Tokenization in Professional Sports

Transcript

okay yeah yeah okay okay and this one is the best ay-ay-ay organization part of the audiovisual I wait for it if you see someone with a

red red heart hey just so you guys know I was just

asked to wait for one more second till one of the volunteers with the redhead is here so I just give it another minute or two and maybe one or two more people show up there would also be nice yep

all right in that case let's get started thanks guys for showing up my name is jonas ruble I am a co-founder of liquidity and what we do is offer tokenization to professional sports teams and athletes and I'm not the most technical person I'm not a developer so I wasn't entirely sure how I could contribute to this event and what I thought my contribution could be Cheryl earnings from selling a total base product to non-technical clients and what we learned from talking to those clients and how we approach the so topic and first of all I would like to show you why we think that tokenization and sports is a really good fit and

therefore let's first look at the sports ecosystem I'm sure many of you guys consider themselves sports fans they're said to be more than three billion soccer fans in the world and most people follow some kind of sports so overall this is a huge market and sports ecosystem in general always looks similar to this so first of all there's sponsors and advertisers that pay athletes or clubs for the region then there's the sports media that to acquire rights to show content that you create content of themselves and in the end they monetize the fans attention

then there's also the leaks that coordinate between the different clubs they basically offer a competitive entertainment product that attracts sponsors and fans alike they generate revenue from the fans and sponsors and they acquire the rights from the clubs to show show the matches and in the end redistribute the revenues from those to the club's then you have clubs and athlete clubs and teams that pay the athletes and generate revenue from media and sponsors and they also generate revenue from fans when they come to the stadium or when they sell merchandise and lastly you have the athletes that sell their performance to the club

and they sell their brands to sponsors that use them to increase their reach and all of this revolves around the fence they're basically in the center of this of this ecosystem so overall we think that sports and tokenization is a match because you have some of those criteria that you will find in all of those charged do you need a blockchain fulfill you have multiple parties that interact in one way or another most of them are in co-op petition so that means in some way they cooperate in some other ways they compete and there is a lot of value transfer between those actors and

a lot of those value transfers happen on a regular basis sponsoring contracts are just extended so there is also room for automation and overall we think that tokenization in sports is a pretty good match and there are many angles from which you can approach this first of all you can build token I tokenized ecosystem where you can basically create incentive alignment between the different actors then there's the security token aspect so you can create financing options with this there's a huge need for capital on especially on the club side on the leek side and they're also willing they are also

parties willing to fund those projects because sports is one of those businesses where you can be pretty sure that it won't die down in the next couple of years and probably not ever because sports has been around for ages and the sports industry seems to be pretty success except about two tokenization projects because just over the last couple of months they've been several projects coming out with pretty huge announcements we're especially with partners that do have a lot of a lot of fans one of those would be voting tokens they were just issued by police rajim o FC Barcelona Juventus Turin West Ham United

iceworm so like huge partners all of them are on the sake of platform and they combined two interesting distribution mechanisms first two onboard users they used this sort of Pokemon go style Pokemon go style token hunt we can use your camera and your phone AR style run around and find tokens those are strategically placed around the stadium around fence doors so basically attract fence to those locations and on board them onto the platform and now they are in the states where you can just buy those tokens another case that drew a lot of attention to tokenization was Spencer Dinwiddie launching a digital security

token to tokenize his contract I Spencer Dinwiddie is one of the most promising NBA players currently at the Brooklyn Nets point guard and first what he wanted to to do was a really interesting product he basically wanted to issue a security token that held a fixed interest rate but also was tied to his next contract right now he has a three year contract once his contract runs out and decides a new one the investors would have been participating in the upside if he was doing well and that would have been a really interesting project as he would basically get to bet on his overall performance not on a single game but on his basically on his career unfortunately the NBA intervened although it was compliant with the SEC

the SEC already gave a go for this it is obviously based in the states and only private offering to and credited investors from a minimum of 150,000 but it pointed in the direction and gave a huge amount of attention it was covered in from coin Telegraph to Forbes to Bloomberg basically every large media outlet talked about this and then there's so read that to digital collectible cards basically you can own player cards for each game day you can set up a team out of five players one goalie one forward one midfield and one defense and an extra player and based on the athletes performance you would get

points and then you can compete against others what's cool here is that you actually own those cards and then you can sell them for real money on dedicated Changez they provided their own marketplace where you can trade them with other place and then there is NBA who announced the top shot and they cooperate with epilepsy epilepsy were behind crypto kitties back in the day so probably one of the one of the depths that drew the most most users in so far and just recently they announced a partnership with the UFC a signed deal there's not much known yet about how the collaboration will work but it's

supposed to be some blockchain game that develops builds and if you consider that the UFC has 300 million fans and the NBA is set to have around 400 million fans worldwide that's a pretty huge user base and if you manage to just get 5% or 10% of those fans on board that would be for speaking in crypto terms a huge amount of a huge amount of fans i've huge amount of users and if you consider that soccer is said to have more than 3 billion fans worldwide there's a huge market and huge potential for different use cases kt tappman was just recently interviewed by sports techie and one of the things she said there was soon i

think we'll stop talking about blockchain and it'll just be the part of the technology stack that everyone uses and we wholeheartedly agree what we want to do is we bring our clients which are in the first step most likely clubs and I'll get to why we identified clubs as our main main target we want to bring them the benefits of tokenization and it's worth telling them that there is huge that there's huge potential and great products that you can build with tokens but there's really no need to talk to tell them about the tech behind it because the truth is and especially at those conferences I think few people have really internalized this is that the average person doesn't care about

blockchain basically if you talk to people on the street nobody cares about blockchain they don't care about decentralization if you tell them about trust lessness that's not a concern to them and I I haven't I mean to me those things are important and I do like to to embrace those to embrace those concepts but for the average user it's just it's a non-event so next I would like to share some of our learnings from talking to several clubs right now mostly like I said those soccer clubs and when we talked to them about technology we realized first the hype around blockchain is over back in back in 2018

when everybody was kind of aware of the Bitcoin craze and most people had heard about tokenization or icos at least those that followed the tech space a little bit they thought it was very promising but many of those many of those promises didn't materialize when we told him about blockchain had raised questions rather than interest because they have been approached by many by many dodgy projects I'm telling them that they could do a club currency or something you like and most of those project that read out weren't really professional and like I said to most clubs decentralization is really not a concern on the other hand when we talked about the utility and the benefits that

tokenization could offer that's when that's when club started to listen so first of all you can save cost when you do product like the Spencer Dinwiddie case that I talked about a financing product based on stos then you can save huge amount of cost compared to issuing a security with a bank and actually just recently we sat down with a club and their house bank and even the bank recommended to the club to if they want to do a an sto to do it with us or if they want to issue a bond to do it via an SCO because it would just be much cheaper than issuing a bond with with them the same thing is market access so if traditionally in Germany many

clubs when they had financial needs issued something called fan and liar or which you can translate to fan bond where they basically raised funds from their fans for a fixed interest rate problem is for example a Berlin Club issues such a bond then even if you're based in Hamburg you might have trouble buying this bond even if you're an avid fan because those banks there won't have listed this bond and it can be really hard to get access to it second of all you would have to open a deposit for it and there's the user experience just sucks then there's additional features that you can put on top of and on top of a financial product when you're talking security tokens so you can tell your fans hey whoever got more than ten

tokens gets access to this kind of content gets this discount on tickets so the clubs have have many options - to make this appealing to their fans and add additional benefits and lastly when you tell them that it's built on open source and there's a huge infrastructure and people basically develop stuff that they can use for free that's when they that's also something that they find really nice so all of this is meant to say that you can talk about the utility of tongs but that should never that should never really be the sales pitch oh one sec is a post there we go

that shouldn't be the sales pitch the the overall sales pitch should always be based on solving problems and reducing frictions and it kind of feels repetitive because this is something that that you hear all over the place but it also feels like very few depths and crypto projects have really taken this to heart and have built their product that they offering around it and I'm really not here to tell you that we have it all figured out I mean we don't have a signed deal yet but from our from our most recent talks I think I can be pretty confident that we're on the on the right path here and I would like to next show you how we how we got there and how we basically how we approach the so topic and how we designed our product

this is of course a little specific to the sports industry but I think you can draw some parallels to other use cases as well so first of all we started with this with this ecosystem of the different different agents that evolve the round fence and we use this as a basis to identify points of friction in the ecosystem and also who our clients should be what's what's the benefit of looking at sports as an ecosystem first before you start building a project so first gives you better understanding of the dynamics between the actors how they interact and where points of frictions are it lets you identify those points existing problems and the appropriate market or clients and lastly and

hopefully it lets you reduce friction and actually solve problems so starting from this ecosystem again we identified collapse as our most likely clients first of all collapse so for now I'm mostly talking soccer because just in Europe soccer is the dominant sport and the sport that has the most following and it's also the sport that we are passionate about so fans mostly identify with their clubs there is their offense that identify heavily with the player there's also fans that would consider their Premier League fans or Bundesliga fans but most of them follow one club then we identified points of friction around

the club's first of all clubs and teams oftentimes have problems with the leaks they want more influence they there are oftentimes discussions for example about how many how many teams should be competing in the Bundesliga for example in most leagues there are 20 teams in the Bundesliga they're 18 for example they also want to have a say in the distribution of money - between the different clubs and they also want to be involved in some decisions for example about rule changes the video proof for example was something that the club's advocated for for a long time and leaks seem to not really listen although it makes perfect sense to use a camera to tell hey was that a goal or not it's

it's a binary decision so why shouldn't you just why shouldn't you just use the technology second there's there's friction between the clubs and the athletes athletes rely less and less on their clubs because they have social media to make themselves a brand in the in the u.s. especially around the NBA player empowerment became a huge huge movement because players don't really look to endorse brands anymore and brands can also be their clubs but they want to partner with them because they know that they have valued themselves and they don't see themselves as reliant upon those entities anymore and lastly this huge friction between the clubs and

teams because fans feel like they have become the product in professional sports and especially professional football and rightfully so they are when a when a club signs a sponsorship deal with the with their main trick with a main jersey sponsor what they are actually selling them is their fans attention for for money so in the end the fans really are the product and the fans are the component that brings the money into the ecosystem because without fans there won't be no media there won't be no sponsors no advertisers so this is what keeps this this life so now but there's and in the past they've been

there have been several decisions or bad decisions by the club's that led to those that led to this feeling so some some are just general UX problems I don't know if you've been to the stadium in the last couple of years but many stadiums have introduced those stadium payment cards well you first have to go to booth then load it with twenty bucks then you have to go to the kiosk buy a drink then you have four euro 50 left when you're at when you exit the stadium then you either have to go to a machine to get those for you or 50 back or you just go home and you have paid more than you should actually need to and basically those concepts were introduced to to increase revenues but fans fans are not completely stupid they realize

and they know that it's for them it's worth worse you eggs while clubs make more profit then they would like to be more in interaction with their clubs this used to be better back in the day when when there was a more direct form of interaction and most fans were locally based around their clubs they could go to the stadium they could watch the practice most of this is gone because oftentimes fans sit in a different country or maybe even on a different continent and from a clubs perspective they are struggling to to maintain the level of fan engagement especially with young fans just recently we talked to one of the German Bundesliga clubs and they said they really had trouble engaging young fans

because they don't they don't watch whole games anymore they'd rather watch highlight clips they follow they follow games on social media in one way or another and clubs don't really have a way to benefit from that yet and they also don't really know how to monetize fans from different from different contents yet so their club for example mentioned they know they have 30 minute or about 30 million fans in China and another 20 million fans in the rest of Asia but besides them buying a trick Jersey or some merch they don't really know how to how to monetize those those fans yet and it's a huge market if you consider that Germany itself has about 80 million people and they have 50

million people just in Asia then they're struggling with that all of this led us to putting together a tokenization playbook and first we use this internally but shortly after we published it because we thought it would add value to the entire community it's available on medium if you want to take a look at it and we outline 10 tokenization plays there are around fan experience financials and commerce and those tokenization plays include fan engagement with tokenization tokenize governance solutions tokenized fan identities then for financials when

we're talking about projects that have an sto component to it tokenize crowdfunding's then you have in-stadium payment systems that you can do based on tokens or combined with tokens tokenized personal seat licenses personal seat licenses I don't know who's who is aware of their concept it's a it's a pretty Us exclusive concept when a team builds a new stadium they often times sell a seat license and basically the seat license gives you the right to buy a ticket for seat a - for every game and for every game you have the first pick if you choose not to buy the ticket it goes to the open market

but you always have the first pick and for that you pay and fans are willing to pay quite a lot for those and lastly you can do tokenized revenue distribution schemes if you're looking at financials for commerce there's digital collectibles just like the solar case I explained earlier with the daily fantasy component to it then you can do ticketing based on tokens and many leaks are experimenting with it just recently the Dutch Football Association sold a share of the tickets for a national game via blockchain and they were quite satisfied with the results it's not quite clear yet how they will proceed but they said they will certainly continue the research in

this area and a more little more complex case but all a viable one is tokenized IP rights and micro licensing systems so then what we did next is we made a rough concept for each play and we followed a general incentive design pattern here or a design process and that is first we define we define the desired behavior so what should what should the users are the network participants do and what should they not do then you should design incentives around it so which behaviors do you want to reward which in which behaviors do you want to punish or disincentivize then you have to rank

them or assign certain values to each of those actions what do you want the most to do and what mechanism is suitable to actually incentivize those behaviors and in the very last step bets is when you should when you should design the experience around it and the user interfaces for it so the results out of this process for the fan engagement play that I want to look at a little more closely now is the following first of all the challenge is to maintain an engaged in active fan base and be offer a competitive product in this digital

age where attention spans just get shorter the solution in the first step is a tokenized fan experience the X and O's are identifying the fan behaviors that you want to incentivize then design and implement the mechanisms by which you want to track those for example if you want to reward live viewership of a game you can do something like whenever your team scores a goal you have a time period of one minute where within you can do a certain action and if you trigger that action you will know okay this fan obviously watch the game and so you can incentivize these viewership and lastly develop the user interface around it and the market for this play would be

clubs and teams for them it's the most viable athletes could maybe do it but few of the individual sports have such as strong following nonetheless it's definitely viable and leaks could also do it but with leaks it's a little more complex and it feels less less like an MVP product for us once we've done tokenization projects with with clubs we're fairly confident that some leaks will have interest but yeah this is this is further in the future and besides those so what I just explained is how we identified friction how we identified our market and what we learned from

talking to our clients what we also learned from talking to our clients that there's a huge need for education around topic and we don't want to educate them on on blockchain itself nobody needs to know what proof of stake is on a club site in order to see the value and the tokenized fan ecosystems what they need to understand is that organization is a toolkit that you can apply in many different ways depending on what you want to achieve and that they have a huge option space of a club for example has so many so many options to offer their fans some benefit they can invite them to exclusive events they can show them behind the scenes they can give them stadium tours they can give VIP tickets to a certain active fans they

can implement proposal systems where fans can do suggestions and the guy that is responsible for the fan relationship at the club can commit to once a month comment on the on the most supported proposals so there's there's many options and so what we did is we launched the webinar and workshop offering those webinars are about an hour long and they're more an introduction and we show them hey that's that's what's out there that's the project that have used tokenization in the past we talk about the projects that I mentioned earlier and then we offer workshops where we go to the clubs we basically show them the huge decision map that there is and then guide them

through the process of hey how how should you make your decisions if you do this decision what does this lead to and what does it maybe exclude and that would be it if you think that is that this has some merit and maybe even there is some connection between the project that you're working at and a tokenized fan ecosystem then just reach out and yeah that would be it from my side thanks for listening and if there's questions I think we might have a minute or two maybe just

use this one are you running some pcs or some smaller examples or no currently currently we don't have any proof of concepts life and this is because we have developed several modules of this but basically what we want to offer claps is a customized experience so when they say hey we want a voting system but not a proposal system then that's how we're going to put it together when another thing that might be interesting for them just to get especially in the first in the first phase would be a sort of tip game where every fan gets to gets

to tip the next game or to predict the result and then you get a reward in tokens you can't make it a betting thing because then from a regulatory perspective this is this is gambling and then they in the whole new regulatory area is applicable to you but yet to answer the questions we don't have those life yet we have in we have developed modules but we haven't really put them together and put them on any test not yet so unfortunately no but as soon as there is we'll definitely communicate it via Twitter or medium so if you follow you will find it easy have you looked at associates model

at all and things that have worked that well there sorry yeah of course I mean obviously we've looked at but what did you say in the end and that well yeah we did get some insight so first of all the first insight I think would be so for those of you so Chios was the one that did the fan voting tokens that I mentioned in the beginning with the AR component and so first of all there's huge interest in this things sake is Alex the guy who's who is the CEO just recently said that within the first two month they on board it about 110,000 users and on average each of them bought

fan tokens worth twenty twenty dollars or Euros and I'm not sure so there is definitely a demand and compared to other depths and other blockchain projects that's a pretty pretty big amount of users and they just started to roll out but yeah that's I think it's a little bit too early to draw many more conclusions the the difference between sake us and us here is that basically sake us build a platform and they are buying the licensing rights from the clubs and then use those licensing rights to promote their own application whereas what we want to do is basically

build a individualized and customized ecosystem for each club so they have control over what's happening there anything else all right yeah can you think of a Trojan horse approach that doesn't allow that doesn't require you to but have buy-in from clubs but allows you to have like a bit of provable grounds of the hypothesis that tokenization leads to benefits to some of the stakeholders so a Trojan horse

approach to be honest not not really I think one of the difficulties here is that we want to target sports fans specifically and in order to in order to on both those you kind of need to be affiliated with the club or at least you need to like the the rights to use their logo because otherwise the fans won't know that it's that it's a product for their club and the the licensing business there is kind of tricky and you don't really want to mess with using using their brand without their permission so if you have an idea for how to do this I'm more than happy to hear it but so far we haven't really figured out how to how to do this yeah

all right if that's it then I would say thank you for listening thank you for coming enjoy the rest of the CC and see you around all right [Applause] a eunuch and I think I was a little bit too long right I'm sorry for that okay this