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Football’s crypto bros – part II

Football’s crypto bros – part II

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The worlds of football, cryptocurrencies and their associated industries have collided more this season than ever before. What can we expect in the future from these fledgling businesses?

In March, Liverpool teamed up with the respected auction house Sotheby’s to launch their ‘LFC Heroes Club’, a collection of NFTs promising buyers access to a Liverpool Football Club community forum, unique experiences, virtual hang-outs, competitions, and guest appearances.

The club was prepared to create, or ‘mint’ to put it in NFT language, 171,000 NFTs.

To date, they’ve sold just 9,271. 

A reminder an NFT stands for a non-fungible token.

NFTs are a ‘unique digital certificate, registered in a public digital ledger, known as a blockchain, that is used to record ownership of an asset such as an artwork or a collectible.’

The sales of Liverpool’s NFTs raised a million pounds in revenue for the club, but given NFTs trade off the back of scarcity, these NFTs are unlikely to be sold on for any profit.

When they launched the ‘LFC Heroes Club’, Liverpool were keen to stress that these NFTs were designed to be collectibles, rather than investment opportunities. 

They went wrong as they were ill-advised with regards to the number from the very get-go.

Tim Mangnall

This is Tim Mangnall – you heard him on episode one of this two-parter.

He’s the CEO of Capital Block, an NFT agency focusing on the sports sector across Europe and working with sports clubs.

When you look at the total number of NFTs across Europe at the moment, no club has sold anywhere near 171,000. You’ve got Galatasaray when they did their drop, they sold 850.

You’ve got Eintracht Frankfurt – they’ve done around 4,500… so coming out with 171,000 NFTs was setting them up to fail.

My belief is that it could have been so much better if they reduced the numbers and they talked around 10,000, 5,000, they’d sold out. This would have been a massive success and it would have driven even more engagement. So, if they put it at 10,000 and they’d sold out and they’d made a million, it would have been a huge, huge success.

They were never, ever under any circumstances going to sell 171,000.

Tim Mangnall

Liverpool dipping their toe in the NFT water could merely be a testing ground to what may follow for the club.

It’s been reported that a cryptocurrency exchange, and a blockchain platform are amongst which could become the club’s main shirt sponsor next year. 

This would be controversial for several reasons. Firstly, cryptocurrencies are still broadly unregulated, and associated with financial speculation. Blockchain technologies are also hugely damaging from an environmental perspective. 

One piece of research looking at 18,000 NFTs found that the average NFT has a carbon footprint equivalent to more than a month’s worth of electricity for a person living in the EU.

But beyond sponsorship there is now an English club which is run by crypto investors. 

What we’re trying to do is different. We’re not trying to sell NFTs to Crawley Town supporters, that would be crazy and arrogant, to be honest, we’re bringing a professional football club, Crawley Town FC, to people who already love NFTs, to NFT fans… 

Preston Johnson – Crawley Town

Earlier this month, League Two club Crawley Town was bought by a group called ‘Wagmi United’ – Wagmi standing for ‘We’re all gonna make it’, an expression popularised by cryptocurrency enthusiasts.

The group behind Wagmi United is a collection of American crypto investors, who are looking to change the model of traditional football club ownership.

When they bought the club, their statement said they would be ‘bringing Web3’s most innovative ideas and passionate communities to the world of sports’ and Wagmi United’s co-founder, Preston Johnson went one step further, saying ‘a conventional approach to ownership hasn’t worked, and the club is losing hundreds of thousands of pounds while its fans suffer through year after year of uninspiring results on the pitch’.

The group promises to give supporters a greater say in how the club is run – through the sales of things like NFTs, which, they claim, would give fans access to certain benefits.

Preston Johnson and his fellow co-founder Eben Smith plan to allow the fans to decide whether or not they keep their roles as directors of the club if the team does not earn promotion to League One by the end of their second season in charge.

It’s an interesting model and certainly a new way of looking at football club ownership.

However, their takeover has been met with some scepticism – mainly from those who are nervous about the volatility of cryptocurrencies. 

Even Crawley Town’s manager, John Yems, who has since been suspended from his role for a separate incident in which he’s accused of making discriminatory remarks, admitted he didn’t understand where the new owners got the money from to buy the club. 

“Listen, when you talk about crypto, I thought that was something that, to be honest with you, was the stuff that killed Superman… I ain’t got a clue about it. 

“So when it comes in, but then how many people in football do know what their owners do or where they get their money from?”

John Yems – Crawley Town

Eben Smith and Preston Johnson haven’t helped themselves in the past with some of their comments made surrounding club ownership. 

In an interview with the Washington Post, Smith said Wagmi United would ‘try a bunch of unconventional stuff but will be pretty much led by the numbers from an analytical perspective. And our hope is that it works. There’s not that much downside if it doesn’t.’

The problem with owning a football club is there is a downside. 

Relegation. Financial troubles. Plummeting out of the league – or worse – due to ownership mismanagement, have become an all too common problem with clubs lower down the league pyramid.

Wagmi United also offered to buy fellow League Two side Bradford City last year, so some have said that they are just looking to buy any club to try out their ownership model – regardless of if they’ve got a connection with the club before.

But for Tim Mangnall, there should be a place for new ideas when it comes to football club ownership. 

Ultimately I think that they are trying to implement a new business model and it’s going to be a risk for any football club that does it. I think to go, okay, well, we didn’t get Bradford now we’re going to do Crawley Town. I mean, yeah, it’s a valid argument for them to say, but they have to find a club somewhere to implement this new business model. And it wasn’t Bradford. So they moved on to a different football club and ultimately it was Crawley Town that felt this could be a good opportunity for them.

As football attempts to rebound from the financially ruinous Covid-19 pandemic, it’s no surprise that clubs are looking at all available financial avenues – beit entire club ownership, or shirt sponsorships. 

And it’s been interesting to see these industries being embraced by more established ones. Sotheby’s partnering with Liverpool on NFTs. The Premier League is reportedly close to announcing an official NFT partner.

But what this season has taught us most is that these industries are unlikely to go anywhere in the coming seasons – they may adapt, and change, but if football in the modern era shows us anything, that for better or worse, where there’s football, there will also be financial speculators everywhere.