The Future of Fan Membership

FROM DIGITISED TO DIGITAL

Starbucks is perhaps the most famous Coffee Shop in the world. Yet beneath the surface, it actually has many of the attributes of a bank. It is reported that Customers using the loyalty program upload into the app over $10bn per year and that it generally holds about $1.5bn in cash. Of course, it’s holding this cash at 0% interest and can make as much as $100m a year in forgotten money – known as Breakage.

This doesn’t change the fact that the primary goal of Starbucks is to sell coffee, but it does show that there is a digital business model emerging where loyalty and the ability to make the life of the customer easier can generate substantial turnover and profits.

It’s, therefore, no surprise that the Starbucks loyalty program is updating to sit on the blockchain which will enable it to use the tools of web3 to further this ability to not just provide coffee and cake (or to me a place to work) but to create a whole new business model with customer data at its heart.

Closer to our sporting home the Ticketing industry is undergoing a similar transformation.

A new, digital, business strategy is emerging. In 2022 Ed Sheeran hosted a number of concerts at Wembley Stadium.      He and the stadium used the Secutix technology company ‘Tixngo’ which is built on the blockchain.      The interesting piece on this is that it wasn’t simply a different technology but for the first time the artist would get to know everyone who is coming to his concert and give him the capability in the future not just to determine prices but to build his own audience.

Typically, a ticketing company will know about a third of who is showing up.Yet due to the technology provided by Tixngo for these concerts, every ticket had to have a proven identity. Not only that but Sheeran himself would be able to identify who they are, not just the ticketing company.

 Here we see the transition from a digitized model to a digital business model. It’s the tip of the iceberg but once artists control the relationship with their audience and with it the access to them the entire model will have to adjust.

 Much like the ticketing space this is what the sports industry at the top level has been looking to do for over a decade. Many of the processes that we see today around sports teams and events are indeed now in a digital format which has made things more efficient and relevant to the smartphone era. Yet despite this investment it appears as though the value chain remained the same… we just became more efficient at what we have always done.

In sports, emerging technology, but perhaps more importantly consumer trends that are becoming apparent, are going to enable the eventual transition to a digital business model. 

Recently CLV group put out their Fan Moneyball report, and I’ll be honest it reminded me of some of the key points raised a few years back in the Fluid Fan report released by the Sports Innovation Lab. One of the great headlines was that:

 “In a new world, fans want to be understood and valued wherever they are”

This shouldn’t be glibly nodded at and then ignored. This is a critical learning from the last 10 years and the web    2 platform era.       There is no argument that fans are consuming content differently than they did before. However, web2 has shown fans are continuing to consume sports – the details released by both Google and FIFA about the consumption around the FIFA World Cup in Qatar are quite astounding. 

Of course, not many people were at the Final in Qatar to witness the most magical of Finals, and yet Sundar Pichai, CEO of Google, tweeted “Search recorded its highest ever traffic in 25 years during the final of #FIFAWorldCup, it was like the entire world was searching about one thing!”

Look at the business model of sports teams and you will see that the same equation exists. Most high-level professional teams, meet and know a tiny fraction of their audience. Many were incredulous when the Barcelona deal with Spotify was announced as that disparity was laid bare. But other than ‘digitizing’ the business model I would challenge you to explain to me how sports companies have changed their model as their sphere of influence has changed.

The challenge for sports, a bit like artists, is that the connection to the fan has been held by someone else.      The broadcasters and likes of Twitter and Facebook know far more than rights holders have. It’s fascinating to consider that the only people not to know whom their consumers are are the ones offering the product!

The business model therefore must adapt and embrace a new ‘digital’ strategy.

In the same way that I am excited about the digital models that will emerge from the blockchain in ticketing, so I am excited about what might emerge when it comes to fulfilling some of the other fan needs.

It is with that in mind that I return to the Fan Moneyball report and pick on this great analysis.

“We are at the start of the web3.0 phase and some immediate judgments about it – as with those about any early product/innovation – should be viewed through that lens.”

It is hard to escape from the fact that many of those calling into question the initial assets that you see companies like Socios.com utilize have been using the very same assets (and promoting them) on web    2 around      Twitter or Facebook votes, all in the name of fan engagement and sponsorship. 

The interesting thing is that Socios.com, along with a number of others in the web3 interaction with sports, is shifting the value chain. When a vote is made on Twitter the data, the revenue, and the point of interaction is very much focused on Twitter. A rightsholder has a relationship with them but the actual value to the rights holder beyond being labeled ‘fan engagement’ is honestly negligible. The proof is back to the income statements of rightsholders and even their data profile of fans (Barca v Spotify) compared to their partners in this exercise.

 Indeed, on Web3 with A16z they have an episode entitled “The Metaverse, Crypto, Virtual Society” and the guests referred to the paradox of Manchester United claiming 1.2bn fans but only generating £600m revenue – and pointing out that in any other business model that simply is terrible performance. The reality is of course that Manchester United do a fabulous job in ticketing and sponsorship but like most are struggling to adapt to a world where the true value of their fanbase is now beyond the 50miles of old.

Sport teams in Europe are trading off the dream of reaching and monetizing global audiences. Web    2 proved that those audiences exist but shifted the value to the FANGS. Web 3 has the ability to not just reach the fans who don’t come to the stadiums but ensure that the value that is created by the new version of member programs are retained between fan and club, not the FANG that connected them.

The social platforms with their     reach and access have real value to sports and fans alike as a distribution and marketing channel, but the equation needs to change. The emergence of web 3 should be the catalyst for a new Digital Business Model to emerge where the relationship between fan and club/rightsholder is held directly.  

Most top-tier organizations have realized the future looks different.     The massive investment in short-form and digital format content is tacit recognition of this changing need, as if it was just about those that bought the tickets then there really wouldn’t be a desire to build new content channels.

As an industry we are far better at creating content, distributing it, tracking it and delivering an experience beyond the first or even second screen. It’s the engine of the industry but it’s the start not the endpoint.

The future of web3 and fandom is a modern membership platform and community where the fans are much more at the heart of the thinking, will be known to their club(s) and be able to drive real rewards from their loyalty. 

In my efforts to acquire Chelsea Football Club I spent most of my time with fan groups. Other than all wanting to win, the other feeling that was widely held was that the club did not care about them. This was interesting as the majority of the groups I could meet in person live locally so there are all sorts of ways to make them feel more included. 

Its more difficult to make fans, and followers, all around the world feel a part of a group and to be accepted by a club. This requires a new way of thinking about loyalty, membership, reward systems and tools to engage. Web3 will be one of the key tools that enable this transition, at first with more rudimentary capability but over time I can see how this will transition into a much broader package where fans will feel like they are been recognized. I call this Earn as you Fan but we are still a few steps from that evolution.

My view is that we will see platforms like Socios.com morph into the modern-day loyalty platforms – and the vast majority of sports teams do not have the capability, budget or will power to create these independently. What they are able to do with assets that once sat on web2 and the shift towards what the Fan Moneyball report called a fan-focused value exchange’ is where we are inevitably headed.

As these Web3 Companies, and their sports clients, build more traction, build direct relationships with the fan base – local and international – so the offering will adapt. More value will be derived in both directions. This will in some cases be the ability to drive better content, rewards, access and assets that we have not designed yet as we are simply operating too far removed from our most important audience – the Fan.

It seems crazy to say this but      as the w    eb3 world will be the first time rightsholders will have knowledge and relationship with their fans at scale it might also be the first time they will be equipped to respond to their needs and deliver what is being asked for. At the moment that relationship is held elsewhere. 

I for one am excited at what that might look like, even if it takes a few bumps in the road to get there.