The Pinnacle is Yet to Come

The active participation of the fan in sports is the single largest opportunity that sits in front of the industry.?Despite living through a Golden Age in sports there is more still to come from the business side of the industry.??Web3 will be one of the major catalysts for fans, followers and consumers to invest even more of their time and hard-earned money on sports, but the way they interact will alter once again.

Fans are changing, but their interest remains incredibly high. Outward investment in the sector – once the purview of millionaires and billionaires, has now expanded even further with institutional money flooding in as they recognize that?whilst consumption of sports has continued to adapt media values remain extraordinarily high – even in Europe where recent deals are effectively flat despite being negotiated during a pandemic.

There are also green shoots everywhere in the industry around innovation.?The vitality of the start-up sector in the industry, the continued VC and PE investment in these companies, and the need for rightsholders and media companies to connect with audiences in new ways is seeing another wave of innovation.

WHY IS THE PINNACLE STILL TO COME?

Despite the investment into the industry and the continued growth it has enjoyed, the reality is that on the digital side of things we are very much still at the beginning of the journey.??It’s like re-reading Kevin Kelly’s excellent book The Inevitable . Though many think of the internet as well established we are only just beginning to unlock its potential – and that means we are in much the same place in sports.

Yes, streaming has become effectively mainstream, and indeed every sports team and athlete has a digital presence but in the vast majority of instances, we have barely scratched the surface.

Web3 is coming.?It’s inevitable, just as web2.0 followed Web 1 so it must go on.?Understanding the underpinning of the next version of the web is critical to sports and building a stronger, more solvent future.

?In many ways, sports is still stuck in Web 1.0.??As an industry, we are very much stuck in broadcast mode, the hallmark of the initial stages of the internet.?For proof visit any major sports team or leagues website or app and look for where the fan can interact. It’s almost never there, and if it is it will likely be a challenge to navigate to.?

The formation of Dugout was a step forward. As a sports team-owned destination on a neutral site and the creative content that is distributed it offered much but the shareholders pushed back against User Generated Content (UGC) and focused on the continuation of a push/broadcast/read-only concept that continues today.???The business has done well, and the founder has exited (congrats) and the business continues to build.?But not long after Tik Tok came on the scene and demonstrated once again the platform power of UGC but more importantly the effectiveness of Internet 2.0 and the interaction it enabled.

The past decade has been dominated by platforms that are interactive, have read/write capability and the user is an active participant.?

It’s ironic that an industry that lives off the passion and interaction of the fans and followers has been built predicated on limiting fan participation (well it allows fans into stadiums which we have discovered in the Pandemic is critical to the broadcast experience).

CHANGE IS HAPPENING

If we look for change it is there and it is accelerating.?For many sports – especially in the USA – this is currently focused on the betting market.?In-play betting is for many construed as active engagement in the industry – though of course, the bulk of that revenue will stay with the bookies and government revenue department rather than the sport itself.?More importantly, it cannot be accessed by the youth market.

We have seen the NFL engage with Nickelodeon, Second Spectrum create a whole new viewing experience, data metrics become built into the broadcast, the emergence of watch-together products such as Sceenic, and also engagement platforms for streaming such as SportsBuff to name a few.?The NBA is also known to be working on a whole new vision for it streaming product to become fully interactive.?At the same time rightsholders now hire data scientists for the business side of the equation, something almost unimaginable just a few years ago.

Progress is being made.?At the same time, the reason for the reluctance to embrace internet 2.0 does make sense.?Fans are by very definition fanatical.?Win and they love you.?Lose and the bile – especially online – can be more than intense.?Keeping that out and at a distance is comfortable and safe and it has taken a while for sports to invest in the infrastructure needed to understand the fans (data) and have the tools to speak more directly.

What this new two-way emerging relationship can provide – per my fan flywheel – is being to grow the conversation and the revenues that come with that.?

But just as sports innovation is accelerating and embracing the capability of Web2.0 so is the change in technology in the broader sense and Web3 is now emerging.

As big data, IoT, cloud, 5G, blockchain, AI, and AR/VR converge and accelerate their growth so the web that links them all (the semantic web) must adapt.??

WEB3 AND WHAT IT MEANS FOR SPORTS

In the simplest of terms, Web3 is likely to end up being the internet of ownership.??

The challenge that sports have – and the massive opportunity that sits before them – is that fans have always felt that in an intrinsic way they ‘own’ their club.?Even when supporting athletes, for many fans the true locus of their intention, they refer to them in a personal way as if they knew them like best friends.?

Web3 will enable ownership in a whole new way.?Blockchain – both in the form of crypto-currency and smart contracts – will likely form the backbone of this as it becomes one of the foundational technologies of the world.

The fan-owned club already exists, but the emergence of this new technology has the potential to, over time, lead to its much broader adoption.?There are already several emerging concepts around how the ‘Decentralised Autonomous Organisation’ or DAO could be implemented in the industry.

So far, they have played at the edges – though the Krause House DAO is explicit in aiming for an NBA Franchise.?Yet there are plenty of opportunities for bigger clubs and leagues to use the DAO to their advantage.

Most the UK-based clubs that tried to launch the European Super League have announced various plans to welcome fan supporters onto the board to discuss some issues.?A minority DAO could be a transformative way for these clubs to engage directly on a regular basis with a much broader set of fans than just a couple of chosen representatives.

There will be instances where famous individuals, probably athletes, can launch a DAO do acquire a stake in a club that they used to be affiliated to.?They would need to commit funds themselves, but a big enough name could do something never considered before.

NEXT LEVEL DISRUPTION

Ultimately the challenge for sports is this.?Innovation and tech are accelerating.?Until now much of that has not directly impacted the model (though perhaps it should have).

Broadcast and media tech alongside social media and other emerging technologies have seen sports consumed real-time, the world over, feeding a seemingly insatiable appetite.?This latter piece has clearly caused stress points in the industry that are still being navigated.

The next era, being one of ownership, is liable to disrupt in ways not yet imagined.?To date, sports have had to focus on local fans for monetization and supporting the business model.?But, as we are already seeing with NFTs, this dynamic is changing.?The vast numbers of followers that premium rights holders have built up will now be tested in a whole new way.?At the same time, smaller teams and leagues will be able to access fans in a whole new way.

It should lead to the next big boom for the industry.?If we get it right, there is an acceleration in revenues to be untapped. Get it wrong, or bury our collective heads, and it could cause disruption that breaks more than a few segments of the industry.?

What we must remember is that sports do not live in isolation.?Web3 is coming.?Blockchain is here to stay.?The Smart Phone and Internet 2.0 completely changed how fans engaged with media and entertainment – and therefore sports.?The same is going to happen again over the next five years.

Web3 and Blockchain will alter the perception of ownership.?This will impact people’s lives in an everyday way and as a result, their expectations of the teams and sports they engage with will change.?If you thought fans had a sense of ownership or entitlement today, wait to see how that grows in the next decade.

The choice before the industry is whether to ignore it and continue as before or to learn what it might mean, understand the potential and harness the next wave of tech innovation to drive fan involvement, and with-it monetization, to a whole new level.

2022 is just the beginning.

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