Web 3.0 and the Future of Professional Sports
Today’s guest columnist is Jon Patricof, co-founder and CEO of Athletes Unlimited.
A few weeks ago, a friend reached out to share his observation that much of what we are doing at Athletes Unlimited reminded him of the underlying vision for Web 3.0. He saw that we are a pro sports league uniquely driven by the athletes, similar to how Chris Dixon of Andreessen Horowitz describes Web 3.0 as the internet owned by builders and users.
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Dixon and others argue blockchain technology is driving Web 3.0. In Web 2.0, platforms (Amazon, Google, etc.) cooperate with creators and builders. Eventually, the platforms begin to compete with creators, leading the creators to seek better arrangements. The arrival of Web 3.0, NFTs and cryptocurrency seems to enable those new arrangements, with Dixon foreseeing a combination of “the decentralized, community-governed ethos of Web 1.0 (1990-2005) with the advanced modern functionality of Web 2.0 (2005-20).” Others, such as Greg Isenberg, talk about how Web 3.0 and NFTs can turn Hollywood from a “dictatorship into a democracy,” while Rebecca Kaden from Union Square Ventures discusses how in Web 2.0, there are “users” and “viewers,” but in Web 3.0, there are “owners” and “members” who “join” and “participate.”
The vision here is that Web 3.0, blockchain and more decentralized digital systems will fundamentally transform areas of our society and our economy.
We created Athletes Unlimited in March 2020 and since then have launched four women’s professional sports leagues that follow a very different model from traditional leagues. Seasons are short and take place in one location; players change teams weekly; and our scoring system tracks players’ team and individual performance on a leaderboard, much like in Formula One or golf. We are innovating on many fronts but probably none more so than how the players have a role in governance, decision-making and long-term profit-sharing. In Web 3.0 parlance: We are sports leagues driven in large part by the “creators” and “builders,” aka the athletes.
To date, most of the talk I have heard about NFTs and blockchain in sports has been almost entirely about secure ticketing and digital collectibles. More recently, investors have been exploring DAOs (decentralized autonomous organizations) to purchase ownership stakes in leagues and teams. Last week, Sahil Bloom wrote on Twitter that he wanted to buy and reimagine the X Games from ESPN; the reimagine part started with the idea of forming a DAO. Within 12 hours, Bloom said he had interest from Ndamukong Suh, Sal Masekela and Lindsey Vonn. Earlier in the week, I had spoken to a potential team owner who said she wanted to form a DAO to purchase a franchise.
However, there could be a much larger transformation on the horizon for the pro sports business driven by blockchain, NFTs and Web 3.0 thinking: a realignment of ownership and control between leagues, owners, players and fans.
At Athletes Unlimited, we realized in the early days that the best approach was to partner with the athletes across the board—they not only share in profits but have meaningful involvement across all levels of decision-making. This may sound small in the broader context of the business world, but both of these are massive innovations in pro team sports. While many leagues have profit participation plans, and players’ associations have weight when they sit down at collective bargaining tables, there is no proper long-term alignment of governance or value creation.
Although many current pro players in the big four leagues benefit from huge contracts, they know they need to turn elsewhere for business opportunities the minute they stop playing. We all know that too many pioneers retired without seeing any of the benefits of the leagues they created. In short, the pioneers in sports were really like the innovators in Web 1.0, who built products and tools but saw no direct benefit. In Web 2.0, the league drove value creation and distribution, but Web 3.0 could usher in a creator/player, fan-driven model.
In Athletes Unlimited, players’ involvement has expanded to the creation of Player Executive Committees, which make collective decisions on every aspect of our leagues, from recruiting to rules to business decisions. I am not aware of any other leagues in which current athletes are involved in board meetings or any committees deciding on league expansion or media rights deals.
There is no doubt there have been many beneficiaries of the current sports governance system, just as there have been many beneficiaries of Web 2.0, including executives, employees and shareholders.
The question is whether there is a chance for a new model, where decision-making is truly shared, where we don’t think about innovation and blockchain only in terms of better monetization of fans but in how it might create a better model for ownership and governance between players, fans, executives and owners.
Ironically, at a time when the world may be becoming more decentralized, the main topic in the world of sports ownership is the rise of private equity and more centralized, institutional ownership of teams and leagues. Private equity funds are buying limited partnership stakes across leagues and in some cases, taking over entire leagues. We are looking at a near-term future where fewer owners and decision-makers exist in the world of pro sports.
Granted, in some leagues, there is talk of sharing percentages of sponsorship or ticket sales with players or mission-aligned partnerships. We are taking that a step further and extending the conversation to decision-making, governance and long-term profit sharing.
The sports ownership world has evolved over the last 20 years, from a very disparate set of single, high-net-worth owners often driven by civic pride and local business interests to a much more sophisticated group of owners, driven by the value of intellectual property, real estate and asset scarcity. Yet little to nothing has changed for current players or fans with respect to team/league ownership.
While the next phase will likely be dominated by an even greater concentration of ownership into the hands of larger and larger institutions, it seems possible that the same forces behind Web 3.0 might usher in an alternative model.
Before founding Athletes Unlimited, Patricof served as president of MLS’ New York City Football Club, where he currently serves on the board of directors. Prior to NYCFC, Patricof was a member of the board, president and COO of Tribeca Enterprises, the owner and operator of the Tribeca Film Festival and related business ventures.