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INSIGHTS

Fan Club On-Chain: Leveraging Web3 for Sports Fan Engagement

Altman Solon is the largest global Telecommunications, Media, and Technology strategy consulting firm exclusively dedicated to the TMT sectors. This article highlights how sports rights holders can leverage blockchain technology and Web3 to create an engaged community of sports fans.

During cryptocurrency’s 2020-2022 bull run, professional sports and Web3 products looked like a perfect match. Web3, or the “next version of the web,” is a decentralized version of the internet that runs on blockchain technology and is an extension of cryptocurrency and NFTs. Major exchanges, like the now-defunct FTX, signed long-term arena sponsorship contracts. While Crypto.com and Coinbase signed multi-year deals with top sports leagues. However, the collapses of major currencies like Luna and Terra in May 2022, and the bankruptcy of FTX, deflated the Web3 bubble. Prominent crypto-sports flops, like Liverpool FC’s ”LFC Heroes Club” non-fungible token (NFT) collection, which sold less than 6% of NFT inventory, further sullied Web3 sports collaborations.

Despite this, sports fans – particularly young ones – are more familiar than ever with digital assets and are willing to use digital assets to connect with their favorite teams. Sports rights holders have successfully leveraged digital assets amid a challenging Web3 climate by centering utility tokens. Utility tokens are assets that give holders access to specific products and services, fostering a fan community and sidelining the speculative nature of crypto. Successful use cases show that sports rights holders should pivot away from using digital tokens as a new class of assets – marketing sports NFTs as financial investments, for example—to a technology that can enable new forms of direct engagement with sports fans. Free utility tokens – fungible or not – can be a savvy way to launch loyalty programs across multiple digital platforms and create ”token-gated” communities of highly engaged fans

Sports fans and Gen Z are familiar with digital assets and fan tokens

During the FIFA World Cup 2022, fan-based tokens were followed by a highly engaged subset of spectators. Within two hours of Argentina’s shocking loss to Saudi Arabia, the Argentine National Football Association’s crypto-based fan token, the ARG, lost one-third of its value. Meanwhile, the floor price of an NFT collection called ”The Saudis” (unaffiliated with the Saudi Arabia soccer team) shot up by 52.6%. This anecdote squares with findings showing that younger consumers, particularly Gen Z, are familiar with digital tokens. Recent surveys indicate that 48% of Gen Z respondents are familiar with digital assets, suggesting that sports rights holders could leverage digital assets to onboard younger sports fans.  

The token-gated community, an on-chain fan club

Utility tokens should not be reduced to digital collectibles. They provide benefits to their holders beyond the theoretical value of the asset. These benefits can include discounts on merchandise or event tickets, authentication, access to VIP services, and, in some cases, intellectual property rights. With their passionate fanbases, sports clubs can leverage free utility tokens as the entry point into a multiplatform loyalty club, using the tokens as a key to admission and providing other benefits. 

An example of a thriving token-gated community is the one launched by Manchester United. The iconic English soccer club partnered with the Tezos blockchain to launch their first-ever Web3 fan community. The club’s inaugural NFT drop gave away a series of free NFTs, which gave token holders access to the club’s official Discord. Over 750,000 free NFTs were claimed over the course of four days. These NFT holders were then granted special access to purchase a series of limited edition ”Red Devil” NFTs. All 7,777 Red Devil NFTs were minted within days, and an engaged fan community on Discord was successfully launched. As of May 2023, the official Discord counts nearly 100,000 members. While still a small community compared to other social media channels, the Discord channel provides unique experiences to highly engaged fans, including meet and greets, creative challenges, and a space to discuss recent matches. Manchester United could continue to onboard new community members through subsequent free token drops.

Best practices for setting up a Web3 loyalty program

Sports rights holders should put thought into setting up a token-gated fan community and focus their efforts on community outreach and engagement. Relying on speculative fervor can be counterproductive and fuel suspicion towards Web3 products. Indeed, tokens should be given (not purchased) as a reward for fan participation and engagement.

Flow chart outlining the four steps to best set up a loyalty program for sports fans with Web3

A loyalty program can be set up in the following way: 

  1. Invite multiple stakeholders and their members to join the community: Rights holders should offer access to the loyalty program to various parties, including club members, social media followers, media partners’ subscribers, sponsor’s customers, and sports fans.
  1. Provide tokens to unlock access: Free tokens act as ”tickets” to the community, in which holders can get onboarded to Web3 and an official Discord server.
  1. Engage fans within the community: Launch experiences where fans can earn loyalty points through various activities, such as ”play to earn” or ”watch to earn” programs.  
  1. Reward community members: Community members can trade in their loyalty points to purchase products and reduced-rate tickets and attend meet and greets and other fan events.
  1. Avoid valuation talk and hype cycles: These communities should be focused on engaging with fans and leveraging the sporting property’s unique IP. Discussion of token valuation, flipping, and floor prices should be avoided. Web3 tokens should be leveraged initially as a gift, not an investment.
  1. Co-create with fans: Rights holders should collaborate with the most active members in the community when planning initiatives, rewards, and activities for the group.

Web3 loyalty programs: In sports and beyond

While fewer pro sports teams wear crypto exchange logos on their uniforms, Web3 tokens have maintained their foothold in the sports industry. French unicorn Sorare’s fantasy sports game is based around NFTs. Initially starting as a fantasy soccer game with over 200 licensing deals with European clubs, Sorare has entered into agreements with the National Basketball Association (NBA), Major League Baseball (MLB), and Major League Soccer (MLS). It has over 3 million players worldwide, many onboarded via free tokens. Likewise, on the fan token app Socios, users can purchase tokens that give fans a share of ownership for a given club and voting rights on club decisions, ranging from uniforms to team warm-up songs.

Outside the sporting arena, brands like Starbucks successfully leveraged Web3 tokens to expand their loyalty program. Starbucks launched Odyssey as a Web3 extension of their Starbucks Rewards loyalty program with a ”play and earn” model. Within Odyssey, members are rewarded with ”Journey Stamps” – or collectible NFTs – in exchange for participating in interactive games or challenges. While ”Journey Stamps” can be sold on secondary markets, with some fetching upwards of $1900, Odyssey has also launched two paid NFT drops (with tokens priced between $99-$150), each selling out nearly instantaneously.

Indeed, crypto has cooled off considerably since earlier this decade. Concurrently, the Web3 market is down in trading volumes, floor prices, and market size. However, sports franchises that ignore digital assets during a bear market run the risk of playing catch-up when the market stabilizes and onboards new users. Using Web3 technology to increase fan engagement is an exciting way to activate a digitally native global fanbase. With their massive fan communities, sports rights holders can create more value by pivoting away from tokens as a speculative asset and using them to reward a growing niche of young, online fans.  

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