WILMETTE, Ill. — As the sports industry moves toward normal operations, it is clear several trends developed during the shutdown. This month, the Business of Speed examines those trends and views how motorsports may be part of this growth.
The continued evolution of the sports business model continues to blur the lines between professionals and amateurs. The growth of social media and expansion of non-traditional media channels presented challenges and opportunities.
The ability to harness the use of these platforms has brought power to athletes as individuals. Traditionally, such communication has come through the form of league media events or agency press releases.
Now, athletes’ voices are being heard — unfiltered and directly accessible to the world. Speaking out on social issues and being part of activism is accepted as part of who they really are.
Motorsports has participated on multiple paths — drivers were responsible to their team, sponsors and fans. This applied at all levels for both professional and amateur drivers. They would address each audience being respective of their place as invested stakeholders supporting motorsports.
Amateur sports, specifically the collegiate system, is undergoing rapid transformation. Outside of scholarships, the athletes were previously not being compensated while being part of structure where media dollars flowed through to their academic institutions.
The historical system relied on scholarships and minimal expense reimbursement to reward students.
No longer, as athletes will be allowed to pursue commercial opportunities. How much money will be generated is uncertain and navigating the new landscape will be challenging.
There is no consistency on how this is moving forward. Federal legislation does not exist, and states are enacting different laws. Uniform guidelines are critical to providing oversight in complex areas that are ever changing.
Name, image and likeness or “NIL” makes up the legal concept of “right of publicity.”
Athletes will be able to earn money from their NIL from several areas — lessons, camps and clinics; product endorsements; and fundraising.
Race car drivers already have the right to generate income in similar ways. They may enter into a personal services agreement with a sponsor or make social media posts for a specific brand.
The marketplace has a new set of entrants as amateur athletes now have the ability to generate commercial revenue. No one is quite sure what direction licensing fees and royalty rates will trend, impacting an athlete’s earning potential.
Over the last year, consumers’ ability to spend disposable income on sports, events, races, games, travel, dining out and other in-person experiences declined. Many chose to spend on hobbies to fill the entertainment void. As a result, the market for collectibles — from sports cards to sports cars — has surged.
This has led to growth in another area of sports finance known as Non Fungible Tokens, or “NFT.”
These are digital assets that can range from images to songs to videos to tweets. They are verified through blockchain technology or a chain of digital ownership records.
Owning NFTs allows individuals to claim exclusive ownership over these items. They can offer a way to monetize digital goods by authenticating their scarcity. In many transactions, NFTs don’t represent the actual asset itself, but solely a record of ownership.
Motorsports is beginning to explore the sports NFT landscape. Being willing to embrace this trend can help individuals monetize a growing market and use NFTs to engage a new, tech-savvy generation of fans.
The Aston Martin Formula 1 team was among the first racing organizations to participate in the NFT. They collaborated with partner Crypto.com to issue a set of limited items to commemorate the return of Aston Martin to motorsports.
McLaren Racing is partnering with Tezos to launch a blockchain platform that will be available across the series in which it competes, including Formula 1, IndyCar and esports. Fans will be able to participate via team, driver and sponsor digitized memorabilia.
NASCAR driver Landon Cassill announced a sponsorship deal with Voyager Digital in the form of the cryptocurrency, Litecoin. The deal is at market rates but payment will be made in the form of digital assets.
The technical aspects of the business of sports are changing rapidly. Motorsports is all about speed and is doing its part to stay in the race.