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NBA has ‘discussed’ team sales of fan tokens, a crypto currency, says Joe Tsai

NetsDaily sat down with Joe Tsai for 90 minutes Friday and talked about a variety of Nets-related issues. This is the fourth of several stories out of that interview.

2021 NBA Playoffs - Boston Celtics v Brooklyn Nets Photo by Nathaniel S. Butler/NBAE via Getty Images

In his interview Friday with NetsDaily, Joe Tsai says the NBA has “discussed” the sale of fan tokens, a crypto currency, by teams that would create a new billion dollar revenue stream for the league ... and permit fans to gain new privileges and even play a role in team decisions, albeit minor ones.

It’s all part of what Tsai, who co-founded Chinese e-commerce giant Alibaba and knows a bit about marketing, believes will be a shift in the fan experience. It will go, he said, from a passive, media model of fan engagement to an interactive one that would include fan tokens, NFTs and of course, sports betting. Tsai also said he’s “closely but not directly” following the progress of New York State’s sports betting plans.

“Another example of fan engagement is using crypto-currencies to engage fans,” Tsai told NetsDaily. “We in the NBA now have the potential for teams to issue fan tokens. It’s been discussed, hasn’t been approved but people in Europe have already been doing this with soccer teams in Europe issuing fan tokens which have privileges attached to it.”

The issuance of fan tokens has not been approved by the league which is exploring various ways to increase team and league revenue following big losses during COVID-19.

While fan tokens may be a new idea in U.S. sports, they have been part of European soccer for several years. Tsai said last week that the total market value of fan tokens issued by European soccer teams is “around $3 billion.”

“You can think of fan tokens as loyalty points that can entitle me to certain discounts — a free beer? — and also fan tokens have also become voting ‘tickets’ because they entitle you to state your vote on a particular decision related to the team. I think teams are not going to let fans become coaches — or GMs — but things like ‘should we wear our City edition uniform?’ That’s high engagement, right? With tokens, the beauty of these tokens is that they become tradeable. They’re effectively crypto-currencies and can be traded.”

In Europe, fans with tokens can vote on things such as who the football club will plays during “friendlies” — preseason exhibition games — and which players the club should target in trades or free agency. As for pricing, tokens can go for as little as a few dollars and indeed, there are already active secondary markets. Fans are encouraged to accumulate them.

In fact, the process is already underway. A majority of NBA teams — 24 including Brooklyn as of last week — have quietly signed up with Socios.com, the leading provider of the tokens to European teams, including FC Barcelona, Juventus, Arsenal and Paris San Germain. The Nets announced their partnership with Socios earlier this month. So far, the partnership has been limited to integration of Socios.com across the team’s social channels and digital signage at all Nets home games.

The announcement made no mention of fan tokens other than stating Socios is “targeting many more Fan Token launches in the USA, Asia and South America with the world’s leading sports properties.” The announcement did promise a “SociosSuite” at Barclays which will serve as “a fan-centric experience opportunity,” not further described.

Tsai did not lay out a timetable for the NBA to approve the issuance of fan tokens but sees it as part of an increasingly changing fan experience, one that is interactive rather than passive.

“When you look at how fans currently engage with the content, with the game, a lot of it is focused on watching the game on TV. So it’s a game that’s two and a half hours long. It’s relatively passive, simply watching on a couch,” he told ND.

Sports betting, he predicted, will be a big part of that, depending on state and local laws.

“In the future, when you’re watching the game or consuming the content on digital, the digital platform enables the fan to interact in various different ways. you can bet on the digital platform. So betting itself is a huge fan engagement tool. It enables the fan to become much, much more emotionally involved,” said Tsai., adding with a laugh, “because people tend to get more emotionally involved when money is involved.”

The betting will not just be on the games, but as Mike Mazzeo of PlayNY has written, expect gambling on things like whether Kevin Durant will make his next shot! Tsai said despite questions, the league is all-in on sports betting.

“Despite all the potential risks and pitfalls of integrity and all that, I think generally speaking the league and the teams are very positive about the future of sports betting ... it will bring a lot of economic benefit to the teams and to the league obviously.”

The benefit to teams, he said, will come “indirectly.”

“The way we are going to benefit is through marketing dollars and people willing to spend their marketing budget on the Nets in order to have access to our fanbase, people like Fanatics. All these betting guys want to get access to our fanbase. And that’s our economics.”

He said he’s looking forward to a competitive marketplace for that access.

“The more ‘players’ in the market, the more competitive the field is, the bigger the marketing budget. So we will indirectly benefit from sports betting. So, we’d like more competition, more licenses. We’d like more players.”

As a result, he said the Nets, as an organization, are following the New York State sports betting process. The state is examining various applications for operating licenses with the expectation that two operators will be named at the end of the year with a goal of getting sports books up and ready to go by the Super Bowl on February 13, the biggest day of sports betting.

“We follow it (sports betting process) closely but not directly. We’re not party to the licensing application. We know people who’ve applied for the license,” said Tsai, referring to the connections between the organization and Fanatics, one of the applicants for a license.

“So we’re tracking what’s going on. Our ‘partnership’ if you will at this particular point is that we submitted ... a letter in support of the Fanatics group. Our belief is that for a sports team like ourselves, we cannot be involved in a sportsbook. There are all sorts of restrictions on that for obvious reasons.”

In general, he said the fan experience is moving from a passive model to an interactive one, from a media model to transactional model.

“Betting itself is a transaction. When you buy a jersey, it’s a transaction and other transactional variables are, to give you an example. if you play an NBA2K game, obviously it’s very interactive, but you can also transact within the game to buy a jersey, buy a wristband or so I gave the example at Milken (Institute Global Conference) that 72 percent of the revenues from NBA2K game comes from microtransactions.”

How much of the brave new world of fan experience will actually come to fruition is uncertain. One controversial possibility is installing facial recognition cameras that would use biometrics to identify individual fans and match them, through databases, with their interests.

The Nets, he said, have not implemented facial recognition, and that any widespread use would likely be five to 10 years in the future. Other teams, other venues, he said, have already made the investment. “I’m told they have facial recognition at Madison Square Garden.”