Almost every boy — and plenty of girls too — dreams about being a professional athlete. What could be better? You get paid an inordinate amount of money to do what you do during recess. But soon reality hits, which is why I believe Chiliz (CCC:CHZ-USD) garnered so many eager buyers earlier this year.
Essentially, Chiliz allows individual sports fans to get closer to the games they love and the teams they follow. Therefore, while this particular blockchain project won’t give you the talent to dribble a football like Zlatan Ibrahimovic, you can influence certain aspects of his team’s business.
InvestorPlace’s own Vivian Medithi provided an excellent breakdown of the CHZ-USD phenomenon:
“Chiliz is the blockchain platform underpinning Socios.com, a fan engagement service that allows sports teams to sell fans special perks, such as voting on team jersey designs or early access to tickets. Those perks are sold as “fan tokens” on the blockchain, similar to recent smart contract NFT sales by Kings of Leon and others.
CHZ-USD is the platform’s primary currency, exchanged for fan tokens and other goods. Last year, the company partnered with UFC to sell event tickets in exchange for Chiliz coin. A recent fan token release for the AC Milan football club generated more than $6 million within 30 minutes of launch, giving an indicator of general consumer interest in these products.”
On multiple levels, Chiliz seems like a no-brainer investment. First, it allows hardcore sports fans to become meaningfully integrated with their favorite teams. Second, fan engagement is rapidly becoming a huge factor in the professional sports world. I’ve covered a few opportunities in the private equity space and demand is quite robust.
But What’s the Point of Chiliz?
A third factor that supports the narrative for Chiliz and CHZ-USD specifically is waning sports attendance. Here’s how USA Today describes it:
“Each year, tens of millions of Americans pour into arenas, parks, rinks and stadiums to see a professional sporting event in one of the four major American sports leagues – the NFL, NBA, NHL, and MLB.
But fans are now less inclined to go to games in person. Each league saw a decline in total attendance from 2008 to 2018. Fans are often unwilling to pay high ticket prices, and teams don’t seem to care, as an increasing amount and share of their revenue comes from lucrative TV contracts as opposed to ticket sales.”
Moreover, the attendance decline isn’t just in the U.S. but also in Europe’s soccer-crazy pro leagues. Clearly, both leagues and team management need to beef up their fan engagement to keep broader interest alive, especially as digital entertainment options begin taking up market share. What could be better than offering a stake in the sport than through CHZ-USD?
Believe me, I get why sports fans are crazy about Chiliz. But the skeptical side of me questions why sports teams need a blockchain project in the first place. If it’s fan engagement they seek, then just engage with the fans.
Of course, the answer is that tokenizing elements of the game or a famous team commands monetary value. So to me, it sounds like the Manchester United (NYSE:MANU) business model. Make a home kit, an away kit, an alternate kit and then an alternate to the alternate kit and so on.
The crazy thing is, those Man United fans — who are almost never from Manchester, let alone England, let’s be real — will buy them all. Which brings me to my final point.
Despite Ills, CHZ-USD Can Move Higher
A team like Man United or AC Milan can easily benefit from Chiliz and the tokenization craze. These teams have serious clout. I don’t mean to pick on the Red Devils, but if the team crafts an eleventh variant of its home kit, with the only difference being a little swish or swoosh somewhere on the fabric, it will sell simply because of the Man U brand.
Plus, I see that CHZ-USD appears to have hit a bottom recently and looks to be bouncing higher. Combined with the enthusiasm for the top-level teams, it’s well within possibility that the token could be very profitable from here.
But will the profitability be sustainable over the long run? I’ve got big questions, honestly. It seems like a cynical cash grab by the biggest sports teams advantaging the euphoria over these tokens. Over time, I think even the Man U fans would rather save their money for the twelfth variant of its home kit.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.