The crypto hype has reached Lionel Messi’s pockets

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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on August 28th, 2021.

When Leo Messi closed the door on FC Barcelona, another one opened wide – and it shows that Silicon Valley is currently tearing down old structures in sport. One of the many ways he is compensated is through the club’s own cryptocurrency.

“Bartomeu was plugging holes in the short term and mortgaging the club in the long term. That leaves us a dramatic inheritance. […] In total, our debt is now €1.35bn”

That’s how the newly appointed Joan Laporta, chairman of the soccer team FC Barcelona, ​​described the financial situation in the club a couple of weeks ago. The person he blamed the financial problems on was his predecessor, Jose Maria Bartomeu. With wage costs exceeding revenues by 115 percent, one can understand his frustration.

However, the almost $1.6 billion that the club has in debt says more about a traditional view of how to conduct business than an individual’s poor judgment. And on the horizon, we now see how Silicon Valley – with both its innovations and compensation structures – is beginning to find its way into the sports world.

The first indication of this is how the super star Lionel Messi, from the just mentioned FC Barcelona, ​​negotiated his new contract with the French soccer club PSG. In addition to a salary of around $41 million per year, he also received a bonus in the club’s own cryptocurrency, called $PSG Fan Tokens. The cryptocurrency can be used to influence smaller decisions in the club. But it can also be traded – and speculated on – as any currency. After the news about Messi, the club sold fan tokens for another $35 million. The price is now up over 350 percent in one year, according to Coinmarketcap.

Cryptocurrencies are a way to take advantage of the strong fan culture that prevails in the soccer world. By going directly to your fans and involving them with both commitment and financial incentives, you can create a more direct relationship. There are already clubs that are publicly traded today, including the English Manchester United and the Italian Juventus. But the shares there do not come with any promises of more impact on the business than an average investor who owns shares in an industrial company. Mostly a theoretical idea, in other words.

Today, much of the soccer world’s revenue comes indirectly from fans. These include club memberships, ticket sales, merchandise, and TV rights to broadcast the games. The TV rights are where the really big money is, but there are also many middlemen before the fans’ TV subscriptions finally reaches the club in the form of revenue. A separate cryptocurrency bypasses many of these intermediaries and reaches fans directly, although the company Socios – which provides the technology for PSG’s cryptocurrency – also takes a share. PSG is not alone in creating cryptocurrencies. Clubs such as Manchester City and AC Milan have also launched their own variants, as has the Soccer Association of Argentina.

Someone else who has reacted to Barcelona’s poorly managed economy is the Silicon Valley legend Mike Moritz, partner at the venture capital company Sequoia and board member of Klarna. In an op-ed in the Financial Times, Moritz writes that the soccer world should look at Silicon Valley and its way of compensating its employees. If Barcelona paid Messi with shares in the club instead of just cash – and in addition ensured that he had to sell the shares when he left – then both parties in the deal would have been in a much better financial position, Moritz states.

Paying with options and shares is standard with the big tech companies, but unusual in a sports context. It is, however, not impossible. When David Beckham left Spanish Real Madrid to play for LA Galaxy in the American MLS league in 2007, many were surprised. However, part of Beckham’s contract was an option to buy an MLS team when he had stopped playing. Since 2013, he owns part of the club Inter Miami CF, and paid a greatly reduced price to get them into the MLS league.

Silicon Valley influences the outside world through both technology and behavior. The technology NFT, which a year or so ago seemed obscure and a bit absurd, is today one of the American basketball league NBA’s newest and fastest growing revenue streams. In total, they have sold digital NFT collector images via their service NBA Top Shot for over 700 million dollars.

One of PSG’s other big stars – Kylian Mbappé – is now said to be on his way. If so, what will his compensation look like? Will he get cryptocurrency to change clubs? The soccer world – with its enormous global interest – has so far only scratched the surface for how technology could help them grow even more.

This column was first published in SvD Näringsliv, in Swedish, on August 28th, 2021.

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