[The Viewpoint] Into the future: The sports industry embraces the Metaverse and NFTs with open arms

The time period between March 2020 to May 2021 is truly a black hole, one to be forgotten in the world of sports. However, that said, there have been some truly memorable events in the world of sports within the said time, especially in football, with Jürgen Klopp’s Liverpool winning its first English league title (2019-20) in 30 years.

However, with the opening of the world, especially the sporting one, which awakened from its year-long slumber characterized by empty stadiums, the focus is on dual attendance of sorts - physical attendance in stadiums; and attendance in the Metaverse.

As deliberated upon in our earlier articles on the subject matter, accessible here and here, a Metaverse can be defined as a virtual representation of reality implemented by means of virtual reality software. With this context in mind, the news reports of the reigning English champions Manchester City looking to open a virtual stadium in the Metaverse makes much more sense, to those not yet fully immersed in the world of the Metaverse.

Place for sports in the Metaverse?

A lasting impact of COVID-19, which will likely never be truly shaken off at least for quite some time, is the aversion of many people to large crowds, especially in venues like stadiums. Another cause of concern, which is still deeply embedded in the world of sports (especially commercial clubs of sports like football, baseball, basketball, etc) is the fear of having to play behind closed doors again – which not only affects the overall psyche of the teams, but also deeply hits the revenue of the clubs.

Due to such factors, coupled with the advances in the world of Virtual Reality and Augmented Reality, the prospect of having a foothold in the ‘Metaverse’ is indeed a very appealing one to sporting institutions, as it addresses two of the above major concerns to some extent. There is great potential to increase fan engagement to hitherto unknown levels.

Keeping this in mind, the news about various football clubs (including Manchester City and Barcelona) taking serious strides to build a presence in the Metaverse is a very welcome one, and is also encouraging for the industry as a whole, as other clubs might follow suit to similarly increase their Metaverse footprint.

It has been reported that Manchester City has partnered with Sony to build a representation of its famed Etihad Stadium in the Metaverse, by using ‘Hawk Eye’ technology.

Proliferation of NFTs in sports

While the move towards having a footprint in the Metaverse is one which is rooted in strong logic, the prospect of NFTs proliferating the world of sports is one which has seen a comparably lukewarm response.

A non-fungible token, or NFT, is a unique form of digital asset which cannot be replaced by something similar. Based around blockchain technology (most notably, the Ethereum blockchain), an NFT is a digital collectible, be it an image, a GIF, an audio-video file, an element in an online game, etc. As such, a NFT is not the ‘object’ in question in per se, but is rather a nigh infallible mode of authentication.

Thus, in order to capitalize on this gold rush of NFTs, which although appears to be weaning off to some extent at present, sporting institutions are also taking steps to take a piece of the pie, so to speak. Perhaps the most recent high profile move has been Liverpool FC’s recent well publicised attempt to sell around 171,000 NFTs, purportedly of randomly-generated 'Hero' tokens, based on the club’s 23 first-team players, and the manager, Jürgen Klopp. The tokens were put up for sale via the famed auctioneer Sotheby's.

The main criticism of such a foray into the world of NFTs by the club is that the tokens itself, while sold at a reasonable amount, do not have any ‘inherent value’ and that the same may lead to losses to buyers (fans) who aspired to re-sell the NFTs for profit. Another issue is the energy implications of NFTs, as storage of data on blockchain consumes enormous amounts of energy. In any case, reportedly only 5% of the 171,000 NFTs were sold, which is perhaps indicative of the sports fans’ perception of NFTs. Or perhaps it’s just pragmatism catching up.

IP in Metaverse – for sporting institutions

With such steps being taken by sporting institutions towards embracing the Metaverse and dabbling in new commercial offerings in the form of NFTs, it is more imperative than ever to accordingly secure IP rights pertaining to the same.

For instance, if a sporting club were to make a ‘virtual stadium’ in the Metaverse and commercialize the same, as if it was a physical object, and engage with fans via sale of ‘tickets’, then in such cases, it may be advisable for the clubs to file trademark applications corresponding with such goods and services.

Further, for clubs and institutions looking to commence sale of NFTs, they may similarly wish to file trademark applications for specifications of goods such as given below:

· "downloadable virtual goods, namely, non-fungible tokens";

· "blockchain-based non-fungible tokens (NFTs) and NFT collectible series";

· "digital media, namely, digital collectibles, digital tokens, non-fungible tokens (NFTs), and digital art";

In this regard, Paris Saint-Germain (PSG) is an example of a football club being vigilant to secure its IP rights in the Metaverse. Recently, on March 16, 2022, PSG had filed a multi-class application in the United States, whose specification of goods and services encompass their interests in the Metaverse as well as NFTs. The relevant specification of said goods/ services is tabulated below –

Conclusion

In conclusion, the Metaverse is wide open to sporting institutions, for constructive utilization. While there are detractors, especially fans who would begrudge such capitalistic tendencies of the modern sporting institutions, the institutions themselves have a lot to gain from such commercialization and monetization of digital assets. After all, just a few decades back, having sponsors on team jerseys was non-existent and the very concept was likely frowned upon. Thus, would one begrudge their beloved football club or NBA franchise from using NFTs and the Metaverse for increasing revenue streams? Time will tell.

Vikrant Rana is the Managing Partner and Pranit Biswas is a Senior Associate at SS Rana & Co.

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