Digital collectibles aren’t yet replacing trading cards or commemorative bobbleheads, but local sports franchises like IndyCar and the Indianapolis Colts still see them as a new marketing tool that could appeal to younger, tech-savvy fans.
In fact, the use of non-fungible tokens, commonly referred to as NFTs, could prove to be a good business strategy for athletes, teams, and sports leagues.
This is especially true as fans seek new ways to interact with the athletes and teams they love, and potentially profit from resale in an ever-evolving collectibles market.
NFTs are usually virtual art with a limited supply that buyers can accumulate, sell or trade using either real money or cryptocurrencies. Tokens, which can sometimes be combined with tangible goods, had to spend $41 billion in 2021.
According to a report by London-based research firm Technavio, by 2026 this amount will rise to nearly $200 billion. In March 2021, a collage by American digital artist Beeple sold at auction for $69.3 million, making it the most expensive NFT bought by a single buyer.
The growing popularity of NFTs has created a stir in the entertainment industry, especially among concert promoters, movie studios, sports marketers and higher level athletes, many of whom create special digital content for ticket buyers and fans.
Archham Habib is the co-founder and CEO of VO2, an NFT platform that operates through Techstars Sports Accelerator, an Indianapolis-based tech incubator.
He said some sports fans see the non-fungible tokens as a way to take credit for the success of their favorite teams and continue to add to their memorabilia collections.
“I think sports fans love to own the moments of the games — and that’s what NFT is: just a way for them to digitally own” those moments, Khabib said. “They also want [collectibles] it can give them exclusive paths to real events—a real benefit. So, I think the next generation of NFTs is what [has] value in the real world.
Start your engines
This month, Detroit-based Penske Entertainment, which owns the NTT IndyCar Series and Indianapolis Motor Speedway, announced it will offer three NFT options for this year’s Indianapolis 500 through a partnership with Autograph, a platform co-founded by NFL star Tom Brady.
Offer includes a free commemorative digital ticket for all race ticket holders, as well as 1,089 digital driver cards (33 numbered cards for each of 33 drivers) available for $50 each, each of which will come with a real piece of carbon fiber , in a race car during this year’s Indy 500. In addition, Team Penske created a digital 3D model of their 1972 Indy 500 winning car. In total, up to 50 copies are available for $150 each.
NFT values are usually determined by the number of copies minted or created; as with traditional art, the fewer copies minted, the higher the value of the NFT. When NFTs are bought and sold, the encoded transactions are stored in virtual wallets that live on a ledger of interconnected computers and servers called a blockchain.
But unlike the physical parts, NFTs also tend to include code that automatically allocates royalties from transactions, ensuring that creators like IndyCar, related teams and drivers continue to earn revenue from sales and deals.
“This is a unique opportunity for us to start exploring how and where we can represent our brand. [distinctive] locations that are new and exciting, especially for potential new fans that we might not have introduced,” said S.J. Ludtke, vice president of marketing for IndyCar.
“We’re very curious to see how NFT-type products work, not just in IndyCar, but in general. By living in this space and exploring it, we can have a new conversation with people who are really interested in this digital world,” Ludtke said.
IndyCar began considering NFTs in early 2021 but waited until this year to prepare a proposal, Ludtke said. The artwork effort for this year’s event took “several months” and the deal closed just a few weeks before the race.
Luedtke said she expects this edition of the NFT — or edition as the industry calls it — to be the first of many, with future races potentially offering additional video content as well as backstage access and other personalized experiences for fans. But Ludtke said it remains to be seen if NFTs will become a sustainable source of income for IndyCar.
“This roadmap needs to be written, but we are definitely planning for that in the future,” she said.
David Pierce, director of the Institute for Sports Innovation at IUPUI, said NFTs could be useful for sports that are trying to boost their popularity among younger consumers.
“There are definitely people who think it’s a two-year fad and it won’t have long-term value — they won’t invest in it because they think it’s a waste of money,” he said. “But at the end of the day, the same can be said for trading cards, right? After all, it is this unique star power of athletes that people are very passionate about that creates a market around them.”
Colts watch out
Penske isn’t the only Indiana sports leader in the NFT space.
Ahead of the 2021 season, the Colts began experimenting with virtual tokens through various NFL initiatives. For example, the team has begun offering commemorative tickets and online video content to those who attend the games in partnership with Ticketmaster. The league also expanded its longtime Panini collectible card deal to create NFT versions of the cards.
In addition, the NFL and the National Football League Players Association are partnering with Dapper Labs, one of the largest digital memorabilia operators, to market the league’s best moments. The collaboration, called the NFL All Day Marketplace, includes video clips from throughout the season as well as from historic games. Some NFTs were sold for $65,000.
Charlie Sung Shin, vice president of data strategy and analytics for Colts, said the team’s efforts are aimed at complementing their existing marketing efforts, such as giveaways at the entrance to games, with the hope of boosting interest in digital engagement.
But it will be a long time before NFTs completely replace doodles or posters.
“It’s more about testing and seeing what the response looks like,” Shin said. “NFT is a relatively small niche market in terms of fan engagement – few even understand what it is. So it’s going to take time, but what we’re doing is learning to see if there’s value in it.”
Sheen said most of the NFT’s relatively low costs (he declined to share numbers) are in the NFL, as most of the initiatives are league-wide.
The Colts are evaluating whether they can add more real-world benefits to NFT buyers, such as exclusive club access and other game day perks.
The NFL is already doing this on its All Day Marketplace. He partnered with Bengals wide receiver Ja’Marr Chase to enter a draw for a pair of tickets to a Bengals game for anyone who buys an NFL wide receiver video clip.
“We look at it through the lens of the fan experience… and what we can do would not have been possible with the technology of the past,” Shin said. “This is the approach we have taken in terms of how we use the programs created by the league and how we plan to implement them in our local market.”
The NBA has also experimented extensively with virtual memorabilia through its Top Shot Marketplace, another collaboration with Dapper Labs.
Like the NFL’s efforts, Top Shot sells collectible “moments” as bundles, which typically include several game clips, photos, and behind-the-scenes content featuring star players.
Since its launch in October 2020, the market has been a boon for the league; According to a study by cryptocurrency news site Be, it made $29 million in March 2022 alone.[In] Crypto. Individual clips, such as LeBron James’ dunk, have made millions of dollars.
Pacers players regularly appear on the site, but the NBA and Dapper Labs tend to take the lead in content creation.
In an email, Todd Taylor, President and Chief Commercial Officer of Pacers Sports & Entertainment, said the Pacers are continuing to evaluate their plans to incorporate NFT into the team’s marketing strategy, but no decisions have been made on what that might look like.
“The NBA has certainly been as active as any professional sports league in figuring out how to succeed in the NFT space, and just last fall, Pacers NFT, created by the league and its partner, NBA Top Shot, was sold at auction for $50,000. he said. “We continue to explore what the NFT market represents for our franchises and how best to use the growing world of digital tokens.”
Similarly, the Indy Eleven pro football team considered options for their own NFT initiatives.
Other entertainment industries, such as live music, have moved to NFT even faster than the sports world.
Concert promoters such as Live Nation include commemorative NFTs in ticket sales. The Day of Legends concert featuring Dirks Bentley on May 28 includes a digital ticket for collectors.
Some artists have also begun to include access to the real world for those who purchase their NFTs, while others have begun to include items that can be used in a virtual reality setting. For example, singer Shawn Mendes created an NFT that gives the wearer a virtual guitar pick necklace, modeled after Mendes’ own, that can be worn by an avatar. Proceeds from the sale will go to his foundation.
And some recent cinematic blockbusters, like Spider-Man: No Home, are offering limited-edition NFTs for those who buy tickets in advance. These digital artworks are very similar to the special posters or comics that were distributed at major music performances and film screenings in the past.
Wherever NFTs go in the future, experts say they are likely to bring big changes to the collecting industry. But it won’t be all or nothing – it’s expected to be a balance between digital and real world collectibles.
“It’s just another piece of the puzzle,” Pierce said of the virtual memorabilia. “Organizations need to do exactly what IndyCar and Colts do: find out where it fits into their overall marketing strategy. It makes sense”.•
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