Blockchain in Sports (Part 2)
7 minute read · Issue Number 41 · November 6th, 2020
Welcome to another weekly edition of the Sports-Tech Biz Mag! Every Friday, we learn about intriguing topics related to sports, business, and technology. If you’re reading this online or in a forwarded email, sign up for the newsletter:
In case you missed last week’s article, we explored the world of blockchain technology, a few of its applications, and some opportunities for it in the world of sports.
Here’s a quick recap:
The blockchain is a network of distributed computers that validate transactions;
There are two influential applications of the blockchain: smart contracts & cryptocurrencies;
Smart contracts can enforce agreements based on changes in data automatically;
Cryptocurrencies allow people to exchange money digitally, anonymously, and without intermediaries;
Blockchain can support a scalable version for scouting and recruiting sports talent;
Teams will be able to compensate players more dynamically through smart contracts.
If you’d like to review the more detailed takeaways of the previous edition, check out the thread I made on Twitter:
In today’s magazine edition, we’ll dive into part two of blockchain technology in sports. We’ll review a few additional areas of opportunity for blockchain in sports and the challenges that the sports industry faces for its adoption.
Blockchain in Sports
So far, we’ve reviewed “On-field” areas of opportunity for blockchain in sports. But what about Off-field?
Sports betting has always been a controversial topic.
Before the internet, sports gambling was very regulated and concentrated among a few key businesses and locations, operated within stable geographical and legal constraints.
When the internet arrived, betting companies grew fast. Now, blockchain technology could accelerate it even further and even become the ultimate bookie.
Think about the concept of a bet. Ultimately, a bet is a contract between a bettor and a “bookie.” If x happens, the bettor gets paid y amount. Else, the bookie gets to keep the money.
Through smart contracts, blockchain technology will reduce most of the friction in sports betting, which will create a more seamless experience for the bettors.
Smart contracts will automate agreements and payments and add variable terms according to your specific needs and interests.
Additionally, if done publicly, transactions would be completely transparent.
Sports memorabilia has proven to be an enormous business, from the second most expensive baseball ever sold to a piece of equipment used by a player.
Memorabilia are elements that create a personal link from a buyer to his sports heroes and could work as a speculative investment on the future value of the item.
For instance, a basketball signed by Michael Jordan could be worth around 8,000 USD! Can you believe it!?
However, the authenticity of these items may often be dubious.
Some outlets create a certification process by affixing a hologram or other identifying markers to the item.
Having a documented claim to a memorabilia item could be the key to sell the item at such a high price (as long as you don’t lose it).
Nevertheless, this all sounds too old-fashioned.
Having the ability to track the chain-custody of an item, managing ownership, validating, and authorizing transactions is the future of memorabilia, and luckily, it’s one thing blockchain technology does well.
Imagine you could be able to provide digital proof that you’re the owner of an item and that you could formally transfer its ownership via blockchain so that he cannot attempt to resell a fake copy.
Owners will preserve the item's value, blockchain technology will reduce memorabilia fraud, and digital collectibles will be a thing.
Oh, and by the way, my great friend Steve from the UK is already creating digital collectibles; check out my conversation with him on The Halftime Snacks Podcast.
Mostly due to viewership, broadcasting rights today are a highly valuable commodity.
The introduction of television and the globalization of sports helped the rights holders to generate big dollars. Today, any person from any location can access virtual sports content from the world's most professional leagues.
Sports media outlets have reached a point where they can stream sports content 24/7, and there’s always going to be an audience. Or they can host personalities —such as Stephen A. Smith or Skip Bayless— that have become massively popular public figures without even stepping into the playing field.
Currently, many media outlets offer subscription services to earn for their content. However, micro-subscriptions or “pay-as-you-go” models are yet to happen in the broadcasting industry.
What does it mean?
Consumers only want to pay for what they consume. Not more, not less. Consumers wish for flexibility and freedom of choice.
Why would I want to pay for the whole package if I only want to watch a few games once in a while?
Even in pay-per-view, the handling of rights and purchase process has never been entirely seamless. Blockchain is here to save us all.
By combining cryptocurrencies and smart contracts with blockchain technology, consumers will define and confirm permissions and payments. Introducing this type of model will allow an infinite number of variations. Subscriptions by city, league, franchise, player, sport, you name it.
Additionally, easing the friction between followers and broadcasts could help reduce piracy in sports.
The Future of Blockchain in Sports
“Okay, Ronen, this all sounds fabulous. But when will we see it? How will it happen?” I’m glad you ask the right questions!
The opportunity areas explained in this two-part series are only a subset of areas where blockchain could develop solutions for the sports industry.
While a few companies are currently working on some of the examples given, most of the scenarios mentioned will develop slowly.
Why? A few reasons:
The technology might not be ready just yet– blockchain technology is only twelve years old!
There are multiple limitations in the industry (i.e., federations, bureaucracy, old mentality, etc.)
The famous Scalability Trilemma: “Decentralization, Security, and Performance. Choose two.” There’s a huge challenge to scale the technology because it is hard to envision a blockchain platform that optimizes all three.
As I said last week, blockchain technology is legit, and I believe it’s here to stay. I do not doubt that sports will be resistant to change and that mass adoption won’t happen overnight.
While the pandemic has accelerated the technology adoption in many industries and sectors, in sports, it will ultimately be the consumer’s demand and the need to evolve, which will make many of these changes inevitable. And, when it does, the technology will be ready.
🎙Bringing Digital and Physical Spaces Together; This week, I snacked with Pierina Merino, the CEO of Flickplay! In 20 minutes, we talk about creativity, her lessons from Frank Gehry, Flickplay's technology, and how the digital and physical spaces will coexist in the future. Come snack with us!
🤽🏻♂️Bullpen by Clint Vojdinoski; a fabulous blog from an excellent friend from Perth, Australia. Clint writes about startups, technology, and the future of sports. Check it out!
Did you learn something new today?
Until next week,
Read more: sportstechbiz.substack.com.
Halftime Snacks Podcast