Mykhailo Orlov/123RF
 

Blockchain for the Sports Industry: 10+ Practical Use Cases

  • 8 November 2018
  • Sam Mire

In 2018, attendance at Major League Baseball games dropped to its lowest average in 15 years, down 8.6% from its overall numbers in 2017. This is estimated to cost the league $355 million on ticket sales alone — that’s before calculating in concessions, merchandise sales, etc. And the National Football League, once the face of invincible popularity, has seen a steady 2% annual attendance decline, a 10% ratings decline in 2017, and registered favorably with only 44% of one survey’s respondents. Meanwhile, the rise in eSports, in which humans compete through digital, video game-linked representations of themselves, has seen a conversely precipitous increase in popularity, with an anticipated increase in regular eSports viewers of 124 million between 2016 and 2020. These are all signs of significant generational differences that decision-makers in the traditional sporting sector must account for by finding ways for the user to feel more invested in clubs, athletes, leagues, and individual match outcomes, while also making the overall in-venue experience more affordable.

When it comes to applying blockchain to these specific challenges, the most interesting use cases include direct investment in athletes and clubs by fans, who are rewarded with that athlete or team’s future earnings, as well as blockchain-based live sports betting and fantasy sports platforms, which can take on a global, decentralized aspect as a result. Other potential uses for blockchain technology in sports management include but are not limited to a decrease in illegal or counterfeit ticket sales; more accessible, transparent reputation management for teams, leagues, and individual athletes; and a general reduction in middlemen through automation to make match attendance more affordable.

Blockchain for the Sports Industry - Practical use cases


Crypto Sponsorships

Blockchain use cases in the sports industry - Crypto Sponsorships

The many forms of sports sponsorships are undeniably effective ways for a brand to get their name out, and that’s why they tend to be so expensive. In 2014, Chevrolet reached an agreement with English soccer powerhouse Manchester United; in exchange for $80 million per year over seven years, the club would display a Chevrolet logo on the front of their uniforms. With the English Premier League’s estimated reach of 643 million TV households in 212 countries, the sponsorship deal was strategically calculated with foreign customer bases in mind. Rival club Chelsea takes in $57 million per year for a similar agreement with Yokohama Rubber.

Total revenues for soccer jersey sponsorships in Europe was set to hit $930 million in 2016, and other leagues around the globe have taken notice. In 2016, the NBA followed suit, agreeing to sell a small space near the collar of teams’ jerseys to sponsors, and not for cheap. While 2017 was the first year in which viewers saw a GE logo adorned on the jersey of their favorite Celtic or a Goodyear logo on LeBron James’ (former) Cavalier tank top, the totality of NBA jersey sponsorships could generate at least $100 million per year. Some cryptocurrency and blockchain-dependent sponsors may take advantage of the wide net that professional sports cast to generate awareness of and revenue for their companies; in fact, some already have.

Sponsorships aren’t technically the direct application of blockchain technology that typically warrants attention, but in the context of major sporting associations, sponsorships carry weight. Several clubs, leagues, and athletes have proven willing to embrace blockchain technology — often in the form of cryptocurrencies — to various degrees. Some have simply agreed to appear in a commercial or place patches on their team’s jerseys. However, athletes are also getting into the blockchain sector in more substantive ways, joining the ranks of startups with visions for applications of the blockchain in sports and beyond. 

Companies Trying to Solve This Problem


Tokenizing Aspiring Athletes

Blockchain use cases in the sports industry - Tokenizing Aspiring Athletes

One 32-year-old former Major League pitcher for the Philadelphia Phillies has become the first to embrace a potentially revolutionary investment strategy, and it is predicated on investing in the athletes themselves. Michael Schwimer knew the perils of minor league baseball all too well; while the minimum salary for a Major Leaguer is $545,000 per year, the starting salary for a minor leaguer is just $1,100 per month, with the high end being $10,000 for a roughly 7-month season. Nobody in the minors is striking it rich, and in the case of injury or unexpected hardship, they can actually end up quite poor.

So Schwimer founded Big League Advance, a business that invests in minor leaguers in exchange for a percentage of their future earnings. Typically, the initial payment of $350,000 purchases 10% of that minor leaguer’s future earnings. Armed with innovate research techniques, it’s a win for Schwimer, especially considering that ten players are currently earning over $25 million per season. And for minor leaguers, who know that injury can strike at any time, it’s a no-brainer that, even if they come to hand over $2.5 million of a $25 million salary each year to Schwimer, they can’t justify regretting. It’s a hefty insurance policy with no hidden strings. This is a model that is being utilized in other sports, including younger athletes, with a little help from blockchain technology.

The tokenization of amateur and low-level professional athletes seeking funding to launch their careers still has kinks to be worked out, but it’s a truly revolutionary proposition for those who seek to pursue a professional athletic career. Platforms that allow investors to view an athlete’s tape and credentials and then provide immediate funds for a promise of some sort of future cut of the athlete’s earnings are embracing the blockchain to hold parties to their agreements. There are ethical and logistical questions to be dealt with, but the idea also carries weight with those who understand how competitive amateur sports have become, and how much money it requires to level the playing field. 

Companies Trying to Solve This Problem

  • PlayerToken – Tokenizing athletes for fan participation. 

Smart Tickets to End Scalping

Blockchain use cases in the sports industry - Smart Tickets

Ticket scalping in professional sports has become such a problem that one former New York City DA said, “The average fan has no chance to buy tickets at face value.” Though he was directing his ire at the exorbitant cost of concert tickets thanks to predatory ticket-purchasing bots, the same can be said of professional sporting event tickets. It’s no secret that sites such as StubHub can make killing purchasing tickets at face value, saturating the market with their reach and influence, and then profiting from the resale of those tickets.

But at least with online vendors, there is some guarantee that the ticket won’t be a knockoff. Just last month, authorities in Tennessee issued warnings that fake tickets were on the rise, and that fans should be aware of supported formats and untrustworthy vendors before purchasing. If a vendor is not part of the National Association of Ticket Brokers, which offers a 200% return guarantee on tickets that don’t arrive on time, purchasers are essentially putting their money down on the roulette wheel. While the NFL came to an agreement with Live Nation in 2008 to get a cut of the scalping industry — a smart move that adds more legitimacy to the sector — not everybody is purchasing tickets from such trusted secondary market vendors.

When a vendor is simply standing outside of the stadium pitching tickets, it’s easy for the ticketless to get sucked into an impulse buy. With smart ticket platforms that trace the chain of a ticket’s custody all the way to the final vendor, fans would have a way to guarantee they don’t get denied at the front gate because their ticket is a phony. These records are immutable and document each exchange, so users would be able to trace the ticket back to the original seller before forking over their money.  

Companies Trying to Solve This Problem

  • Eventchain – Placing limits on scalping with smart contracts. 

Decentralizing Ticket Resale / Sharing

Blockchain use cases in the sports industry - Decentralizing Ticket Resale

Members of the National Association of Ticket Brokers offer a 200% return if a ticket or set of tickets do not arrive on time to the purchaser, but what if this issue could be resolved through blockchain technology? A hefty refund will not replace the experience of seeing Manchester United play during your week-long trip to England, and unfortunately snafus, shipping delays, and other logistical issues can easily get in the way of you and your once-in-a-lifetime experience.

For example, StubHub offers to provide updates on your ticket, but depending on your time of purchase, there is no guarantee that the ticket will arrive on time. These scenarios aren’t fictional, either. In 2015, Heidi Van Boven awoke on Super Bowl Sunday to find that, nearly two weeks after purchasing four tickets for a total amassing more than $12,000, she would not receive the tickets. As a result, she was forced to return to the secondary market, and this time she had to snag two pairs of tickets from two different vendors — for a startling total of $50,100. It was an astounding price gouge, and the Van Bovens’ complaint was only one of 111 filed with the Washington State Attorney General that year over undelivered Super Bowl tickets.

Much of this issue has to do with shady dealers, archaic physical ticket methods, and a lack of transparency in secondary ticket markets. If tickets could instead be transmitted immediately upon purchase, using smart contracts and the data-sharing capability of blockchain platforms, these nightmare scenarios could be largely avoided.

Companies Trying to Solve This Problem

  • Blockparty – Restoring franchise control to ticket resale, while allowing for P2P resale.  

Recording and Sharing Performance Data Securely

Blockchain use cases in the sports industry - Sharing Performance Data Securely

Major League Baseball’s likely National League MVP, Christian Yelich, had a 2018 regular season WAR (Wins Above Replacement) of 7.6 to pair with 187 hits, 36 home runs, 110 RBIs, 22 stolen bases, and an OPS of 1.000. While LeBron James is considered to be among the top two greatest NBA players of all time, he still has room for improvement from the left corner of the three point line, where he shot a respectable yet not stellar 33.3% last year. Baltimore Orioles slugger Chris Davis, who makes $17 million per season, posted historically poor numbers in 2018 due in large part to statistically-minded managers shifting on 275 of his 323 plate appearances this year, accounting for where Davis tends to hit the ball. Tyreek Hill, wide receiver for the NFL’s Kansas City Chiefs and the fastest man in the league, posted a top speed of 23.25 mph last year, which would have put him not far behind sprinting legend Usain Bolt in a 100-yard dash.

If you can’t tell, analytics have taken over virtually every professional sporting league, as new technologies — sensors in particular — have allowed us to trace individual performance like never before. And, importantly, this data is valuable. That’s why a scouting director for the St. Louis Cardinals was sentenced to 46 months in prison for hacking into the rival Houston Astros’ internal database to gain insight on minor league prospects.

While much of the performance-derived data in sports today, including much of the above-cited statistics, are fit for public consumption, many clubs prefer to keep their proprietary data in-house. Utilizing a platform that allows data to be shared between coaches, trainers, general managers, and the players themselves without being potentially hacked, duplicated, or extracted without authorization will provide easy insight without allowing defectors to take critical algorithms and data along with them when they depart for a new club. 

Companies Trying to Solve This Problem

  • DYNO  Using blockchain to secure health data from wearables and biometric devices.  

Decentralizing Fantasy Sports Participation, Payments

Blockchain use cases in the sports industry - Decentralizing Fantasy Sports

Fantasy sports, and fantasy football in particular, have become more mainstream than the games’ founders ever imagined. Last year, daily fantasy sports generated a reported $3.2 billion in entry fees and $335 million in total revenue. That is only daily fantasy sports; it doesn’t count the leagues that players set up and play amongst themselves. The industry in total is pegged at roughly $7.22 billion, including money spent on ancillary activities, such as draft parties, food deliveries, fantasy-related memorabilia, etc. Offices, schoolyards, and group chats have all become the domain of fantasy sports players, who enjoy the competition amongst friends and the ability to make virtually every game more interesting.

One high estimate, according to a Forbes contributor, suggests that the sum of all tangible and intangible revenue created from fantasy football alone could be as much as $70 billion. However, ask any league commissioner and you’ll find that securing payment isn’t always easy. In fact, it’s not rare for the resident shirker in the league to put off paying until Week 4 or 5 of the season, by which time they’ve realized their team is no good and decide not to pay their dues at all. After all, if only 67% of players are employed full-time, we aren’t talking about the most financially stable or reliable demographic.

Already, there are ICOs pushing decentralized fantasy sports tokens, but the blockchain could function as an even simpler enhancer for various fantasy sports platforms. A blockchain-enabled platform linked to a league could ensure that no player’s team is unlocked until they have paid their dues, and such a platform could also allow players to take over another’s team by exchanging funds or tokens. There are several promising possibilities for blockchain technology to improve the already massive fantasy sports landscape.  

Companies Trying to Solve This Problem


Transparency For Drug Testing

Blockchain use cases in the sports industry - Transparency for Drug Testing

At the 2014 Winter Olympics in Sochi, Russia, the host nation absolutely dominated the medal count, with many of its 232 athletes taking home some kind of hardware. And while the International Olympic Committee ultimately cleared nearly 400 Russian athletes to compete in the 2018 Winter Games in South Korea, they were forbidden from sporting any sort of Russian paraphernalia — the nation had been banned after a systemic, complex, state-sanctioned doping scheme was uncovered in 2016. Even with these bans, a Russian curler was still banished from the 2018 Winters when he failed a test for a performance-enhancing substance…a curler!

But Russia is far from the only nation with an athletic doping problem. Steroids all but changed the nature of professional baseball forever when several high-profile athletes were brought before Congress to testify about steroid use in Major League Baseball, and superstar pitcher Roger Clemens was eventually indicted in 2010 on charges of making false statements to Congress. Track and field, the NFL, tennis, and countless other sports have also grappled with how to implement drug policies. Even with policies in place, you get cases like Ryan Braun’s, a baseball player who accused a sample handler of tampering with his failed drug test, only to come up positive in a subsequent test and be exposed as a fraud.

The blockchain could provide an unassailable chain of custody for drug testing, handling, and storage that would seriously diminish the amount of hearsay that can create a false positive or cause unwarranted suspicion over a legitimately failed test. A more universally accessible system of failed and passed tests may reduce the amount of trust in a system where teams or nations have plenty of incentive to conceal positive tests, from college to professional ranks.  


Fan Revenue Sharing

Blockchain use cases in the sports industry - Fan Revenue Sharing

Professional sports franchises represent one of the most fast-rising value assets there are. Between 2011 and 2016, the American sporting landscape has seen extraordinary growth in the value of its franchises. Major League Baseball franchises’ values have risen, on average, 19.8% during that period; NBA teams by 27.6%; NFL by 17.4%, and NHL by 21.3%. These figures become even more impressive when considering that the Dow Jones rose at a rate of 6.7% during that same period. This comparison gives way to an apt metaphor: If you could own stock in a professional sports franchise, wouldn’t you? Especially if that company was an unassailable asset that is almost certain to grow — like the $4.8 billion behemoth that is the Dallas Cowboys? Or Manchester United, which is worth $4.123 billion? Or any of Forbes’ 50 Most Valuable sports franchises? Of course you would.

While many clubs do not need to rely on outside funding from fans to sign players, build new facilities, and compete, there are professional leagues throughout the world that can use all of the cash flow they can get their hands on. Spanish soccer club Leganes is worth approximately $5.25 million, and is the sort of club that could be ripe for an outside investment model, both to gain a greater following and for genuine financial support. Several blockchain-enabled services are utilizing tokens and smart contracts to promise fans future revenue shares in exchange for immediate funding. This allows fans an even greater stake in their clubs, and allows clubs to reward that loyalty with results thanks to the additional capital.

Companies Trying to Solve This Problem

  • Socios – Fan tokens for voting and revenue sharing. 

Rewarding Fan Interaction and Content Creation

Sports fans are known for being die-hard. Athletics represent our vicarious outlet and it brings out our most tribal side. The most ingenious leagues and clubs find novel ways to tap into this rabidity. Though GoPro is not technically a sports club, their viral advertising campaign very much reflects the spirit of ingenious sports marketing. Through its “Be a Hero” campaign, it allowed customers to become the potential stars of their advertisement, and the company has become synonymous with user-generated content.

Campaigns launched by sports franchises seeking greater fan input and interaction is not new. When the now-San Jose Sharks first became an expansion hockey team in 1991-2, they solicited entries from future fans for potential team names. They received 2,300 suggestions, and though they didn’t ultimately become the San Jose Rubber Puckies, their willingness to reach out to the public shows proactivity that can help provide a spark in the community for any club, new or old. There are countless other campaigns and contests and promotions that, however dumb, remind us that valuing the fan is first and foremost in remaining a relevant franchise or league.

The point is, clubs who find a way to reward fans will also attract fans, expanding their reach and value simultaneously.

Some interesting concepts for the blockchain include rewarding fans for interacting with clubs’ sites, sharing content and liking posts, racking up unique tokens that can eventually be exchanged for merchandise or other worthwhile rewards — a sort of loyalty program for sports fans. Clubs can also hold contests on blockchain platforms, tying unique identifiers to fans who can purchase tickets to the club’s events and, as a result, be entered into contests or giveaways. Additionally, clubs can use a blockchain platform to compensate fans who, for example, illustrate an original Twitter avatar for the club account, with redeemable tokens for merchandise and other club-related swag.

Companies Trying to Solve This Problem

  • Blocside  Digital wallet for soccer fan participation.

Sports Streaming Services for Individual Events/Matches

Blockchain use cases in the sports industry - Sports Streaming Services

There’s no doubt that the major networks aren’t going anywhere, especially when it comes to sports programming. According to UFC commissioner Dana White, the recent showdown between Khabib Nurmagomedov and Conor McGregor sold “way over 2 million” individual, one-time pay-per-view subscriptions. With a price of $64.99 for an HD viewing and a conservative sales figure of 2.5 million, that would mean a net revenue of about $162 million. For a single fight.

UFC is far from the only litmus test of how valuable sports programming has become. The NFL, the mother of all American sports leagues, garners the most eye-popping television contract figures. In January 2018, Fox Sports dished out $3.3 billion for five-year rights to broadcast Thursday Night Football. With 11 games per year played on Thursday nights, that accounts to $7.5 million per game. Meanwhile, ESPN pays $1.9 billion each year, or $11.875 million per game, to broadcast Monday Night Football. The network also shells out $1.4 billion each season to broadcast a varied array of NBA matchups. Individual clubs, not just leagues, make out quite well, too; the New York Yankees sell their television rights for an estimated $191 million each year. Money talks, and in the case of sports television contracts, it speaks to the undying demand of sports fans for round-the-clock sports.

Still, there are countless millennial sports fans who would be willing to pay for individual sporting events but are unwilling to pay a year or two-year contract with DirecTV or a cable service simply to watch the World Series, Super Bowl, or Thursday Night Football at home. These fans will typically go to a local bar or a friend’s house to watch these events, which represents lost revenue for the networks and rights owners who miss out on a potential sale simply because no single-event platform exists. Additionally, even pay-per-view sports services require a DirecTV membership. The concept of an on-demand service for individual sporting events crossing sporting lines, underpinned by blockchain smart contracts that release the content once payment is received, holds much promise for viewers, leagues, and networks alike.  


Unprecedented Data and Information Sharing with Fans

Blockchain use cases in the sports industry - Information Sharing with Fans

According to at least one expert, there is actually a science behind our sports-induced fanaticism. Dubbed the “Sports Complex,” science has shown that one’s allegiance to a sports team can be similar in strength to their identification with their nationality, ethnicity, and gender. “I think, therefore I am….a Yankees fan.”

Whether this self-identification with a sports team leads one to otherwise impossible levels of euphoria, or drives them to murder, we have to admit that it is real — countless viral videos of smashed televisions and unbridled freakouts have proven the Sports Complex to be true. It’s also proven by the findings of a study, which concluded that, on a scale of 0–100, sports fans are generally 3–5 points happier an hour after their team wins, but if they lose, they are, on average, 6.5–10 points sadder. Making matters worse, when a fan expects their club or team to win, the agony is far worse if they lose, while the respective serotonin from an expected victory is fairly minimal.

But the fact that fans continually come back for more agony in exchange for a minimal boost in happiness shows just how fanatical fanaticism is. And contrary to many narratives and perceptions, millennials are just as in tune with watching and consuming sports as prior generations, and their embrace of tech makes it likely they would leap at the chance for even more sports-related content.

While many clubs would never go for it (looking at you, New England Patriots), a subscription platform that hosts in-house updates, proprietary metrics, visual media, and other forms of team-centric content could easily convince diehard fans to hand over twenty bucks a month to access it. Fans, especially in the age of fantasy sports, are always looking for more content, a greater edge, and tidbits that can help them prove their fandom amongst friends. This has become increasingly difficult to do in the age of the 24/7, free sports news cycle, but paywall-linked blockchain-enabled platforms filled with non-replicable, unique content could further separate the true fan from the Bleacher Report-reading bandwagon imitators.

Companies Trying to Solve This Problem

  • Lympo – Sports and health data sharing, launch support from Mark Cuban.
About Sam Mire

Data journalist and market research analyst focused on emerging technology, trends, and ideas.

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