by Rafi Azim-Khan, Head of Data Privacy and Marketing Law at Pillsbury
Professional sport is big business and fans, sponsors and the media are the customers. Many years of advice to Premier League clubs, F1 racing teams, and golf pros, for instance, has confirmed the varied nature and value of assets, both physical and virtual, held by the same.
Increasingly, intellectual property, data, and fan loyalty are some of the biggest assets in the game. With a host of ever-developing ways to monetise these assets, sports teams are sitting on veritable goldmines. But like any mining expedition, the potential rewards come with significant risks which need careful consideration to avoid legal suits and fines and damage of relationships with fans.
One of the latest ways clubs – and players themselves – are seeking to monetise intellectual property rights and brand recognition is through the use of non-fungible tokens (NFTs). In very simple terms, they are unique digital assets – artwork, player image, digital collectibles, for instance – with the holder’s ownership rights recorded on a blockchain. Each has a unique ID number and unique value.
A number of Premier League clubs have sought to monetise their rights via NFTs.
Although it is relatively easy to mint a new NFT via a blockchain marketplace account, there are numerous pitfalls and great care must be taken. Issues can come in many forms, such as those I have seen intellectual property disputes in different countries – over IP in a trophy, for example – advertising rules compliance in NFT promotions, and reputational damage, for example where NFT values plummet leaving aggrieved fans out of pocket.
Another way that clubs might seek to extract value from the digital asset ecosphere is through sponsorship deals with companies within the NFT space: exchanges, NFT minters, and promoters, for example.
However, this is not without its own set of risks. For example, in the volatile world of crypto, what would happen to the sponsorship deal if the sponsor found itself facing difficulties, as IQONIQ recently has? Other key issues might be reputational, for example if fans’ foray into the NFT ecosystem proved to be a financial disaster.
The law is also quickly developing, new regulations (for NFTs directly or general compliance, such as advertising) could be published that put relationships under strain. In any of these cases, sports franchises could save themselves serious headaches by ensuring they were properly advised from the outset and did not rush into things.
Appropriate contractual drafting and regulatory advice will be key to ensuring sports clubs can extract themselves from difficult situations as painlessly as possible. Developments in intellectual property law might also give pause for thought.
The UK Government has recently announced plans to loosen copyright protections to permit the “mining” of datasets to train “artificial intelligence” models – concepts that may have sounded positively Sci-Fi when companies first obtained the intellectual property rights in affected materials. This demonstrates that your rights may change as technology does and a forward-thinking approach (and specialist horizon scanning) is required.
Looking beyond NFTs, there may be other goldmines that sports organisations are neglecting. In today’s data economy, teams will have vast statistical databases – miles run, aces served, lap times, aerodynamic effects, the list goes on. Such data could, for example, be licenced to game developers or virtual world creators to improve realism, it could also be exclusively licenced to media companies, fantasy league creators, or betting companies who could utilise the data in their own businesses, or it could be made freely available to fans in a drive to improve engagement and strengthen customer satisfaction.
Whichever approach is taken, specialist advice is essential and risk mitigation required to ensure the club is not left holding the (boot) bag.