2022 Innovation Issue: NFTs coming of age in sports and entertainment

Digital collectibles aren’t replacing trading cards or commemorative bobbleheads quite yet, but local sports franchises like IndyCar and the Indianapolis Colts are still eyeing them as a new marketing tool that could attract younger and more tech-savvy fans.

In fact, leaning into non-fungible tokens—commonly called NFTs—could prove to be a good business strategy for athletes, teams and sports leagues.

That’s particularly true as fans look for new ways to engage with the athletes and teams they love and potentially profit from resale in the ever-evolving collectibles market.

NFTs are usually limited-supply, virtual art that buyers can amass, sell or trade using either real money or cryptocurrencies. The tokens, which can sometimes be paired with tangible goods, accounted for $41 billion in spending in 2021.

That’s expected to swell to nearly $200 billion by 2026, according to a report from London-based research firm Technavio. In March 2021, a collage from American digital artist Beeple sold for $69.3 million at auction, making it the most expensive NFT purchased by a single buyer.

The increasing popularity of NFTs has spurred excitement across the entertainment industry, particularly among concert promoters, film studios, and sports marketers and higher-caliber athletes, with many creating dedicated digital content for ticket buyers and fans.

Arham Habib is co-founder and CEO of VO2, an NFT platform that operates through Techstars Sports Accelerator, a technology incubator in Indianapolis.

He said some sports fans view non-fungible tokens as a way to take ownership in their favorite teams’ success and to continue growing their memorabilia collections.

“I think sports fans love owning moments of games—and that’s what an NFT is: just a way for them to digitally own” those moments, Habib said. “They also want [collectibles] that can give them exclusive paths to real events—real utility. So, I think the next generation of NFTs is something that [has] value in the real world.”

Start your engines

This month, Detroit-based Penske Entertainment—which owns the NTT IndyCar Series and the Indianapolis Motor Speedway—announced it would offer three NFT options for this year’s Indianapolis 500 through a partnership with Autograph, a platform co-founded by NFL star Tom Brady.

The offering includes a complimentary commemorative digital ticket for all race ticketholders, as well as 1,089 digital driver cards (33 numbered cards for each of the 33 drivers) available for $50 apiece, each of which will come with an actual piece of carbon fiber that rode in a racecar during the Indy 500 this year. Also, Team Penske has created a 3D digital model of its 1972 Indy 500 winning car, with up to 50 copies available for $150 each.

NFT values are generally determined by the number of copies minted, or created; as with traditional art, the fewer the minted copies, the higher the NFT’s value. When NFTs are bought and sold, the coded transactions are stored in virtual wallets that live on a ledger of interconnected computers and servers called a blockchain.

But unlike physical pieces, NFTs also tend to include coding that automatically distributes royalties from transactions, ensuring the creators—such as IndyCar, associated teams and drivers—continue seeing revenue from sales and trades.

“This is a unique opportunity for us to start exploring how and where we can put our brand in [distinctive] places that are new and interesting, especially to potential new fans who maybe we wouldn’t get in front of” otherwise, said SJ Luedtke, vice president of marketing for IndyCar.

“We’re really curious to see how the NFT type of products play out—not only around IndyCar, but in general. By living in this space and exploring it, it allows us to put ourselves into a new conversation with folks that are really interested in this digital world,” Luedtke said.

IndyCar began considering NFTs in early 2021 but waited until this year to pull together an offering, Luedtke said. The effort to create artwork for this year’s event took a “handful of months” to complete, with the deal closing just weeks before the race.

Luedtke said she expects this NFT release—or drop, as it’s called in the industry—will be the first of many, with future races potentially offering additional video content, plus behind-the-scenes access and other personalized experiences for fans. But Luedtke said there’s no telling yet whether NFTs will be a stable source of revenue for IndyCar.

“That road map is to be written, but it’s certainly something we’re definitely planning on in the future,” she said.

David Pierce, director of the Sports Innovation Institute at IUPUI, said NFTs could be beneficial for sports that are trying to boost their popularity with younger consumers.

“There are definitely people who think it’s a two-year fad, and it won’t have long-lasting value—they won’t invest in it because they think it’s a waste of money,” he said. “But, ultimately, you can say the same thing about trading cards, right? At the end of the day, it’s that unique star power of athletes, which people get very passionate about, that they’re creating a market around.”

Colts keep an eye out

Penske isn’t the only Indiana sports leader in the NFT space.

Ahead of the 2021 season, the Colts began experimenting with the virtual tokens as part of various NFL initiatives. For instance, the team began offering commemorative tickets and online video content to those who attend games, in partnership with Ticketmaster. The league has also expanded its long-standing deal with Panini trading cards, to create NFT versions of cards.

In addition, the NFL and the National Football League Players Association partnered with Dapper Labs, one of the biggest digital-memorabilia operators, to sell highlights from league games. The collaboration, called NFL All Day Marketplace, includes video clips from throughout the season and from historic games. Some NFTs have sold for as much as $65,000.

Charlie Sung Shin, vice president of data strategy and analytics for the Colts, said the team’s efforts are meant to supplement their existing marketing efforts, like giveaways at the entrance to games, with hopes of driving more interest in digital engagement.

But it will be a long time before NFTs fully replace bobbleheads or posters.

“It’s more about testing it out and seeing what the response looks like,” Shin said. “NFTs are a relatively small, niche market in terms of fan engagement—not many even understand what it is. So, it’s going to take time, but what we’re doing is going through with learning if there is value there.”

Shin said most of the relatively low cost associated with NFTs (he declined to share figures) is fronted by the NFL, since most of the initiatives are league-wide.

The Colts are evaluating whether they could add more real-world benefits for NFT buyers, such as exclusive club access and other game-day perks.

The NFL is already doing that in its All Day Marketplace. It partnered with Bengals wide receiver Ja’Marr Chase to enter anyone who buys an NFL wide-receiver video clip in a drawing for a pair of tickets to a Bengals game.

“We’re looking at it from the lens of fan experience … and what we can do that might not have been possible with technology of the past,” Shin said. “That’s the approach that we’ve taken, in terms of how we’re using the programs that the league has built, and that’s how we plan to execute it in our local market.”

Taking a shot

The NBA has also experimented extensively in virtual memorabilia through its Top Shot Marketplace, another collaboration with Dapper Labs.

Like the NFL’s effort, Top Shot sells collectible “moments” in the form of packs, which typically include a handful of game highlight clips, photos and behind-the-scenes content featuring star players.

Since its launch in October 2020, the marketplace has been a boon for the league; it generated $29 million in March 2022 alone, according to research from cryptocurrency news site Be[In] Crypto. Individual clips, such as a LeBron James dunk, have fetched hundreds of thousands of dollars.

Pacers players have been featured regularly on the site, but the NBA and Dapper Labs have generally taken the lead in producing the content.

In an email, Todd Taylor, president and chief commercial officer for Pacers Sports & Entertainment, said the Pacers are continuing to evaluate their plans to incorporate NFTs 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 have success in the NFT space, and just last fall, a Pacers NFT created by the league and their partner, NBA Top Shot, fetched $50,000 at auction,” he said. “We continue to explore what the NFT marketplace represents to our franchises and how best to leverage the growing world of digital tokens.”

Likewise, the Indy Eleven professional soccer team has considered options for its own NFT initiatives.

Other entertainment industries, like live music, have taken even more quickly to NFTs than has the sports world.

Concert promoters such as Live Nation include commemorative NFTs in ticket sales. The Legends Day concert featuring Dierks Bentley on May 28 includes a digital ticket for collectors.

Some artists have also begun including real-world access to those who buy their NFTs, while others have started including items that can be used in a virtual-reality setting. For example, singer Shawn Mendes created an NFT that gives the owner a virtual guitar-pick necklace, modeled after Mendes’ own, to be worn by an avatar. The proceeds from the sale will go toward his foundation.

And some recent cinematic blockbusters, such as “Spider-Man: No Way Home,” have offered limited-edition NFTs for those who buy tickets early. Those digital art pieces are much like a special poster or comic distributed in the past at major musical performances and movie screenings.

Wherever NFTs go in the future, experts say, they’re likely to bring big changes to the collectibles industry. But it’s not going to be all or nothing—there’s expected to be a balance between collectibles in the digital and real worlds.

“It’s just another piece of the puzzle,” Pierce said of virtual memorabilia. “Organizations should be doing exactly what IndyCar and the Colts are doing: Figuring out where it fits in their overall marketing strategy. That makes perfect sense.”•

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