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Intro Notes, Plugs & Amendments 🔌🔧

This edition of Sporting Crypto is brought to you by Momento Market - football’s auction house. More to be revealed soon but for now, join the waitlist.

The football season (European football, not American!) is back, and I actually coincidentally met a newsletter subscriber at the pub this weekend.

It was a freak occurrence, considering there are only just about 1600 subscribers, but nonetheless — I guess it’s time for me to quit whilst I’m ahead, right?

When thinking about what to write this week — I was conscious that I maybe haven’t gone deep enough on fan tokens in the past. My previous attempt was here after the IQONIQ scandal:

This time, fan token platform Socios have made a splash by acquiring 25% of FC Barcelona’s audiovisual studio. 🔌 We have sponsor slots available from September onwards for Sporting Crypto. If you’d like to partner, reach out on Twitter or LinkedIn, or email me back at this address!

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This Week’s Deep Dive: FC Barcelona and Socios.com Seal $100 Million Deal

Socios, the fan token partner has sealed a $100m deal with FC Barcelona — that gives them ~25% equity in Barca studios. What does that mean?

Barca studios are an ‘audiovisual’ company, whose portfolio (of rights) includes Metaverse, NFTs and Barca tokens.

The crazy thing?That stake is in principle, forever.

Socios have struck a deal to basically acquire ~25% of FC Barcelona’s Web3 rights forever.

Which is crazy, really.

In all seriousness — first of all, how do you value your ‘forever’ Web3 rights? And when you do come to a valuation — why do you look to sell them forever and not for a set period of time like pretty much all other rights?

Barcelona’s President Joan Laporta said

Barcelona are in huge financial difficulties, constrained by La Liga’s revenue rules.

To cut a long story short, La Liga basically have their own ‘Financial Fair Play’ rules that you have to abide by. This essentially means that the registration of new players and other expenses is contingent on your revenues versus costs. If you’re from the US, this is almost like a European football league trying to implement something as close to a salary cap as you can imagine without there being one.

Barcelona have had to sell a percentage of their TV rights to broadcasting groups and try to shift various players off their books in order to meet those financial requirements.

Allegedly, Barcelona have also tried to find legal loopholes around how they can structure and fund these deals. By apparently paying themselves…

Reports in Spain are saying that these dealings could see them in a worse position than they were before.

So now you have some context on why Barcelona are doing this and who are Socios and why have Barcelona sold ~25% of their Web3 rights to?

Socios are a fan token platform that have sealed deals with a host of football clubs and sports franchises.

They sell fan tokens on behalf of these partners (Arsenal = $ARS) and fans can buy them to participate in engagement activities via their app.

I’ve been pretty vocal on podcasts and on this newsletter that I don’t really understand the need for a token in this model.

I’ll explain super briefly in bullet points because I do want to go deeper on the $100m deal with Barcelona because that for me is an incredibly interesting discussion point.

• Socios have their own blockchain, Chiliz. Socios is built on Chiliz essentially.

• As far as I can see, they do not need a blockchain to do the things they offer their partners (choosing captain’s armband design for example)

• Fans need to first buy the Chiliz token to then buy the fan tokens (although a lot of the fan tokens are now being listed on exchanges)

• The fan tokens can be bought by anyone and traded by anyone, meaning you can essentially have huge supplies of the tokens owned by non-football fans

• The fan tokens essentially grant no rights once the deals with clubs/sports brands expire which could create issues in the future

There are also some allegations against Socios about not paying former staff members that I covered here:

Regardless of my thoughts on Socios, they’ve clearly done very well commercially to tie up the number of deals they have.

If you add on top of that a $20m ambassador deal with Lionel Messi and this recent Barcelona deal — it’s clear that their model has yielded substantial cash to play with at this point in time.

What I want to explore more though is what the actual implications of this are.

The press releases and comments are quite vague, but from what I understand, Socios essentially now own ~25% of the rights that Barcelona have when it comes to anything to do with Web3.

I also presume they have the first refusal on anything that Barcelona do in this space.

$100m on the face of it seems like a lot. But selling ~25% of something that you have no idea of how it might impact your business in the future seems incredibly shortsighted.

If we pivot this slightly, imagine a football club signing an exclusive social media deal with MySpace when it first became a thing. A forever deal.

Imagine signing a deal with a phone app tech vendor that had no expiration date.

Imagine selling the entirety of your digital rights during the dot com boom because you thought the internet was a fad.

It seems crazy, right?

And now, it’s not to say that crypto will definitely reach the potential some think it can — but even if you think there’s a chance it will — this seems shortsighted but also poor from a risk management perspective.

There are stories out there of football clubs selling their digital rights in the early noughties, only to buy them back at 10x or 100x the original sale price.

I’m not saying that will definitely happen here.

In fact, Web3 isn’t even certainly a huge revenue driver for brands that aren’t Web3 native.

But if it becomes an incredible marketing tool for many, then it’s probably going to limit how creative you can be there.

To summarise:

This is clearly short sighted and lacks risk management, even if the thing you’re selling can’t be valued and even if the thing doesn’t have huge amounts of monetary value now or later— it could have other indirect consequences for your business.

On the socios side, the cynic in me thinks; why would they do this?

This isn't going to be a big revenue driver for them, at least, at the start. And they are, by all means, and purposes a startup. As we all know, cash is king in startup land.

I guess the answer is; that this is a way to make yourselves more credible. 

Someone, I follow on Twitter (who is private) tweeted:

More sports crypto stories & things to put your radar

• Charlton Athletic are being targeted by a DAO called Generous Robots, from a sponsorship perspective. Their project’s founders are not doxxed (anonymous).

• The MLS owns a Bored Ape

• Coindesk did a live stream on “Strange Marriage of Sports & Crypto”

• Manchester City dropped their third kit on Roblox, making a lot of fans upset…whilst not realising that most future football fans play in virtual worlds like Roblox.

• Stade Francais and The Sharks are the latest Rugby Union teams to partner with Socios. 

• The NWSL has told players they could themselves be bankrupt, after Voyager Digital, their former sponsors, went bankrupt. This is horrible and sports leagues and teams need to do more due diligence over who they are getting into bed with.

Great reads, great tweeting and more general ‘stuff’ that could impact you

• There has been a lot made over ‘rights’ in NFT land. The latest trend is CC0…but what does it actually mean?

• Tiffany & Co sold out their 250 NFTs in seconds, making ~ $12m in the process.

• I mean this is just crazy.

• The institutions are still coming into crypto, even if retail still flees. 

Thanks for reading!

Thanks for reading the latest edition of the Sporting Crypto newsletter. I’m really happy to see so many people enjoying it and sharing it with their networks. If you enjoyed this, please tell your friends who might be interested - and share it on social :)

This newsletter is for informational purposes only and is not financial or business advice. These are my thoughts & opinions and do not represent the opinions of any other person, business or entity.