Why sports and esports teams should be in it for the long term when it comes to NFTs
The NFT phenomenon of 2021 has meant that most sports and esports organizations have had to gain a basic understanding of these unique digital assets. However, the term NFT is overused, and crucially, misused. NFTs are mostly perceived as an extension of cryptocurrencies, which can provide short-term gains through creating and selling them. However, viewing NFTs through the lens of short-term gains not only comes with the reputational risk of being seen by fans as a money-grabbing exercise, but also misrepresents the true purpose and potential behind the technology.This misrepresentation is understandable — the pandemic has had a huge impact on revenue for players, teams and organizations alike. The issue is that the approach across the industry has been quite fragmented — with no clear guidelines for teams and players on how to interact with the assets. This means that the technology has been implemented with varying degrees of success, and varying levels of understanding of how else it can be leveraged for long-term success. If done in the right way, NFTs hold the potential not just to provide a ‘stop gap’ when revenue is down, but to drive tangible, long-term growth and increased fan engagement.
This is why we're starting to see moves like the recent one from the NFL, which hinders teams from signing sponsorship deals with cryptocurrency trading firms or selling branded NFTs, while the league itself works on building an overarching strategy to enable all teams to leverage the technology effectively. This will hopefully lead to a more considered approach to NFTs that puts the fans first, prioritizing fan experience, and ensuring fans are getting real value from the purchase of their NFTs. In sports, this could look like teams creating NFTs that provide additional value, such as an NFT of their players’ jerseys and including an exclusive interaction with the associated player upon purchase. Leagues could also create their own licensed NFT collections, such as the NBA’s Top Shot product. By leveraging blockchain’s transparency and security, fans can be safe in the knowledge that they're buying collectibles or NFTs endorsed by the league as a whole.
This adds further value for fans other than just the prospect of increased resale prices. NFTs could even be customized, with the promise of additional personalization and reward upon purchase. This could look like the promise of subsequent rewards such as names on NFTs of team jerseys, or personalized video messages from artists or players. This adds an extra layer of reward to the NFTs, giving them more utility and making them more high value to the end customer.
By taking this fan-centric approach, sports and esports businesses can protect their reputation and build a better relationship with fans, all while preserving this new revenue stream. Using NFTs, not just as collectibles to deliver immediate revenue, but as a tool for building fan engagement, can set organizations up for long-term success, as fans become more loyal as they are further engaged, building a passionate fan base for the future.
Looking ahead, we could see more leagues taking control and building a comprehensive strategy, in order to ensure teams can navigate regulations and rights effectively, and ensure that NFT technology is used to improve the fan experience while prioritizing consumer protection and ensuring inclusion for league partners and sponsors.
Lars Rensing is CEO of enterprise blockchain service provider Protokol.