and Basketball Fantasy, mature simulation game mechanisms have been formed.

But what is different from the past is that the core of Web3 sports games lies in the star card NFT, which players can trade on the secondary market. This makes the star card financial and attracts a large number of speculators. Interestingly, the player’s own growth space and rarity affect the price of player cards. For example, rising stars in the early stages of their careers have great hype potential, while the opposite is true for veterans who are about to retire. At the beginning of this year, the new generation NBA star Giannis Antetokounmpo’s star NFT was sold on Sorare for 113.888 ETH (approximately US$186,000).

There are two core points that allow “fantasy sports” to maintain long-term playability.

1.Maintain timely data updates

Unlike most game fans, the appeal of sports games comes primarily from sports fans. There is a high degree of overlap between deep sports game fans and real sports fans. From EAFC (formerly FIFA) to NBA2K, although they have gradually evolved from a stunning debut to a routine reskin product with constant criticism, they still maintain a strong ability to attract money. Among them, timely updated game data is a best-seller. The main reason lies.

In simulation sports games such as DraftKingsReignmakers and Sorare, players need to know real player data, understand tactics and the overall status of the team, which can effectively attract passionate fans. For this type of player, once enough stickiness is formed, timely changes in lineup data are more important than changes in details such as graphics, actions, and gameplay diversity. Although most sports games only undergo minor repairs every year, players are very tolerant and are willing to pay for more timely sports data. If player and team data are not timely, the appeal of such games will be significantly reduced.

2.Rarity-preferred income model

“Fantasy Sports” games refer to MyTEAM and Ultimate Team players’ preferences for star rarity, and gain revenue by dynamically adjusting the player card pool. This includes frequently increasing the upper limit of the card pool (player ability value, salary cap limit, etc.) to encourage players to purchase card packs and participate in draws, or directly acquire their favorite players by purchasing game gold coins.

However, the mainstream “fantasy sports” gameplay of Web3 sports games itself also has some flaws. For example, due to the long game cycle, the persistence is weak, making it difficult to ensure that players maintain sufficient attention throughout the year-long full season. In addition, the “ entry fee + prize pool” gameplay is often considered to be gambling, for example, the entry fee in the game, player selection (similar to betting), and sharing of prize pools are similar to gambling behaviors. On the surface, players need to predict player performance rationally, but in fact they need luck. In addition, the high entry level of the game itself is not friendly to new fans or non-fans.

Apart from fantasy sports games like Sorare and DraftKings, other sports chain games have yet to make waves.

Previously, FIFA and EA broke down their relationship due to sky-high contract renewal issues. They had launched four Web3 games in different modes, but these games were not attractive enough to fans. Specifically, there is a big gap compared with mature Web2 sports games in terms of gameplay, screen presentation and star portrait rights. In the future, as 3A-level sports games such as “Goals” try to enter Web3, this situation may improve.

The new direction of sports NFT

In addition to the above scenarios, the new gameplay that combines NFT with real-life sports is also an excellent attempt for NFT to move from fiction to reality, such as NFT tickets.

Ticket NFT has already had precedent in the music field, and its biggest role is to prevent ticket reselling and counterfeiting. However, most ticket NFTs are one-time use and have a relatively short validity period. After the ticket NFT enters the venue, it only has collection value. However, except for rare NFT ticket stubs (such as the debut of a star, cooperation with a certain celebrity, etc.), other ticket NFTs have a relatively short validity period. Value is more limited.

Sports events give NFT tickets the possibility of long-term use - such as season tickets for a team’s home stadium. For some clubs with a large number of fans, team season tickets are basically “hard to get”. Ticket NFT can be used as a team POAP. The club can publish a loyalty point program similar to “Odyssey”, such as purchasing team peripherals, checking the number of attendances during the season, etc., retaining or eliminating season ticket holders, and allocating season tickets for the next season. Ticket seats.

The club can also provide benefits to some high-point NFT holders, such as players’ signed clothing, offline meetings, etc. In July last year, Paris Saint-Germain sold three NFT tickets worth more than US$220,000 for a friendly tour match in Japan, and buyers could obtain unique rights.

Although NFT tickets are a good solution, fans of sports games cover all ages. NFT itself has a small audience. In addition, many sports fans are older and more conservative, and are slow to accept new things. At this stage, ticket NFT is more suitable for a small range. promotion.

NFT governance

The decentralized nature of Web3 makes the team’s democratic decision-making possible. Last year, Chelsea’s former owner Abramovich had to sell his team shares due to political reasons. Some fans wanted to protect the team’s interests. During this handover period, they launched a crowdfunding campaign to purchase 10% of Chelsea’s shares. shares, established ChelseaDAO and hopes to participate in the team’s key decisions in the future.

(During Chelsea’s turbulent period, fans hoped to raise funds to establish a DAO organization to take over some of the team’s affairs)

Due to various reasons, ChelseaDAO ultimately failed to do so, but Crawley Town Football Club, not far away in England, has launched a small democratic “revolution” with the help of NFT: a Web3 Capital called WAGMIUnited acquired this football club in the English Second Division. Football clubs in the league allow fans to participate in team building through Web3 management methods (with NFT as the core governance), introduce voting to determine team signing positions, and allow season ticket owners and NFT holders to vote together.

Although this management method is very democratic, it seems to have little to do with the club’s performance. Crawley Town’s status fluctuated during the season, and the head coach was changed many times. The final result was only 22nd place, which was difficult to avoid relegation.

The poor record of the Crawley Town team may be related to the fans’ lack of expertise in sports management, which is also a common problem in DAO management - community voting relies more on common sense rather than professional knowledge. In addition, due to information gaps, it is impossible for all information such as the team’s daily operations and locker room management to be known to the outside world.

It is foreseeable that when the team hands over the overall decision-making to the fans DAO, this democratic management method that lacks innovation and long-term perspective will be difficult to improve the team’s performance.

Club Fan Token: A new attempt at fan empowerment

In addition to NFT, fan Token is another business model related to sports fans. Compared to holding less liquid NFTs and passively bearing price fluctuations, fan tokens proactively give governance rights to assets. Previously, there were fan groups who hoped to rely on “DAO+Token” to operate the club. Fan Token provides the opportunity to allow fans to participate in some governance activities, such as deciding on the captain’s armband for a certain game, club bus design, warm-up music, etc., allowing fans to have some say.

Clubs also benefit under this model. As the leader of Web3 sports fan projects, Chiliz has incubated fan tokens of many clubs, including AC Milan (ACM), Atletico Madrid (ATM), Tottenham Hotspur (SPURS), etc. Chiliz’s incentive platform Socios.com generated $12 million in revenue from fan tokens in 2021. Clubs that cooperate with these fan tokens can receive a share, adding new revenue paths for the team.

For example, in 2020, Barcelona’s fan tokens were sold out on the day they were launched, with sales revenue reaching US$1.3 million, part of which was given to the club, adding to its financial income.

(Socios.com has partnerships with multiple sports clubs)

However, the revenue from fan tokens has limited financial help to the team. Broadcasting rights, match days and real-life commercial activities are still the main income of sports clubs. Let’s take Barcelona, ​​which is facing financial difficulties, as an example. According to data from Deloitte Football Money League, the club’s revenue in 2022 will be nearly 640 million euros. In comparison, even Socios.com’s revenue for all partner teams in 2021 will be only A small witch meets a big witch.

(Barcelona Football Club’s 2022 revenue components chart source: “DeloitteFootballMoneyLeague2023”)

At the same time, fan tokens have also been reduced to “fans using their love to generate electricity, and non-fans’ hype targets.”

On the one hand, the affairs that Token holders can participate in are limited. The affairs that they can participate in each season are few and insignificant. Major matters are still managed by the team and club executives. On the other hand, the fan token lacks long-term investment value and has become a disguised casino. If collectible star NFTs may be sold at high prices due to their rarity, fan tokens have no value anchor. Even the club’s position in the league and game performance will affect the token price.

At the 2021 European Cup and the 2022 World Cup, fan tokens of different teams experienced price fluctuations at different stages of the competition. Even during the team’s offseason, the team’s transfer operations, the departure of the team’s top star, or the introduction of famous stars can have an impact on the Token price. It can be said that this kind of fan token with meme attributes is essentially guided by the emotions of fans.

Web3 and sports IP in the cold winter

In the past, Web3 sports projects have actively launched advertising displays, NFTs, fan tokens, metaverse games and other scenarios for fans. These scenarios are all centered around fans, which provides fans with rights and conveniences, but this does not The fans didn’t buy it.

First of all, the concept of fan groups itself is very complicated. Sports fans generally cover all age groups, including people of different educational levels and ages. It will take a long time for most of them to accept the new concept.

Secondly, after witnessing the introduction of foreign capital by many European giants such as Manchester United and AC Milan, and using the management ideas of listed companies to run the club, which led to years or even decades of turmoil, more traditional European fans have no idea about the participation of foreign capital. Team affairs are relatively exclusive, and Web3 capital, which has not yet been understood by most people, is even more so. Although this does not mean that the Web3 Capital injection team is destined to be unsuccessful, at least the failure of the Crawley Town team has left a deep impression on the fans.

However, sports event clubs have a large number of fans, which is why Web3 Capital is unwilling to give up sports projects. But if Web3 itself wants to gain the recognition of fans, it must not only truly benefit the fans, but also probably have to prove its own value first.

In the 2021-2022 season, the encryption industry provided approximately US$130 million in sponsorship investment for the NBA, becoming the second-ranked sponsorship category that season. Major sports brands such as Adidas and Nike have also entered Web3 in recent years. Just as Web3 and sports are entering the honeymoon period, with a series of scandals such as the FTX thunderstorm, Tom Brady, Stephen Curry and other stars who have endorsed FTX have been implicated. Even the Miami Heat’s home championship cooperation with FTX The name was also removed. To make matters worse, the bankruptcy of Voyager and the breakdown of its cooperation with the Dallas Mavericks made “Web3” stigmatized in the sports world and its reputation plummeted.

The Crypto industry wants to build a huge business empire with the help of sports events, but the frequent negative news has not only hurt its own image, but also dragged some people in the sports circle into trouble. This makes the sports industry have to deal with Web3 cautiously. Capital has deepened the generation gap between them.

Does Web3 need sports fans, or do sports fans need Web3? Although it is often said that the combination of Web3 and traditional sports can bring new revenue to clubs, it is simply insignificant compared with mainstream revenue sources such as tickets, broadcasts and fan peripherals; in terms of popularity, Web3 Capital seems to need to rely more on sports events publicity to expand their influence. But whether it is influence or income, Web3 and sports IP have not yet formed the “1+1>2” effect. Moreover, from the perspective of looking for investors, traditional sports clubs have a more obvious preference for traditional capital, while Web3 Capital represented by FTX obviously lacks this stability.

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