NFTs shouldn’t be tickets and here’s why
Game 3 of the 2019 NBA Finals was pivotal in the Toronto Raptors’ run toward its first league championship. There was also a moment during the game that captures the complicated relationship of tickets and NFTs.
Toronto led most of the game comfortably, but with Golden State about to cut the lead to eight points, the Raptors blocked a fast-break layup, sending the ball out of bounds and Toronto guard Kyle Lowry diving into the stands after it.
Almost as soon as he landed, he was shoved and cursed at by a fan sitting in a courtside seat. The man was quickly identified as billionaire venture capitalist and Warriors minority owner Mark Stevens. Punishment from the NBA was swift, with a $500,000 fine and a year’s ban from the league, including from his team’s own arena.
Wait, an owner can be banned from the seat he essentially owns?
Tickets for the vast majority of live events are not — and will almost certainly never be — owned assets, even for team owners. In conversations I’ve had with venues, teams, and leagues, the overwhelming majority do not want their tickets to become ownable assets — they will remain revocable licenses. The most recent episodes in Boston, Philadelphia, and New York only reinforce that perspective. Why does that matter?
What a ticket is vs. what an NFT does
There has been a great deal of ongoing hype around Non-Fungible-Tokens (NFTs) as tickets, and for good reason. At the broad-brush level, it seems like this could be a good fit.
NFTs are quickly gaining traction in the sports collectibles market and among artists, and Dallas Mavericks owner Mark Cuban went so far as to say his team is actively exploring ways to make Mavericks’ tickets into NFTs, which would effectively make them ownable assets.
It’s important to note, however, virtually all teams — including Dallas — define tickets, or seats, as a revocable license. Tickets are keys to experiences. These keys have a finite life and finite utility. That’s because the majority of rights issuers want to maintain control of the ticket and access to the experience until the experience is complete.
NFTs, by contrast, are (and are portrayed as) owned assets. This is groundbreaking for digital content, offering a way to both claim and prove ownership for a medium that previously had no method to certify authenticity. This doesn’t work for tickets, and the Golden State Warriors moment shows us why.
Read the fine print
On the surface, all NFTs appear to be ownable assets capable of generating royalties upon sale and transfer, but not every NFT is created equal. Yes, NFTs can incorporate “smart contracts” that can generate royalties and remunerate future sales back to the original owner. However, it pays to read the fine print to understand what you are actually buying. Did you buy an asset or did you actually buy a “non-exclusive, non-transferrable, royalty-free license to use, copy, and display the Art for your purchased NFT, and any included merchandise”? In the latter case, what exactly do you own?
If an NFT is an owned asset on a blockchain, but is treated as a license, then how can it be revoked? The answer is access. Many NFTs being “sold” today contain stipulations that they must remain inside the marketplaces from which they were originally purchased. This means, those marketplaces can restrict your access to them if the license is revoked, much the same way a venue can restrict access to a ticket holder for violating terms of use. This creates operational and legal complications as well as being a suboptimal use of technology — a classic case of when you have a hammer everything looks like a nail.
So then how exactly might live entertainment (sports, music, the arts) best take advantage of NFTs?
‘Decoupling’ tickets from NFTs: The ‘good option’
Cuban told CNBC this spring that his Mavericks are “trying to find a good option to turn tickets into NFTs.” His statement alludes to decoupling NFTs and tickets, which gives the rights issuer the best of both worlds. It provides control over their tickets and the ability to leverage NFTs as an experience ownership and engagement tool.
Ian Lee, the Managing Director of crypto-focused venture firm IDEO CoLab, believes we need to look beyond collectibles and that NFTs should be designed as experiences, not products. Ian outlines several ideas to achieve this, including identity and reputation management, community membership, and collective experiences. He also introduces the idea of “NFT-enabled composable products derivatives” with potential applications for custom apparel, gaming, media, aerospace, and food.
What if we thought about NFTs as an extension of tickets — a superfan’s portal, even — that connect to experiences and memories that don’t yet exist.
For example, let’s say there was an NBA game with several highlights that are memorialized as NBA Top Shot cards. The team could offer a complimentary NBA Top Shot to any fans who bought and scanned tickets at the game and who also post on social media, tagging the team. Now the teams and the NBA have a new way to engage with fans that attend games in a way that’s customized to the fan, since ticket data attributes flow into the assignment of the NFT.
Focus on the experience, not the product
It’s not surprising that the live entertainment industry is exploring using NFTs in ticketing. However, experiences, not products, should lead the future. Thinking this way is especially smart considering, as Ian points out, 74% of Americans prioritize experiences over products, particularly millennials and zoomers.
Ownership of extendable experiences, not tickets, will enable our games and shows to engage us in new and exciting ways, truly putting fans first.
