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Why the likes of Inter, PSG and Barca are banking on Socios fan tokens to help generate new revenue

Socios.com has grown its roster of partners from 20 to 48 in the last seven months alone. Having already generated nearly US$200m in 2021, Alexandre Dreyfus, the company's founder and CEO, explains why some of the world's most recognisable sports teams are opening their eyes to the business of fan tokens.

6 August 2021 Sam Carp

Alexandre Dreyfus is well within his rights to sound enthusiastic.

One by one, the deals have been trickling through. And with each partnership announced by Socios.com, the blockchain-based fan voting and rewards platform founded by Dreyfus in 2018, comes what the French internet entrepreneur believes is further endorsement of the company’s strategy to bring supporters closer to their favourite sports teams.

Even in the time writing this feature, Socios has announced deals with top-flight English soccer clubs Everton and Leeds United, who this week became the 47th and 48th partners of the Chiliz-owned platform, joining other Premier League sides such as Manchester City and Arsenal, in addition to major European teams like Barcelona, Paris Saint-Germain and Juventus

A piece published by the i newspaper in March even went as far as describing Dreyfus as someone ‘who could yet shape the future of European football’, but the man himself doesn’t quite subscribe to that theory. 

“I would never say that,” laughs Dreyfus, the chief executive of Socios and Chiliz, speaking to SportsPro from the south of France. “I don’t think we can do that, and that’s not our goal anyway. It’s just to support clubs to achieve a better connection between the fans and themselves.”

Alexandre Dreyfus, chief executive of Chiliz and Socios.com

'Instead of owning a share of a company, you own a share of influence'

The obvious question, then, is how does it work?

The teams that have partnered with Chiliz have done so in order to launch their own fan tokens – or collectible digital assets – on Socios. Supporters can then buy fan tokens using the $CHZ cryptocurrency, which secures them the right to vote on club decisions such as kit designs, goal music and where the team might travel for its pre-season tour – although the polls are ultimately decided on by the clubs. Unsurprisingly, the more tokens a fan buys, the more votes they get in club polls.

As it turns out, fan tokens are in high demand. When Barcelona, for example, launched their initial fan token offering in June last year, they sold out in less than two hours, generating US$1.3 million for the cash-strapped La Liga side. Clubs determine the price of their tokens, but the revenue from when those tokens are either traded or sold is split 50-50 between the teams and Socios.

The sports industry will move from a passive fan to an active fan industry, where fans will have more influence.

In 2021 alone, Socios claims its fan tokens have generated close to US$200 million in revenue, meaning its partners are in line for a share of around US$100 million, depending on how many they have sold. 

With that in mind, Dreyfus believes that Socios is serving a purpose for an industry where sports properties have “reached a ceiling” from a revenue perspective. He points out that teams can’t sell more tickets than they have available, nor can they increase ticket prices exponentially due to a potential backlash, while there is evidence that income from sponsorship and broadcast rights is plateauing in many leagues.

What they can do, though, is find new ways to monetise their following in what Dreyfus describes as a global and scalable way.

“Our business is to support clubs to generate additional revenue,” he adds. “And that revenue comes from an idea that we started three and a half years ago, which is a belief that the sports industry will move from a passive fan to an active fan industry, where fans will have more influence. Of course limited [influence], but still influence, and that influence can be monetised. 

“We think that fanbases can be monetised, not in a way that it's about the fans that are in the stadium and the community around the stadium, it's actually the 99.9 per cent of people that are not in the stadium, and not even in the city of the team they are supporting.

“So we came with this vision that two things matter for a fan: one is being recognised as a fan, and even though I'm in Korea, in Japan, in Brazil, or in France, or wherever, I can still be recognised as a fan, because that's what sports is today: it's global, it’s not local. And suddenly, as a recognised fan, I can have a say.”

Dreyfus acknowledges that using the term ‘polls’ can make Socios’ offering sound “basic and gimmicky”, but he rejects the suggestion that the things fan token owners are able to vote on are inconsequential. He also stresses that it is different from taking part in a poll on a social media platform such as Twitter given that fans are part of a community who have ultimately paid to participate.

“The reality is what we really offer you is a share of influence,” Dreyfus adds. “Instead of owning a share of a company, you own a share of influence. 

“Last week, for example, PSG asked their fans what cover of the FIFA 22 they wanted to have for the PSG edition. It's small, but yet it has never been asked before. What is the music of Juventus every time they score a goal in the stadium? Maybe it's a small thing, but yet it was never asked before.

“It’s about all this education that we have to do towards the clubs, the fans, the media, and even the sponsors at some point, and now we need another two, three, four years to really push this to go to the next step. 

“But, for us, the foundation is this influence, this participation, this recognition of me being a fan and being able to be part of this community, this new digital community that gives me a new way to interact with my team.”

'You cannot buy legitimacy, you have to earn it'

Socios, whose name derives from the Spanish word used by the likes of Barcelona to describe their members, has actually been around for a while, but many people won’t have heard of the platform until recently. The company says it has grown its roster of partners from 20 to 48 in the last seven months, while it has also been busy taking its first steps into new markets and sports outside of soccer. In addition, Socios made mainstream headlines this summer when it unveiled its inaugural shirt sponsorship deals, first partnering with La Liga club Valencia before announcing an agreement with Italian champions Inter.

Indeed, the first SportsPro article about Socios was published in late 2018, but Dreyfus says it has taken time for the business of fan tokens to gather the momentum it appears to be accumulating now.

“Nobody wants to be first, nobody wants to be last – especially in the sports industry,” he notes. “I think it's a matter of education. Clubs like Juventus and Paris Saint-Germain were the first two to partner with us. They took a risk, they got massively rewarded financially in terms of the revenue we generated for them, and they became our best ambassadors.

“The thing is, all of these teams, they talk to each other. So they call each other and say, ‘hey, can we have more information about your partnership with Socios? Does it work? Are we legit? Did you really get paid the amount you got paid?’

“You cannot buy legitimacy, you have to earn it. We are still in a very early stage, but today we are still in the process of trying to earn that legitimacy. Every time we add more teams that are powerful brands, the more we become legit. And therefore all the other teams want to be part of this, because they do see the value today which they may not have necessarily believed two years ago. And that's fair.”

Unsurprisingly, there has been an element of scepticism among supporters about Socios’ attempts to monetise their engagement. Premier League side West Ham United, for example, were forced to abandon their deal with the platform last year before even issuing a single fan token following criticism from their fans.

At the time, Kevin Miles, the chief executive of the UK’s Football Supporters’ Association, claimed that Socios’ model “attempts to monetise fan engagement which the leagues and clubs have committed to doing for free”, adding that “there should be no financial barriers to engaging with your football club”.

Dreyfus, though, is keen to highlight that it is written into many of Socios’ agreements that season ticket holders or paying club members have the opportunity to receive a fan token for free. He also reiterates that the company’s aim is to generate revenue from fans further afield, rather than those who buy tickets to games every week.

“I say that unfortunately they don't read what we are doing,” says Dreyfus, when asked what he would say to those who are critical about the concept. “Our target is not to monetise the traditional, hardcore fan. Our target, as I said, is to go after the 99.9 per cent of fans that are not in the stadium.

There is a bit of bad faith from some supporters’ associations that don't want to try to understand what we do. At the end, it's not for everybody, and nobody forces you to be part of it.

“Number two, they are arguing that ‘we should not pay for that’. Now, as I said, it's free. But ironically, the fact that they say that shows that they actually think that what we do is valuable. They want what we do, but for free, which we actually give them. But if it was free for everybody, it will not work.

“So there is a misconception. That's why it's all about education. There is a bit of bad faith from some supporters’ associations that don't want to try to understand what we do. But it's okay. At the end, it's not for everybody, and nobody forces you to be part of it.”

Dreyfus also rejects any suggestion that the Socios model could lead to a scenario similar to that involving Football Index, the UK-licensed product that enabled users to bet on the future success of individual soccer players. The company went into administration earlier this year following a major crash on its market, before suspending trading, deposits and withdrawals on its exchange, leaving many customers with money trapped in the platform.

Socios allows fan tokens to be sold on the app’s marketplace, and their price does fluctuate according to supply and demand, but Dreyfus says the comparisons end there.

“I never heard of [Football Index] before it collapsed,” he notes. “In our case, not only do we not do gambling, but most importantly, you actually buy something that is valuable. When you own a token of a team, you can vote, you can get a five to ten per cent discount at the club shops, you have VIP experiences in the boxes, and then tickets, etc.

“So when you buy a fan token, sure, the price may fluctuate, but the value of the service is still there. So the price is just conflation of what fans and users think it is. That doesn't change the fact that there is value against it. There is a service, there is a benefit.

“So it's obviously completely different. And it's done in partnership with the teams. So there is a commitment to provide value – not as a financial value, but as a utility value.”

The New Jersey Devils became Socios' first partner in the US at the end of April

'The US is a different animal' 

Whatever your opinion on the long-term viability of the business of fan tokens, the speed at which Socios has become a familiar name within sports industry circles is difficult to ignore. According to Dreyfus, the company now has nearly 140 full-time employees across regional headquarters in Madrid, Istanbul, Sao Paulo and Buenos Aires, with that number set to grow to 200 by the end of the year.

Chiliz will also open a new office in North America as part of the company’s plans to spend US$50 million on its expansion in the region. The National Hockey League’s (NHL) New Jersey Devils became Socios’ first partner in the US at the end of April, while it also now has deals with the Philadelphia 76ers and the Boston Celtics of the National Basketball Association (NBA).

Dreyfus reiterates throughout that there is plenty more to come.

“The US is a different animal because the regulatory framework is much more complicated and changing than everywhere [else] in the world,” he says. “So we have to be more cautious the way we approach it. And we have our own strategy there.

Our mission is definitely to be the major player in our space there and that's why we are securing a relationship with most of the biggest brands already.

“The US is way, way behind in terms of global fan monetisation, their domestic market is huge. Therefore it always has been very profitable, but like everybody else they are facing challenges. So the question is, how can you grow that revenue?

“It will take a few years to pick up, but our mission is definitely to be the major player in our space there and that's why we are securing a relationship with most of the biggest brands already.”

What Dreyfus describes as “most important”, though, are his global ambitions for Socios and how the product is going to evolve in the coming years. In the first instance, he says that Chiliz is “going to sign more and more teams”. Based on the company’s recent track record, only a brave individual would doubt him.

“Now, for us, there are a few keys,” Dreyfus says. “One is to have a better product. Our product is still in a very early stage. We need more features, we need more utility, we need more community tools, we need more innovation. That's not all about trading or voting, but about the gamification. So we can focus on that, the product is going to be critical.

“And then it's going to be the marketing, because funnily enough, when you think about it, we never did proper marketing. We leverage the promotion that the teams are giving us, but we didn't do TV advertising, or digital advertising, or YouTube, or Instagram, or whatever. We don’t do that yet.

“So now that we have 50 plus [partners], and eventually a little bit more, now it makes sense for us to actually promote our product in order to do user acquisition that eventually is going to translate into revenue. But it would have been too early to do it before.”

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