The Future Of Sports Can Be Changed By NFTs, Virtual Reality, And DAOs

from the it's-not-such-a-crazy-thought dept

One of the hottest gifts in Wisconsin over the holiday season was Packers “common stock,” allowing fans who buy in to hold a small percentage of ownership in the NFL franchise. The Packers are selling 300,000 shares of the stock priced at $300 to raise money for stadium improvements at Lambeau Field and sold more than 100,000 in the first week alone. Many are skeptical of why fans are spending hundreds or thousands of dollars on shares that, by rule, cannot provide them with any financial benefit. You can find an explanation by looking at a seemingly unrelated technology: non-fungible tokens. An examination of the market for NFTs not only provides insight into the “common stock” phenomenon, but may also provide a glimpse at a different future for how we support and even participate in the decision-making process of our favorite sports teams.

Packers Stock as an NFT

The Packers ownership structure is unique in the National Football League. The NFL has rules requiring that franchises be owned by an individual or a small group of owners. The Packers have an exemption to this rule, as the team has been owned by stockholders since 1923 when it sold shares of the organization to keep the team financially solvent and located in Green Bay. Stockholders were prevented from selling their shares to anyone but the team for a fraction of the purchase price in order to prevent the team from being sold to an individual and then moved to a larger market. The Packers held similar stock sales in 1935 and 1950.

After financially stabilizing the team, further stock sales were held in 1997 and 2011 to fund additions and redevelopment to their stadium. Previous stockholders were given large splits, essentially guaranteeing that they had an outsized role in leadership decisions of the franchise.

Shares sold in 1997, 2011, and 2021 provide minimal benefits to those who purchase them. They provide a uniquely numbered ownership certificate, the ability to purchase owners-only merchandise, an invite to the annual owners meeting, and votes to decide Green Bay's board of directors and a seven-member executive committee that represents the team at league meetings. The maximum number of shares an individual can purchase is 200, and stock cannot be resold and may only be transferred to immediate family members.

Still, despite minimal benefits and the heavy restrictions, these sales have been enormously popular, with the offerings raising $24 million in 1997, $64 million in 2011, and a projected $90 million this time around. Today there are approximately 361,300 stockholders, including myself, who hold roughly 5 million shares.

So what does Packers stock have to do with NFTs?

NFTs face much of the same criticism as Packers stock. Created to provide scarcity to digital art and other online goods, the NFT market has increased rapidly in scope with many NFTs selling for millions of dollars in cryptocurrency. Many see NFTs as nothing but a scam on unsuspecting customers as NFTs provide little to no tangible benefit to those who purchase them — just like Packers stock.

But people who buy Packers stock or NFTs seem to value these commodities for the same reason. Packers fans are proud of their team's ownership structure and want to display the part they play in keeping the Packers a fan-owned team. And as Techdirt's own Mike Masnick recently noted in a podcast, owning NFTs is also a way to prove fandom. While NFTs do not grant a copyright on an image, the blockchain does provide a proof of ownership of the NFT for all to see.

Both provide a kind of status symbol of fandom for those interested in the industry to view.

While Packers stock shares traits with NFTs, it lags behind as the process of sending the stocks and verifying who owns them remains offline. Likewise NFTs have yet to contemplate what role they might play in sports beyond providing ownership of sports moments such as NBA Top Shot. The following will provide some ways in which these models might converge to bring both different experiences to fans and even provide for a decentralized governance model for sports team ownership.

Stock and NFTs as Fandom

Without a doubt, the most popular use of Packers stock isn't attending the owners meeting or voting on the future of the team; it's displaying the certificate of your share in your home or office. Many fans own stock from each of the major sales to display together and prove their extreme Packers fandom. In this way, Packers stock is most similar to NFTs, though the digital nature of NFTs lets them be displayed to the whole world rather than just those who can physically see the stock (photos posted on the internet notwithstanding).

There is no reason a marriage of the physical and digital couldn't take place with Packers stock, or other forms of fan involvement.

Some of the most obvious venues are social media platforms like Twitter, which is working on integrating NFTs into the user experience. Fans of teams are often incredibly vocal on Twitter, and sometimes that gives them the chance to interact with players and other professionals on their favorite teams. If stock ownership could be converted into an NFT to be displayed on a Twitter profile, similar to the much desired blue checkmark, an owner's praise or criticism of their team might carry extra weight. At any rate, making the stock verifiable and compatible for digital display would certainly make ownership more valuable.

Still, stock ownership of a professional sports team only applies to one major American sports team. There is no reason, however, the same principle couldn't be applied to other ways of proving fandom. Many fans have season tickets which could easily come with an NFT recognizing the fan as a season ticket holder. For that matter, there is no reason a team couldn't simply sell “fandom” NFTs serving a similar purpose.

Proof of fandom and displaying of NFTs certainly provides some promise, but there is far more that can be done to enhance the fan experience.

As previously noted, one of the benefits of owning Packers common stock is a yearly invite to attend the owners meeting in Green Bay. While the event is well attended, nowhere close to the more than 3 million shareholders attend the event. The fact that I live more than 1,000 miles away prevents me from attending the meeting in any meaningful fashion.

But virtual reality spaces could provide an opportunity for that “in-person experience” at the owners meeting without the need for travel. I could interact with fellow owners in specific rooms, attend panels or keynotes about the future of the franchise, and even take virtual tours of the new facilities or additions.

Once again, this concept need not be limited to NFTs denoting stock ownership. As a season ticket holder to the New Orleans Pelicans, I was invited to a private event with the team’s head coach, but I was unable to attend in person. If my season ticket purchase had come with an NFT that granted me access to such events in virtual reality, not only would I be a happier fan, but I’d also be willing to pay more for the season tickets rather than just purchasing them on a game to game basis. (Interestingly enough, due to the recent surge in COVID-19 cases, this event was held via video call)

There are any number of similar benefits that could be available to team shareholders, season ticket holders, or fandom NFT owners on social media or virtual reality. Events on Twitter Spaces could be available exclusively to those with the correct NFT. Virtual reality could host any number of events, such as an owners-only viewing party of a game, or access to exclusive opportunities to meet and talk to players and coaches. Like the physical merchandise only available to Packers shareholders, digital goods could be made exclusively available to certain fans.

There is little doubt that NFTs will continue to be intertwined with sports fandom for some time to come, but the potential for better fan benefits has only just started to be tapped.

NFTs as a Decentralized Ownership Model

NFTs’ capacity to showcase fandom is one thing, but what if they also offered fans the opportunity to have a real say in the future of the sports franchise they love?

As previously noted, one of the benefits of Packers common stock ownership is voting rights on the future of the team. With the cap of 200 stocks per person and the generous split offered to owners of the first three stock sales, the average fan is unlikely to cast the deciding vote in any decision, nor are they allowed to vote on big decisions such as firing and hiring of the general manager.

Nonetheless, marginal voting rights are still more powerful than the average sports fan has in making decisions about the team. They also prevent a single owner from having an outsized role in the future of the franchise. This is why so many fans of teams that have had little success often complain about bad ownership more than the players on the field. The Packers have been able to avoid this fate, and the lack of centralized ownership likely plays an important role in the team’s success throughout its history.

There are even some ancillary benefits to this model. For example, the Packers are the only NFL team to publicly report their financial status, giving fans of every team a glimpse into the rest of the league’s finances. This provides substantial benefit to fans and politicians when NFL owners come crying to politicians about needing taxpayers to pay for a new stadium.

But there is no reason the basic Packers structure couldn’t be updated for the digital age to allow fans to have a greater say in their favorite team. While the NFL has banned any other franchise from operating in this capacity (after all, what are professional sport leagues but cartels to enrich existing team owners), start-up leagues could borrow from this model. Furthermore, they already have a decentralized system for which to test this model of decision-making.

Decentralized Autonomous Organization (DAOs) could provide a vehicle for future ownership or decision-making for sports teams. DAOs are built with smart contracts, which are self-enforcing digital arrangements. A good way to visualize a smart contract is a vending machine. The contract is fulfilled when a user inserts the right amount of money and the correct item is automatically dispensed to the purchaser. In the DAO space, it would be inserting the correct NFT or other digital token in order to vote.

A recent example of democratic governance within a DAO was the Constitution DAO, where a group of people wanted to bid on purchasing one of the 13 remaining original copies of the U.S. Constitution. The donors of the project, who donated in Ethereum, were granted the ability to vote on what to do with the Constitution if they won it. Over $40 million worth of Ethereum was donated, though the bid ultimately proved to be unsuccessful. While deciding what to do with a document isn’t as complicated as running a professional sports franchise, it certainly provides some proof that large amounts of funds can be raised in a DAO.

While it might be impractical to put every decision of the team up to a disbursed number of owners, large decisions like a vote of confidence in the general manager or head coach could very well be possible.

The NFL or another major sports league would prove a poor test case for this structure of sports ownership, at least initially due to the size and scope of the organization as well as the rules governing operation. But there are any number of other smaller sports leagues where this could be tested.

The United States Football League, a league which previously competed against the NFL in the 1980s and even won an antitrust court case against the league, is planning a relaunch in 2022. Unlike the NFL, it is expected that the new USFL will operate as a single entity with all teams owned by the league. But instead of simply expecting fans to attend and watch games, what if the league offered them a real chance of ownership of the team by selling stock in teams as a form of NFT?

This ownership of the team could be used in any number of ways. Fan ownership of the team might be a way to give people a stake in their team and create loyalty with a new franchise. The league could even decide where to put teams by letting “owners” vote on where teams should be located. If the residents of New Orleans purchased stock NFTs of the New Orleans Breakers team and voted to move the team to New Orleans, the league might feel better about their location decision. What better way to prove a particular city has interest in supporting another sports franchise than by having citizens literally be invested in the team?

Additionally, without previous governing arrangements, these franchises could put far more decision-making power into owners. Everything from the large decisions like hiring or firing of general manager and head coach to choosing a starting quarterback, or smaller ideas like selecting a mascot, could be run through a vote of the DAO.

Decentralized ownership provides a few benefits beyond greater fan involvement. The dispersed ownership structure of the Packers can help prevent a bad owner from making bad decisions causing the franchise to suffer. A DAO could rather easily prevent an individual or group of individuals from amassing too much power. Just ask Washington Football Team fans how they feel about Dan Snyder. Additionally, it would prevent the problem of general fan polling, where teams end up with mascots like Dogey McDogeface—presumably, fans invested in the team would like to see it succeed.

This model of sports ownership could even be tried with independent baseball teams in America or as a way to support historic franchises, such as the second oldest soccer club Wrexham A.F.C, rather than relying on millionaires to pick up the tab.

Whether or not the Packers model can be replicated is a serious question, but that doesn’t mean that advances in technology aren’t well positioned to impact and potentially disrupt the professional sports world. Fan interest and involvement in the sporting world remains high, and the potential for crowdfunding and decentralized decision-making are improving all the time. Sports franchises are ultimately dependent on fan support to exist. Why not give fans a bigger say in how they root for, or even run, their team?

Eric Peterson is a contributor to Young Voices and lives in New Orleans. 

Filed Under: daos, fandom, nft, ownership, sports

What Netflix's Congenial Trademark 'Threat Letter' Says About Everyone's Tolerance For Trademark Bullying

from the progress dept

Readers of this site will be well-versed in trademark threat letters. With the sorts of trademark stories we cover here, our discussion about threat letters typically take the form of trademark holders going out of their way either to overstate their rights or to act as aggressive and threatening as possible. Or, of course, both of those things at the same time. But not every company goes full bully when sending out trademark cease and desist notices, as exemplified by Netflix this week, when it sent out a notice to a Chicago popup bar called The Upside Down, an obvious reference to Netflix's hit show Stranger Things.

Writing to request an end to the use of its trademark, Netflix did not address the bar's owners in threatening terms or legalistic language. Instead, it appealed to the owners' appreciation of creativity and engaged with their shared appreciation of the Stranger Things brand, inserting references to characters and phrases from the show throughout the letter.

"Look, I don't want you to think I'm a total wastoid, and I love how much you guys love the show", the letter opens, "but unless I'm living in the Upside Down, I don't think we did a deal with you for this pop-up". It continues: "You're obviously creative types, so I'm sure you can appreciate that it's important to us to have a say in how our fans encounter the worlds we build";. Making its point firmly and clearly, but humorously and politely, the letter states: "We're not going to go full Dr Brenner on you, but we ask that you please 1) not extend the pop-up beyond its 6 week run ending September, and 2) reach out to us for permission if you plan to do something like this again."

The letter checked all the right boxes to not come off as bullying. The letter was both humorous as well as transparent in its effort to incorporate the fandom of the show into its language. It didn't promise punishment for any past acts, instead simply asking that the bar not extend its run even further and asking that it seek permission for its name for any future endeavors. Netflix didn't treat its fans as the enemy, but managed to act human while at the same time asserting its trademark rights.

For this, the company not only got the bar to agree to its request, but the letter received praise both in the media and on social media.

Netflix elicited a torrent of internet praise for its handling of the situation. Local news website DNAinfo reported on the "super classy letter", describing it as "adorably nerdy", and emphasizing Saul's lack of hard feelings towards the corporation. There was also positive coverage in the Sydney Morning Heraldand Fox News, while one blog lauded it as "the best cease-and-desist letter you've ever seen".

On social media, where reaction can often be the most negative, the responses similarly lauded Netflix for its enforcement approach. On Reddit, one user commented that the move was "totally reasonable and nice of them", with another calling the move "brilliant", adding: "In the age of Twitter, you don't want to anything to be used against you. Now it makes the pop-up look like bad guys for not reaching out to them."

What is most interesting to me about this story isn't Netflix's letter itself, although it was certainly nice to see a company get this so right. More interesting was both the media's and public's reactions to the letter, which seems to indicate that on some level the media and general public are waking up to trademark bullying and the fact that there are other ways to handle trademark issues beyond being a jerk. While I cover trademark issues all the time, I don't expect the everyman to have an understanding of ways to protect trademarks that goes beyond, "Company X has a trademark, so of course their lawyers sent out a threat." The reaction to this story seems to indicate that the public is beginning to understand that enforcing trademark law doesn't have to equal acting like a jerk. And that's a good thing.

If lawyers finally understand that being an overaggressive jerk can backire, it will make them think twice about using that approach. It will also convince lawyers that being congenial can go viral in ways that a company does want. These are good things that will be propelled by a public starting to understand that not every C&D has to be all threat and nothing but.

Filed Under: cease and desist, fandom, fans, friendly letter, stranger things, the upside down, trademark
Companies: netflix