The sports industry should heed the warning signs as they adopt emerging blockchain technologies such as NFTs, experts warn.
The sports industry took a hard hit from the coronavirus pandemic. Most leagues got suspended, and then teams played without the audience for an extended period. Sports clubs started to seek out new revenue streams, and the crypto industry arrived to aid with juicy deals.
Numerous partnerships between major sports clubs grabbed headlines over the last year. Even national teams and major club unions joined the trend. So, it became even more surprising when FC Barcelona and Manchester City, two of the biggest soccer clubs in Europe, terminated their crypto-related sponsorship deals in the same week.
FC Barcelona canceled its partnership with nonfungible token (NFT) marketplace Ownix following the arrest of Moshe Hogeg, an Israeli crypto entrepreneur who was among the company’s consultants. Ownix was quick to deny any organic link to Hogeg in a Twitter flood. Cointelegraph reached out to Ownix but the company declined to comment further on the issue.
Manchester City also suspended its deal with 3Key, which the club has announced as a regional partner in “decentralized finance trading analysis and advisory technology” just a week earlier.
The sports industry is eager to join the NFT hype, which Morgan Stanley predicts to become a twelve-digits market by 2030. Timothy Mangnall, who helps sports clubs better understand crypto and the NFT world through his NFT agency Capital Block, told Cointelegraph that it is easy for clubs to forget to do the basic due diligence on companies and professional backgrounds before jumping into long-term commercial deals.
Barcelona had been approached by a number of NFT marketplaces in the months leading up to the announcement of the deal with Ownix. Many of the contenders already had strong track records in the NFT space, yet Barcelona chose to go with a rather unknown brand in this space, Mangnall explained:
“What this shows me is that is Barcelona solely looked at the money on the table rather than doing what they would do for every other sponsorship agreement which is proper due diligence.”
The crypto market is full of small NFT firms who are ready to dash out ten times more money than major exchanges just to score big deals with sports clubs, he added, warning that this should be a red flag for any club, who should then double down on its internal review process and deep dive into the company and the owners.
Tokenization is a product of blockchain technology that attracts huge companies with massive brand values and fan bases, adds Ahmet Usta, co-author of Blockchain 101 and co-founder of Avaxtars and Crypto Mandala NFT projects: “Clubs are naturally aiming to get high returns from fan tokens and NFTs as early adopters. However, they should focus on adding value with innovation and solid business models to their token and NFT offerings.”
NFTs are not going anywhere and will be part of our future, Timothy Mangnall summarized, adding that “clubs should not be scared to miss out on the hype at the moment, but take a step back to understand the sector and plan for the next 3 years minimum.”