Big3 recently announced its plan to decentralize sports team ownership. The 3-on-3 basketball league founded by the rapper Ice Cube is not the first to introduce the concept. SailGP, MotorDAO, Buy the Broncos and Krause House have all rolled out similar initiatives. But Big3 has a track record (it’s entering its fifth season) and a dozen teams without owners, and it’s including potentially lucrative licensing rights with the sale of its “Fire” NFTs, all of which makes this endeavor different. So, too, does the league’s motivation for the 21st Century Ownership project. Big3 seeks to further engage its most passionate fans and leverage those individuals as a vehicle for growth (the three DAOs cited are all looking to gain a foothold in sports).
JWS’ Take: While many individual NFT issues are nothing more than cash grabs, leagues and teams have sought to use digital tokens to offer value beyond being collectibles. “Our focus is on rights and utility—what [the token holder] is entitled to receive and how they are able to interact with the team [as a result of having it],” Big3 co-founder Jeff Kwatinetz said.
The logic behind the strategy sounds sensible. Sports leagues, particularly those without teams in traditional home markets, are challenged to build fan bases. By facilitating more direct engagement with and empowering the most passionate of fans, Big3 can create a “super fan army” that will promote the league and its merits.
Big3 hopes to sell 25 Fire-tier NFTs (for $25,000/per) and 975 Gold-tier NFTs (for $5,000/per) for each of the 12 teams. Every token holder will receive signed memorabilia, access to a private team Discord channel, exclusive merchandise and the chance to have their voice heard (think: voting rights towards team actions). But those in possession of Fire tokens will get a whole lot more. Kwatinetz claimed those individuals will enjoy “more of a feeling of being an owner than limited partners in some of the biggest sports teams out there.”
To be clear, those participating in the May token sale are not buying an ownership stake in Big3. (Big3 was founded on a centralized ownership model; the league and its investors own the 12 teams.) But Fire NFT owners will participate in the upside should the league sell the team that corresponds with their token. “We can’t sell a team without the majority of the 25 approving it,” Kwatinetz noted. Should a sale be consummated, the league would be entitled to 60% of the proceeds while the team’s fire tier NFT holders would split the remaining 40%. The co-founder said league leadership has “always talked about [evolving towards] a structure that would have [individual franchise owners] and some sort of sharing mechanism with the league itself.”
While speculators may purchase Big3 NFTs because they believe the value of the league and its teams will increase (the tokens can also be resold on the secondary market), Kwatinetz said the potential to cash in down the line is “not the reason to buy one.” The rights, control and access that come along with token ownership are. FWIW, much of the interest received thus far has come from fans of the league and the blockchain community (think: funds, whales).
Fire NFTs come with a collection of rights that span well beyond what comparable offerings have put forth. Most notably, token holders will be able to monetize exclusive team IP, though it excludes players and coaches. Kwatinetz said that licensing rights are “not an insignificant thing. [They] can be worth tens of millions of dollars.”
If that is the case, why is Big3 willing to relinquish the rights? Kwatinetz explained that media and sponsorship drive the business, and the league is not concerned about the prospect of losing some potential merchandising revenue. In fact, the way leadership figures it, the more revenue lost the better. “We don’t mind people making money off of our league because they will only make money if they’re creative and successful doing it—and we want that. We want the league to be popular. We want more people wearing our shirts.”
Fire-tier token holders will also receive access to “an owners suite, two tickets to every game in the first five rows and private parking [at the venue],” Kwatinetz said. If one was only accounting for the cost of tickets received, which can be resold, the NFT owner will receive $25,000 in value –equivalent to the cost of the token– within three years. (It’s worth noting that the average attendance at Big3 is TK.)
Unique experiences are part of the Fire package too. Kwatinetz said, “If the team wins [the championship, those 25 individuals] get the same ring that the team gets” and will be a part of the televised ring presentation. They’re also entitled to attend press conferences, player meet and greets and a weekly strategy session with the team via Zoom.
If Big3 manages to sell all 12,000 tokens, it will generate $66 million in gross revenue. While that total may sound significant, it could cost the league—at least in terms of potential revenue lost—nearly that much to fulfill its obligations within just a couple of years.
But Kwatinetz looks at it as an investment in the future. “We want people to get value [from their tokens] and have these experiences. That means the league is working because if these people are out there doing it, they [won’t be doing] it in silence. They will talk about the league to their friends. They will become influencers. They will come to us with ideas. Sponsors will see that we have this intense engagement from fans. We think a lot of leagues are going to end up copying [the model].”
We’re not convinced—at least not as it relates to the big four sports leagues. The cost of entry is too great for a decentralized ownership group to acquire a meaningful stake. But Big3 could be at the right place at the right time. The league is “not too big where we can’t bring the fans in and have meaningful engagement. But we’re big enough that people don’t have to worry if they get involved; it won’t disappear in a year,” Kwatinetz said.