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What are Fan Tokens: Restructuring Fan Engagement for the Sports Industry

Blockchains have introduced an array of new opportunities for various industries by enabling the creation of blockchain-based tokens, including utility tokens and security tokens. Recently, a type of utility token called fan token has grown in popularity, specifically by reshaping the way in which sports organizations manage and monetize their supporters. While the fan token concept has long hovered over the blockchain space, the Covid-19 pandemic caused sports teams to desperately search for new revenue streams, which led to an increased adoption of fan tokens.

Fan Tokens

What are Fan Tokens?

The term fan tokens was first coined by Chiliz in their whitepaper to introduce the Socios platform. They are defined as “utility cryptographic branded tokens bearing the marks/name of the partnering sports team or organization to which they relate.”  Essentially, a fan token is a cryptocurrency that grants holders access to a range of sports club-specific benefits. Such perks might include voting rights on exclusive club polls, VIP experiences, access to sponsored promotions, and any other rewards that the participating sports club decides to offer. The unique perk that transforms fan token holders from passive consumers into active participants is voting rights, which may allow fans to influence marginal club decisions such as choosing a new team uniform.

Fan tokens for sports teams
Fan tokens provide sports teams with a potential new revenue stream (photo source)

How do Fan Tokens Work?

Fan tokens of a specific team are fungible, meaning they are mutually interchangeable and each one provides the same utility. In theory, they effectively act as the building blocks for creating a team-based economy because they can be bought, sold, and exchanged between the fanbase. Fan tokens can also be spent like currency to receive collectibles, merchandise, or have exclusive interactions with athletes.

Fan tokens give holders exclusive voting rights on club decisions. In this respect, they are analogous to holding shares in a corporation. Similar to how corporate shareholders do not need to deplete shares in order to vote on a company’s business matters, fan token holders do not have to “spend” tokens to participate in team polls. The more tokens a user possesses, the greater influence that user enjoys over such polls. However, some teams might restrict voting eligibility and other perks until a user holds a certain amount of tokens. This all may vary depending on the specific sports club. For example, the AC Milan (ACM) token gives all holders a share of influence on club decisions. It also serves as a membership key that grants users the privilege to enter exclusive competitions for unique rewards, club recognition, and more.

Importance of Fan Tokens

The global sports market is growing each year and is predicted to reach $614 billion by 2022. Sports teams are always on the lookout for new ways to monetize their audience besides traditional income from broadcasting and ticket sales. Currently, the majority of sports fans show their support by watching games and purchasing merchandise or memorabilia. They have no say over any decisions made by their beloved teams.

Chiliz looks to change that by using blockchain technology to develop fan tokens. By offering a framework to enable sports organizations to crowd-manage their fanbase, sports enthusiasts are also elevated from passive spectators to active influencers. In June 2020, FC Barcelona partnered with Chiliz to launch fan tokens and proceeded to sell out within 2 hours while generating $1.3 million in revenue. Such evidence shows that the fan token concept might be very much welcomed for both fans and teams.

The FC Barcelona fan token chart
The FC Barcelona fan token was launched in June 2020 (source: coingecko)

Fan Token Applications

  • Football: So far 19 football clubs have signed up with Socios to implement fan tokens. They include AC Milan, Manchester City F.C., FC Barcelona, Young Boys, and more. Each club has its own fan token which can be purchased using CHZ on the Socios platform.
  • Gaming: Some Esports teams also use fan tokens to enhance community engagement and open voting on in-game activities. Socios has already partnered with OG, Team Heretics, Natus Vincere, and Team Alliance with more to come.
  • Fighting: With the fan tokens craze catching up, various professional MMA organizations like the UFC and PFL have launched their own tokens. Both organizations developed fan tokens using the Chiliz Blockchain in order to open a new avenue of fan access to game rewards, chat forums, and fan polls.

Moving Forward

Fan tokens offer sports organizations a new way to monetize their followers while giving fans the chance to actively participate in team decision-making. Currently, fan tokens are mainly applicable for the sports industry and must be purchased on the Socios platform using CHZ. However, as blockchain adoption universalizes, fan tokens have the potential to proliferate beyond just sports. For example, companies like Mogul are working to offer fan tokens in the film and entertainment industry. They aim to provide token holders insider industry access along with some creative influence over film-making. The possibilities for fan tokens are endless, and we may soon see new forms of fan engagement in multiple fields.

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