Blockchain’s Potential Impact On Sports Media And Sponsorship
BY ADAM GROSSMAN
Even though we have Block in our name, Block Six Analytics is not a blockchain company. However, we do see blockchain technology impacting our business in ways that are likely to surprise many in the sports industry. More specifically, blockchain could alter sports media and sponsorship in counterintuitive ways.
To start, we will give a brief summary of what blockchain is as there several books, documentaries, and articles that can provide a fuller description. Let’s look at the area where blockchain first became famous – currency. For money to change hands, a buyer needs to submit a form of payment (i.e. cash, check, or digital payment) and the seller needs to receive the payment. A clearing house needs to ensure that a transaction only occurs once (i.e., a person does not use the same check for two different transactions) and that both parties can be involved in a transaction. Banks, credit card companies, and digital payments providers (e.g., PayPal) provide this service for a fee as private companies.
Blockchain technology, typically via cryptocurrency, changes this type of transaction. The way that cryptocurrency works is based on everyone in a network having a public and private cryptographic key. The public key serves like the routing and account number on a check. It lets everyone involved in the transaction know that a specific person that is making the transaction and is derived mathematically from a public key. The private key is like your signature on a check. Rather than writing a person’s name, the private key an extremely long series of numbers and letter that only that person knows and is difficult to determine by another person or computer. When a transaction occurs, high powered computers are mining the network for a new “block” (i.e. receipt of that transaction) by decrypting a “hash” (a complex series of letters and numbers). To incentivize mining in the network, the first computer in the network to successful mine a transaction receives a new portion of currency. Transactions all are recorded in a “public ledger” with unique blocks of transactions that include people’s public keys that can be seen by everyone in the network.
What does any of this have to do with sports? Cryptocurrency enables everyone in a network to trace every transaction by looking at the blocks in public ledgers. In sports, one of the most difficult things to track right now are tickets. When a team sells a ticket, it is a challenge to determine if a person used the ticket, sold the ticket on the secondary market (i.e., StubHub or SeatGeek), gave it to a friend, or did not use it at all. Advances in digital ticketing and Major League Baseball’s new relationship with Clear make this significantly easier. In particular, scanning tickets on a phone or letting fans “enter stadiums using fingerprints, and eventually, just their face, instead of tickets” makes it much easier for teams to track whom and when someone is using a ticket.
However, this still requires fans to opt-in to a team’s specific ticketing platform or to participate with a vendor like in Clear. If that does not occur, then a team will still have difficulty tracking a transaction, particularly if it occurs outside of its network. Blockchain for tickets will eliminate these issues because all transactions would be public and decentralized. Every team (and potentially their sponsors) could see every part of the transaction through the public ledger and track each part of the ticket’s journey through a block. This would potentially eliminate counterfeit tickets and payment processing because each ticket would be tracked no matter where it is sold. There are several companies currently exploring how to apply blockchain technology to tickets but are still in early stages.
Yet, ticketing may not be the most interesting application of blockchain technology in sports. In his recent book Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy, George Gilder argues that Google has helped to lead to the creation of the “aggregation and advertising” model as the primary way to monetize content. The reason is that there is so much content it is difficult to know who is consuming it or when it is being consumed at any time. In addition, people are not charged by the amount of content they consume. Therefore, content has ads in the form of banners, pop-ups, pre-roll, mid-roll, etc. that interrupt the experience or audiences have to go through an inefficient process to pay for content.
Sports is extremely susceptible to this problem particularly when comes to watching games. Historically, much of sports content has been free. The traditional way to consume a game is to have it “interrupted” by ad breaks or the “Playing Through” concept seen in NBC’S broadcast of the British Open where ads are run next to a live broadcast. In addition, customers of cable or satellite companies are not happy with the increase in their bills to pay for sports they may or may not be watching. As more content moves to digital and / or over the top (OTT) channels, consumers have to go through paywalls where people typically have to fill in their credit or banking information, pay a flat fee, and wait for the transaction to process.
Blockchain technology would eliminate most if not all of these issues with sports media in a way described in more detail in Gilder’s book. He states that Blockchain technology would enable the currency to become the “messenger” of content. More specifically, content would essentially contain an embedded code then, when accessed, would automatically charge the consumer. The transaction would be recorded in a public ledger in block format automatically and be tracked in a similar form to the way currency is tracked as described above.
Knowing and generating revenue for the content that people actually consume could be a boon to the sports industry. Sports content is still in high demand as demonstrated by how many of the top-watched programs every year are sporting events. Rights holders can not only charge people every time they consume content but also track exactly where the content is seen. This would make it extremely efficient to remove any illegal broadcasts or streams of content because teams, leagues, etc. would know exactly where that activity is occurring by examining the public ledger. In addition, audiences would have an easier time accessing content they want while watching shorter games because there would be less need for ad breaks. This likely would increase the number of people watching sporting events and increase revenue for rights holders and / or broadcasters as games become more popular over time.
Counterintuitively, this likely makes traditional sponsorship more valuable. Sponsors still want to reach large audiences that are engaged in content. If commercials are limited or eliminated completely then companies will need to activate within the content itself. Sports is already in position to do this via stadium signage and jersey logo activations. More specifically, sports audiences are already accustomed to seeing company signage and logo activation when watching games. It is not clear if that would be the case with other entertainment content as product or logo placements have received mixed reviews. Therefore, “traditional” sponsorship can potentially be the most “lucrative” asset in a blockchain content world.
Blockchain is still in its very early stages, both inside and outside of the sports industry. We are still a long way from blockchain impacting ticketing sales let alone media and sponsorship. However, blockchain does provide the opportunity for sports organizations to develop novel solutions to many of the industry’s most pressing challenges.