In the future, the most successful sports teams will be owned by their fans. In Germany, there's a rule, the 50 plus one rule, where 51% of the club needs to be owned by the fans. And so, you can sort of create like a self-reinforcing economy with these crypto assets. Recently, the Deloitte Money Football League report was launched, and Real Madrid is a football club that is making more revenue. The Green Bay Packers, which are one of the most valuable NFL teams, is a very similar setup to Real Madrid. We've actually probably never seen the best F1 drivers because they probably never drove a car.
Hello and welcome to a new episode of Game Day. Today I'm here in London with Peter. Peter, nice to meet you.
Thank you for making the time. It's really a pleasure to be here at Game Day. We try to tell the game behind the game. We try to give people a view of the sport industry and the business behind sports. And we're doing that with many executives from different backgrounds. I'm very excited to be here today and talk about the possibilities of blockchain technology and crypto in general for the sport industry. But before getting into the topics that we will discuss, it would be great if you can introduce yourself and tell our viewers how you got here, how you built Blockchain.com, and a little bit your journey till now.
Sure. And thanks for having me on the podcast. We're very lucky we get a sunny day in London which is exciting. So Blockchain.com started as an open source software project. So there were three of us that were really interested in Bitcoin because it was only Bitcoin at the time. And so we were building sort of tools to make Bitcoin more useful. And so you know, Blockchain's always been a company that responded to consumer demand and then later to institutional demand and then later to enterprise demand. And so what I mean by that is like we were building solutions for folks in the Bitcoin space and then later the digital asset space as a whole. The company, as rather than an open source software project but a company, got started in about 2013. We raised our first venture capital in 2014 so about 12 years ago now. So well as the end of 2014 so 11 years. And it's been a really incredible journey since then. You know, today we run one of the largest consumer businesses in the industry, about 40 million verified users. We run one of the largest institutional businesses in the space. We have about 2,000 clients around the world.
And then we run a large infrastructure business. We're sort of one of the largest stakers, one of the largest liquidity providers to exchanges globally, as one of the largest validators in the world as well. And so really a key sort of piece of the backbone of the industry from both a consumer perspective as well as an enterprise perspective. And one of the things I like to tell people is you know even if you don't have an account with us which I suppose like 20% of all crypto accounts are with us but if you're not part of that 20% you almost certainly have traded with us at some point because we are usually the liquidity or processing behind about half of the space. And so you know what does that mean from a sort of practical perspective? It means a lot of volume. You know I think in the last two or three years we've done about 1.5 trillion of transactional volume.
And so you know every day there's a lot of bits and atoms floating through our systems. And you know our mission is to help keep crypto running and keep it running smoothly.
That's incredible numbers and congratulations on such an incredible journey and I think you're one of the biggest experts that we have in blockchain and in crypto in general. In sports, the relationship with the crypto world has had a lot of ups and downs. We had the early 2020s where everything exploded especially after COVID with NFTs and you have many projects like I don't know Sorare with the fan tokens, NFTs as I said before, companies like Dapper Labs that are doing very interesting things using blockchain. But there was a time where I felt that every company was using the blockchain word to make them look cool, but the product was not really using the blockchain technology in an effective way. I'm curious to get your view on how do you think blockchain technology and crypto can help the sport industry changing a little bit the way we interact with fans or find alternative revenue models.
Well, I think one of the challenges in emerging technology generally is that the first uses of it are usually like fad driven. So you know if you go back to the original like to the internet actually you know the first uses of the internet were very fad driven. What I mean by that is people didn't move business communication online like that wasn't the first form of online communication like that wasn't how the internet was used for communication. It was used ICQ which I'm becoming old now but like ICQ was these like servers where you basically just hopped on and chatted about random stuff with random people. And so that eventually that technology eventually and it took almost 20 years became Slack. And then of course Microsoft Teams copied Slack, right? But it took 20 years for sort of chat communication on the internet starting at ICQ to eventually become serious business communication. And now I think probably most tech companies and almost every company in the world runs on some combination of Microsoft Teams and Slack. But that took 20 years, right? And so usually in technology, like the first application of something is very much a fad. And I think you saw that in that wave you're talking about in 2020 in sports. Now, what do I think will happen when it moves from sort of fad and like gimmick to real? I actually think that in the future, the most successful sports teams will be owned by their fans.
Today, most sports teams are owned by families or, you know, increasingly there's more private equity. I think you're going to see an arc where a lot of the families sell to private equity. The private equity messes them up as they do most things. And then those private equity teams, you know, will eventually, you know, end up in the hands of their fan base. The best way to do that is to honestly put that on a public protocol on a blockchain and have a native digital sort of internet asset. Why? Because one you can incentivize certain behavior. So you can you know distribute ownership to particularly dedicated fans. You can pay fans for working in the stadiums. You know as you probably know one of the biggest challenges to a football stadium NFL or football here in Europe is the fact that you need a huge amount of employees like 15 to 20 days a year,
right? Which that's a difficult thing to do.
Well, if you had everybody who own part of the team, you could pay them in the sort of currency of the team itself to be working at the stadium, right? And so you can sort of create like a self-reinforcing economy with these crypto assets. And I think eventually people will apply those to teams. And you can even extend that even further and think about players, which are the number one cost of sports teams. If you were paying players in all or part of a token that was attached to the value of the sports team, every player on the team would be incentivized to make that team more valuable. And I think, look, you can have very valuable teams that aren't that don't win.
It's very difficult. For the most part, the teams that win are the most valuable ones.
Yeah. Right. And so, in the long term, at least. And so I think that you know using these sort of digital assets you can sort of decentralize the ownership and brand value. You can basically bring your whole fan base, your employee base, your players into the process of making the equity of the team valuable. And when you have everybody sort of rowing in the same direction and economically incentivized to make something valuable it's a lot easier to make it valuable. And so I think you'll see you know a couple teams do this kind of out of desperation and then it will really start working and teams will almost have to do it to compete.
I think this is a very interesting view because when you look at the US market as you said most of the teams are owned by family big families or wealthy individuals or private equities. But when you come into Europe the ownership of the team is completely different. Yes, you have more and more US private equity especially investing into Europe and in the UK you have many examples with all like I don't know Liverpool with the Fenway group or Manchester United owned by the Glazers. In Italy now there's a lot of investment from US firms with many private equities that own AC Milan, Inter and some of the big teams. But there are very interesting examples like for example in Germany there's a rule that no private owner can own more than 50% of the club that 50 is the 50 plus one rule where 51% of the club needs to be owned by the fans. And in Spain for I'm a Real Madrid fan and Real Madrid doesn't have an owner. It has 80,000 members that own one share and every four years you run for elections and you know it's a very political thing and you have that in Real Madrid you have that in Barcelona you have in many football clubs that are actually owned by the fans. But the fans in reality are not participating on the economic incentives of...
Yeah because I mean so basically you do have sort of fan ownership. You have fan I wouldn't say fan ownership in Europe and it's specific to Germany and Spain, right? Because anywhere where there's not a rule that's long gone away. What you have is not so much fan ownership but fan collectives. So for example in Real Madrid like they can't really there's you can't really buy and sell the shares from my understanding. Like the shares do not freely trade.
No, no, no, no, no. You have actually if you want to become a member, you have like there's a waiting list. It's a fixed thing.
It's a fixed thing. Yeah. And so the problem with that is like everyone's not experiencing the collective upside of Real Madrid success. And so, you know, you don't have like and this is why the elections are a disaster in Real Madrid and Barcelona as well. It's like other than the clout of saying that you're involved, there's absolutely no reason to try to improve Real Madrid as a Real Madrid fan or quote shareholder because they're not really shares. It's like some collective scheme. And I think what we've seen historically is that like collectives and which is sort of a communist concept are not very good at increasing the value of an asset. And so you sort of have like two opposite poles inside European sports right now and America. You have like families, private equity, and then like these collectives. And by the way, we have a collective in America as well. I don't know if you know this.
Oh, really? Which are one of the most valuable NFL teams. Is very similar setup to Real Madrid.
Yep. It's owned by the fans, but not really owned.
Yeah. Yeah. Like not like it's not equity. It's, you know, like more of a membership.
Yeah. Which is also why the Green Bay Packers play in sub freezing temperatures in an open air stadium because they have never been able to raise the investment to build a roof.
To build a roof. Interesting. Well, in Real Madrid, the case is that we had for many years a very strong businessman and he has driven the value of the club forward in terms of you can argue his policy, many things, but in terms of economic valuation and how he's been managing the club from a financial perspective, there's nothing you can tell because at the moment is the most recently the Deloitte Money Football League report was launched and Real Madrid is the football club that is making more revenue. So, it's very interesting what you are saying about the ownership and how blockchain can enable a more effective ownership of the club to the models that we have in Europe.
And you can think of these crypto protocols and networks as like orchestration. It's like collective economic orchestration. And what I mean by that is, you know, one of the big challenges in human life is how do we get a bunch of people to cooperate towards one common goal.
Right. And a crypto network enables people to do that one very efficiently and two with very little trust of each other. And the efficiency was super important because, you know, I don't know how many fans Real Madrid has now, but I remember reading somewhere that like at one point that Manchester United had like over 200 million fans. Right. If you think about like, okay, if Real Madrid and Real Madrid probably is something like that, probably 150, 200 million fans, right?
But there's only 80,000 collective memberships, right?
One of the coolest things they could do is make the 200 million fans owners of Real Madrid. But how would you administer having 200 million members or owners rather than 80,000? Be really difficult. Unless you used a crypto protocol or a blockchain where you could sort of automate all of this at a smart contract level.
Yeah, it wouldn't be difficult at all. And it's interesting because I started actually my career at Real Madrid when I finished my university was my first work experience. And it's incredible how important. So if you think about Real Madrid, it's a global brand, but when you think about their communication and the way they do things, it's incredible how influenced they are about the local press because at the end of the day, 80,000 the president needs to make these 80,000 people, 80,000 fans happier than anyone else because they are the ones that vote every four years and then make sure that...
But they're probably not the ones that drive the economic success of the club.
No, probably not. Yeah, because now marketing so for sure Fly Emirates is not paying millions just to talk to these 80,000 fans. And talking about sponsorship, you have a really successful partnership with the Dallas Cowboys. I'd love to understand from the brand's perspective when you approach sports what are the things that you're looking for as a brand, what is the impact that sponsoring a sport club like the Cowboys, one of the biggest franchises in the world, brings to Blockchain.com?
Yeah so I think there's a couple things you're looking at. There's like tangible and intangible value. On the tangible value front like you're looking to buy the most amount of impressions for the least amount of dollars. So, one of the reasons that, you know, folks want to prioritize like want to chase after like a Cowboys sponsorship and it was very competitive at the time actually is that they play on Thanksgiving and Christmas on national TV in America at home. So, if you're a stadium sponsor of the Cowboys, you know that you're going on national TV regardless of how good they are twice a year.
And they're always pretty good.
That's the other thing. You don't want to sponsor a team that's like bad. You want to sponsor a team that's consistently above average, and they are. You also like know that they're going to play on national TV twice. They also have the most fans of any NFL franchise. So, they have I think it's like by an order of three times. Why? Texas is big. Yeah. And they have a lot of fans in Mexico. So, it just kind of like, you know, that's how it broke down. But they're going to get featured more on Red Zone which is kind of a strange concept to people in Europe, but ESPN, the main sports show in America, has this show called Red Zone where they just show people going into the end zone scores. And so, you know, the Cowboys are always because they have the most fans, all of their scores are going to recaps are going to make it there. So, you're going to get more views. So if you look at how many views like you know how many times is the Tampa Bay or Jacksonville Jaguars or the Bears going to go on national television versus the Cowboys. It's a huge huge gap. So that's sort of like quantifiable and then there's just sort of like intangibles. You as a brand want to be associated with another premier brand you know tier one to tier one. So, you know, like with Emirates, right, in Real Madrid, like, you know, Emirates is a tier one airline. They want to be with a tier one football team.
Very similar to us, like we were a tier one company, want to be with a tier one football team. And so there's and in this case, the Cowboys are the biggest team. You know, if we went out and we sponsored say like a random club from, you know, a random part of France or random part of Italy, everybody would be like, whoa. like why like they'd be like is Peter from there this local team? You know and I would have loved...
I think you'd be surprised how many times the sponsorship decision in sport especially comes from this...
No I wouldn't be sentimental I wouldn't be surprised because I because people sponsor the F1 and the only reason to sponsor the F1 is if you're a massive fan of the F1 because the numbers never work. That's and I'm a huge F1 fan and so I would have loved for the numbers to work for the F1, but the F1 like quantifiably doesn't work. And so that's you I know exactly how much money is spent because people are fans of something. Yeah, it's called every sponsorship at the F1. But yeah, you know, it's for us it was a very, you know, was a quantifiable thing and then also an intangible thing as well. And it was partly driven by the fact that we have had historically a big and embedded user base in Europe and the UK and we wanted to expand into the US. And so we did that partnership right at the beginning of our expansion into the US.
Okay. So it was a key component of your growth strategy into the US.
That was the main goal when you were thinking about the...
And you have to line those things up, right? You have to look at like, you know, it has to all match up to be successful.
Yeah. I think the other thing and the last thing I would say is, you know, when I talk when people talk to me about doing sports sponsorships and what would I look for or optimize around, you're going to end up spending a lot of time there. Clients want to go there. Investors want to go there. You know, you're going to end up spending a lot of time in that stadium. You really should pick a sponsor that you actually enjoy seeing. Not, and I don't just mean the game. I mean, you know, that you enjoy seeing the GM that you enjoy seeing the CEO or president of, you know, Real Madrid. In this case, you know, like I have a really good relationship with the Jones family. I, you know, have a lot of respect for Jerry and Stephen as entrepreneurs. It's like it's a joy to go see them and to be in Dallas and they have really a phenomenal hosting ability. you know, they are, and this is something I would say about them that's fairly unique, always go they're always amazing at helping us host people at the games, staying in touch, you know, really being phenomenal partners. and you're going to spend so much time there that you really got to pick a place that you're happy about going and a team to work with that you're happy about doing things together because you know it's people talk about sports sponsorships and I really think that they're more like sports partnerships you know like you are sending them money but you're trying to achieve a common objective together and you got to really like your partners or it's going to be a long deal.
And sometimes it's as you said it's very very... I think with sports you have this unique thing that unifies people like nothing brings people together like a sport does. And you always are happy to enjoy that sense of human achievement and that's why I think sports will not be it's one of the few entertainment industries that is not going to be disrupted by AI other types of entertainment because disrupted... but not completely what I mean completely substitute. So I cannot imagine a world where robots playing AI robots playing American football will be more interesting than actual people playing football and even in sports like F1 where technology plays a key role and AI is obviously changing the way things are working. you still have one person driving the car. And I don't think autonomous car driving, self-driving car will be more interesting that cars driven by people.
No, I would agree with that. I think that the athletes will be more important than ever. Yeah, I think it'll be easier to become an athlete than ever because for example, you know, there's probably been 10,000 better F1 drivers born and died than the best F1 drivers that we've seen drive. The reason is that like becoming an amazing F1 driver is like it's basically an accident of the lottery.
You have to have the aptitude, but you also have to be born into a family or a place where you can go through the karts, right? And so there's probably been like we've actually probably never seen the best F1 drivers because they probably never drove a car. And so I think what you know the way technology will change it is the simulations will get so real that it will take the cost to train to become an F1 driver down to the point where the available pool of drivers is 100x what it is today, maybe a thousandx.
And so I think because of that the drivers will get more important and races will get more exciting and it will completely change the race. But you know from like a perspective of it'll also be easier to field a team. You'll need less people. You won't really need a wind tunnel. You won't you know but at the end of the day will anyone want to watch autonomous drive cars drive around a track? I don't think so because they'll all drive the same.
Yeah. Now, I think it'll change the sports business and it will change the talent pipelines, but I think people will still want to watch people play. I think generally, you know, people, it's funny, people ask me a lot like what I'm investing in like with the whole AI thing and it's always entertaining because I'm not an investor. I'm an entrepreneur. But I think that the safe category things you can put your money to work in are like hard materials, hard money, and then entertainment. Because I think the demand for entertainment is going to go up pretty exponentially and you can actually see that already. You know, if you look at the value of the entertainment industry in 1900, it was tiny. And then we had invented mechanized farming and we went from, you know, about 75 to 80% of the human population basically working full-time on feeding the human population to 7 to 8%. That was sort of the last big revolution of this scale that we've seen. And in that revolution, the value of the entertainment industry went up about, you know, somewhere around a thousandx over a hundred year period.
And I think that you'll probably as we go through this next iteration, I think you'll probably see another exponential several orders of magnitude exponential increase in the value of entertainment. And although if you look at all the entertainment landscape, sports and I think music, they both have a similar thing in common which is that it's the only entertainment that you need to consume live. So in a world where everything is consumed on demand, sports needs to be consumed live and nothing is better than the experience of going to the stadium and enjoying that common sense with belonging with the fans. Now I will say that I actually think that the music industry I think musicians are going to become less valuable. The reason that I think musicians will become less valuable and are already becoming less valuable is if you look in inflation adjusted terms they're making less money today than they used to. The reason is probably because it's become easier to be a musician. So there's more of them.
And so you know nowadays like you know go back to the Beatles there's no auto tune for the Beatles. like you had to get up live on stage and deliver that and it took insane talent and nerves of steel. Now like we have live autotuning, live patching, the productions have become as much about the show as they are about sort of the vocals or you know like you can swap out the musicians. And what's interesting is a lot of the best paid musicians in the world today are actually DJs.
Who are not singing live at all. Right. or playing an instrument live, right? The you know the person who's probably going to make the most money over the next decade in the music industry is a DJ. You know probably either Tiësto or Black Coffee like and so because like the technology has made it easier to be a musician and has made it easier to be a musical entertainer. I think that you know that sector will actually the sector will grow. I agree with you, but the individual value of being a musician is declining.
Okay. Yeah, it's a really interesting view. Going back to the Cowboys partnership, you know, the first thing and this has been I'd say the traditional business model of the sport industry that essentially has been transferring the attention and the audience to a third party whether it was a sponsor or broadcaster. So if you look at the business model, it basically lies on three big revenue sources. Media rights, sponsorship and events, merchandise or commercial businesses. The media rights business model. It was essentially, you know, the sport properties selling their rights and a third party that was a broadcaster talking directly to the fans. I think with technology that business model has been challenged. So for tier one properties like the NFL or the NBA or Premier League, there's always going to be value over the media rights, but the media rights business has been growing over the last 25 years and now it's plateauing or decreasing for many properties. In sponsorships it was a little bit the same. So brands were coming to sports because sports were putting together huge audiences and they were coming just for the visibility. But today as you mentioned before, it's not only the visibility, it's everything that you're able to build around it. So I'm curious to know how are you activating your sponsorship with the Cowboys to make it more effective and drive your business goals.
Yeah, I mean we activate in two ways. One is that we do a lot of institutional and client events there. So we have a hospitality setup in the stadium and do a lot of hosting at the games. The other thing that we do is stadium activations. So we have folks that are doing stuff outside the stadium as well with sort of the fan base there. And then we work with some of the Cowboys players as well. So we do activations sort of across the whole stack. I you know transparently am not the expert on activations or that sort of stuff. So, it's hard for me to go into super detail on it. But we do have a team actually that's based in Dallas that's dedicated to activating that partnership.
Yeah, I saw some of the things that you did and like for example the math book about the Cowboys and it goes completely outside of what you could think a traditional sponsorship would look like. So, I thought that was very interesting. How are you using your brand and the partnership to activate in different areas to try to reach new people. So it's very interesting to see the work that you're doing there because it's not anymore the what you said just the brand visibility, it's also how that can drive your business goals. And when you look at this sort of partnership or the sports landscape, is there anything else that you say or any industries that you see particularly interesting or opportunity to invest especially thinking about your growth strategy or international expansion?
Yeah, I mean I think you know the F1.
You just said that the economics didn't work.
I love the F1. No. I'm kidding. I don't know. I don't know what deal will be next. I think it would, you know, it would be attached to a market entry is my guess. And similar to the last one, I think that we look at a lot of these deals, it's probably a good time to be doing them right now, honestly. But we'll see. I don't know that there's anything imminent on the horizon, but I imagine then if you know it'll be to support a new market.
Yeah. And in terms of global expansion, I'm curious to know because you know people think about when they think about blockchain crypto people think about immediately about the first developed countries but actually blockchain crypto can be enabled for all the people that doesn't have access to traditional banks or financial industry. There's far more users of crypto products outside of the EU and US than there are in...
That's so what are the markets that are more where crypto has more potential in your view or the markets that you are prioritizing? Take a view on potential and take a view on like user numbers. Like you know if you look at Nigeria, Argentina, Venezuela, Colombia, Turkey, the Philippines, they'll all have far more users than the EU. Each one will have more users than the EU.
