Blockchain offers great hope of creating fairer and streamlined ticketing, but many challenges remain

By Bret McCormick

Editor’s note: This story is revised from the print edition.

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Forty-five minutes before Bruno Mars took the stage at Barclays Center for a show in 2018, he was “freaking the f*** out,” according to the pop artist’s manager. Mars had seen ticket prices for the concert rise to $600 on the secondary market, money that he would never pocket.

That story was later relayed by the manager to Josh Katz, who had built a successful company curating background music for retail settings. It served as further confirmation as to why Katz had gotten into blockchain. He had started New York-based YellowHeart in 2017 and just a few months ago landed his first sports client for blockchain ticketing, Premier League club Burnley F.C.

“I always saw this as the perfect use case, because ticketing is rampant with fraud, counterfeiting and a rampant middle-man population,” Katz said. “Blockchain cures all those things, all the things that are wrong with ticketing.”

As Katz speaks, he channels the excitement many feel about blockchain. Its best attributes point to a digital future that is fairer and more transparent, and foments exponential technological development that could upend almost any legacy system.

“We’ve just scratched the surface of what’s possible, and so this is a really exciting time to be in this business because there is going to be so much innovation,” said blockchain investor and Sacramento Kings owner Vivek Ranadivé.

That innovation has already begun in the sports and ticketing industries. The success of NBA Top Shot in 2021 made “NFT” — short for non-fungible token — arguably the year’s most-used acronym in the sports industry. Brendan Lynch, Ticketmaster executive vice president of enterprise and revenue, told Sports Business Journal that the company is unveiling “some exciting new initiatives in NFTs” this fall, while SeatGeek has plans to launch a marketplace for buying and selling NFTs and just hired a new head of engineering from a blockchain company. And dozens of pro sports teams have already released collectible NFTs to their fan bases.

Still, there is great uncertainty around applying blockchain to ticketing. SeatGeek Chief Product Officer Eric Waller said he gets very similar responses from leagues and teams on tickets and NFTs. Everyone wants to do something, but they’re not sure what. As AXS Chief Product Officer Michael Rojas said, when it comes to ticketing, blockchain “still has some maturity issues.”

Future possibilities

Blockchain was invented in 2008 as a public transaction ledger for Bitcoin. It’s a chain of digital records connected by hashes — timestamped digital fingerprints — with each subsequent block containing its own unique hash alongside the hash of the previous block. The links make it impossible to alter individual blocks, greatly reducing fraud and security breaches.

The strength of blockchains comes from the group. They run on distributed, peer-to-peer networks of validators, sometimes called “miners.” Transactions on the Bitcoin and Ethereum blockchains can be watched online in real time and no central authority controls the system. Bitcoin and Ethereum blockchain code is also open-sourced, sparking growing and complex ecosystems around those technologies. Even the code for ERC 721, the technical name for the process of minting NFTs on the Ethereum blockchain, is freely available on Github.

NBA Top Shot

Thanks to cryptocurrency, blockchain’s profile has grown significantly in the past four years. Spending on the tech will approach $6.6 billion this year and reach nearly $20 billion by 2024, according to the International Data Corporation. Forty-one percent of global companies responding to a Deloitte survey indicated that they had put blockchain technology into production in 2020, a healthy jump from the 23% that did the year before.

At Ranadivé’s suggestion, the NBA created a blockchain committee earlier this year. Ranadivé was an early investor in Dapper Labs, the blockchain company behind NBA Top Shot, which as of mid-July had done close to $635 million in NFT transactions in less than a year of existence, according to DappRadar. Ranadivé said he looks for new tech to check at least one of two boxes: do things that you already do but do them better, or do things that you couldn’t do before.

“Blockchain offers the opportunity to do both,” he said.

Tickets on a blockchain

Monumental Sports CEO Ted Leonsis, another Dapper Labs investor and member of the NBA’s blockchain committee, believes that selling tickets as NFTs and utilizing blockchain’s ability to track items as they move through the world would help rights holders claw back revenue that’s leaking into the secondary market. Blockchain could also enhance sports venue security by helping teams better know who is using tickets. Leonsis offered the analogy of an airport, which would never allow someone on a flight without knowing their identity.

“Our customers can become our partners” by reselling tickets, “so we’re going to have to rewrite the relationship of what the ticket is and what you’re getting when you buy it,” he said.

The U.S. and Canada already have an entrenched and complex system involving the world’s wealthiest and biggest ticketing companies, sports leagues and sports teams. The competitive nature of the ticketing industry complicates efforts to move forward, but Rojas thinks that blockchain might be “the Switzerland,” where common rules could be agreed upon.

“Everybody wants something to happen, but they’re not sure how to do it,” said Ranadivé. “We’re kind of living with an Industrial Age ticketing system, and we’re in the digital era.”   

Katz’s YellowHeart received early investment from Live Nation, but a blockchain ticketing effort wilted on the vine last year because of COVID. Coming out of the pandemic, he’s not convinced that blockchain is a priority for ticketing industry leaders.

“You’ve seen it time and time again with technology,” he said, “where older companies try to make it fit their older infrastructure and newer companies win because they’re building from scratch.”

During an upcoming NBA Summer League tournament, Ranadivé’s Kings are launching what’s called the Smart Ticket in conjunction with LAVA and Flow. A select hundred fans will receive an NFT, money to spend on food and beverage at the event and a limited edition digital NFT animation of the California Classic poster design.

Ranadivé doesn’t think technology is holding back live sports ticketing.

“I think it’s more of an issue of who’s motivated to do what,” he said.

Facing new challenges

That disconnect becomes clear when speaking to ticketing companies about blockchain. Waller said that blockchain ticketing is feasible, but “as we’ve dug deeper into that particular angle, we’ve become less and less convinced that it’s worth doing.” He and others highlighted four major hurdles that are blockchain-specific: high fees, enormous energy consumption, and the two most critical to address, scalability and public awareness.

Sandy Khaund, whose blockchain ticketing company, Upgraded, was bought by Live Nation in 2018, said the biggest challenge with ticketing is blockchain systems struggle processing high transaction volumes. Few, if any, crypto transactions are instantaneous, whether it’s 15 to 20 seconds for Ethereum-based coins or considerably longer for Bitcoin. Either would be unacceptable wait times for entering a stadium.

A live look at the Bitcoin blockchain in mid-July showed that the system processed 190,000 transactions over a 24-hour period. Compare that to Ticketmaster, which over the course of an NFL Sunday in the fall processes millions of tickets, including hundreds of thousands within a 30- to 45-minute window before kickoffs. Its competitors would add millions more to that number during an average game day.

Because blockchain is still in its infancy — its brick cellphone stage, as Khaund called it — public awareness is still limited. That makes trials like the ones that SeatGeek is planning for undisclosed one-off events this coming sports season — think appending an NFT to a fan’s all-star game or college bowl game ticket — critical. Waller said that an NFT option would probably appear alongside a fan’s mobile ticket and if the fan opts in, a user flow would help them set up or connect a digital wallet. Will 5,000 people create and open digital wallets? Or will five?

“That’ll be the first learning,” Waller said, “how accessible it really is.”

Framework, systems, rules

Technology-specific problems will likely be solved in the coming years. But there are more fundamental issues that pose longer-term challenges to large-scale ticket dispersal on blockchain systems, the first of which revolves around Leonsis and others’ desire to earn royalties from subsequent ticket transfers.

“That is kind of the lure,” said Rojas. “Teams really want to control their market; they don’t want third parties benefiting from the content they’re providing. It’s definitely some revenue they want to capture.”

Blockchain’s sports impact

Blockchain’s impact on sports ticketing has been limited so far, but the technology has had a presence in American sports for at least seven years.

2014: Bitcoin payment provider Bitpay signs with ESPN to sponsor college football’s Bitcoin St. Petersburg Bowl, the first major blockchain-related sponsorship deal in U.S. sports.

2014: The Sacramento Kings become the first pro sports team to accept Bitcoin as a payment option in their venue, Sleep Train Arena, also through Bitpay.

2015: Bitpay sponsors Kyle Busch’s NASCAR team, likely the first such pro sports team-blockchain partnership.

2018: eToro partners with seven Premier League soccer clubs. eToro pays for the deal entirely in Bitcoin.

February 2020: FC Barcelona partners with Chiliz on Barca Fan Tokens, which could be sold, traded or used to access exclusive experiences and merchandise.

September 2020: NBA’s Top Shot launches on the Flow blockchain. Top Shot’s popularity exploded in early 2021 as part of the NFT craze.

March 2021: The Oakland A’s announce they will accept Bitcoin as payment for suites.

April 2021: The Golden State Warriors become the first U.S. pro team to offer NFTs.

June 2021: FTX signs a 19-year, $135 million deal for naming rights to the Miami Heat’s arena.

July 2021: UFC unveils a $175 million deal with Crypto.com, with kit branding for every UFC fighter.

Limiting ticket transfers is unlikely given that they’re an established aspect of the American sports ticketing culture and preventing them is illegal in Colorado, Connecticut, Illinois, New York and Virginia. Beyond legality, there is no way yet for a blockchain ticketing system to tell the difference between a transfer between two friends and a “transfer” between two people who have never met before who just exchanged money for the ticket. Anonymity is often associated with blockchain, but without known identities, the transfer problem proves nearly intractable.

“With any new technology — including blockchain or NFTs — we believe it’s critical to make sure they are utilized to enhance the consumer experience, not to limit a fan’s control over the ticket that they’ve purchased or foreclose competition across the industry,” said Akshay Khanna, StubHub’s general manager, North America.

That’s not as much of an issue in Europe, where blockchain ticketing is growing fastest. Reselling tickets above face value is illegal in some European countries and banned altogether in others, including France. There isn’t the same accepted culture of secondary markets and third-party sellers, so blockchain tickets with embedded rules limiting transfers make sense.

Another philosophical issue is selling tickets as NFTs: If tickets are viewed as revocable licenses by rights holders, as they generally are, how does that square with NFTs, which, by nature, are owned?

“It really gets to the core of how you define a ticket and how you want it to be transacted in a marketplace,” said Matt Zarracina, the co-founder and CEO of True Tickets, which runs blockchain ticketing in the theater world.

Short-term applications

Zarracina lands on a solution that is taking hold in sports: selling tickets with NFTs, not as NFTs. In other words, combining existing ticket systems with blockchain tech.

Tickets become multidimensional when infinitely programmable NFTs are appended to them. NFTs could be used to access exclusive experiences at a sports event or could be tied to physical objects like memorabilia or game-worn apparel. NFTs could eventually incorporate augmented reality or hologram technologies, bringing a moment back to life. They’re already bridging the gap between physical and digital fandom in more meaningful ways, and the innovation is only getting started.

“If blockchain is in the second inning, then NFTs are in the bottom of the first,” said Khaund. “I kind of compare it to the internet in 1996.”

Top Shot cut up the NBA’s digital video archive and put it on the blockchain in limited number, creating scarcity and value. Sparked in part by the Top Shot surge, NFT sales rose to $2.47 billion in the first half of 2021, according to Dapp-Radar, dwarfing the $13.7 million sold during the same period in 2020.   

The marketplaces and communities that will spring up around sports-related NFTs will speed up broader societal adoption of blockchain-backed technology. As blockchain becomes better understood and more prevalent, “it challenges you as a builder to make sure you’re really building something that adds value, because you no longer get a pass on the technology,” said Zarracina.   

That could have a big impact on live sports ticketing, which is inherently a conservative space. It’s a huge source of revenue, but more importantly the primary point of interaction with a fan. Teams don’t want to screw that up. The potential in NFTs may be worth the risk.

“I think the fact you’re seeing organizations and companies and leagues being willing to experiment with these technologies in this way credentializes this idea that there is something there and ultimately there is going to be some value long term,” Zarracina said. “We just aren’t quite able to put our finger on it.”

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