The dream of clubs like Liverpool is to monetise their global fanbase. They have never worked out a way that fully exploits the numbers of people across the world who declare they are supporters of the club. NFTs are the latest attempt to squeeze cash out of these fans.
It will not work. At least in the long term. The reputational damage caused by this endeavour to make money for nothing will linger around Anfield long after the phrase non-fungible tokens has been forgotten.
The LFC Heroes Club is a series of digital art works that will be sold by the auction house Sotheby’s over a three-day period starting on Wednesday. The bidding ceases on April Fool’s Day. The timing could not be more appropriate.
Non-fungible refers to something that is unique and cannot be replaced by anything else. The thirst for income displayed by Fenway Sports Group is anything but special, but the timing and scale of this “drop” is bewildering. Liverpool’s American owners should know better by now.
Plenty of people have warned them that this moneymaking scheme is at odds with the ethos that the club likes to project. They have put collectables over collectivism.
NFT’s are part of the crypto boom. The industry is largely unregulated, which makes it very dangerous for the unwary. Liverpool are at pains to say that the rather cliched and simplistic illustrations should not be considered investments. The reality of an auction of limited-edition items is at odds with such advice. For the “Legendary” category of 24 one-off cartoons of players dressed as superheroes, bidding starts at $100 (£75). The club have indicated that 10 per cent of any future resale royalties will go to the LFC Foundation charity. Pre-sale talk about sell-on rules subtly encourages the idea that values are going to climb.
As does the slightest knowledge of the NFT market. Despite buyers not owning the copyright to any image – all that is being purchased is a piece of data in a blockchain digital storage area and the illustration is attached to that – the trade in NFTs has allowed some investors to make millions in the past few years. Others have lost their investments. In the past month, the price of Ape Kids Club NFTs which have been heavily promoted by John Terry dropped by some 90 per cent. The likes of Ashley Cole and Tammy Abraham deleted their social media posts promoting the items. The overall trend suggests the bubble is bursting.
The power of Liverpool’s brand and the fanaticism of some supporters will most likely guarantee a successful launch next week. FSG have long sought to lure the team’s worldwide followers into spending that goes beyond buying merchandise online. Eight years ago, when the club proudly proclaimed that their Indonesian Twitter following had exceeded 100,000, John W Henry was asked how much income that – or any other foreign language social media platform – generated. Liverpool’s principal owner could not answer. The message was passed down the food chain: we need to make money in cyberspace.
One of the reasons that Peter Moore was brought to Anfield as chief executive five years ago was because of his experience at Electronic Arts, the video game company. The development of in-play purchases changed the gaming landscape. Moore left Liverpool two years ago but it was clear that the club would continue to pursue options to milk the “metaverse”.
A large proportion of Liverpool fans do not like the latest development. The Spirit of Shankly Supporters’ Union yesterday said they had “raised concerns about financial, environmental sustainability and other risks involved”.
A number of teams across the game have formed partnerships with Socios, a company that sells relatively inexpensive tokens to supporters which offer greater engagement with the clubs. This month Off The Pitch, a football finance website, published allegations that Socios’s owner refused to pay promised bonuses to employees to maintain the value of his associated cryptocurrency. Arsenal were among the clubs to contact Socios for clarification. Without regulation, problems can easily occur.
Nevertheless, two events this week will have hardened FSG’s attitude. The first was Manchester City topping the Deloitte Money League for the first time. Although the figures for 2020-21 were skewed by the pandemic and the loss of match-day income, City’s elevation highlights the impact of Abu Dhabi-related sponsorships. Liverpool know they cannot compete with state-backed clubs. The Saudi Arabian buyout of Newcastle United is likely to stack the deck further against teams whose commercial relationships have no political overtones.
Uefa’s financial rule changes, which propose that clubs can spend up to 70 per cent of their income, has set alarm bells ringing in Boston. FSG believe that these changes will further entrench City’s power.
Even so, the NFT sale leaves a nasty taste. The Liverpool Foundation will receive half the income but it feels like the charity’s involvement is there to make the situation more palatable.
Liverpool do not want to get left behind financially and FSG will explore any possible income streams. The only people taking a risk here, though, are the fans. The Heroes Club could very quickly turn Anfield’s owners into villains if buyers lose a lot of money.