Dubbing Miami “The Tokenized City” — Starting with AmericanAirlines Arena
Note: We are fully aware that the sponsor rights to the Miami-Dade County arena are still in negotiations, and that the name “AmericanAirlines Arena” name may be changed in the future.
Preface
The tokenization of assets provides massive value to all parties involved. Due to the industry’s nascent nature, tokenized securities (and the process of “tokenization”) are most commonly understood through real estate and tangible assets. Generating X amount of security tokens for a property with the goal of distributing/collecting a proportionate value of cash flows and capital appreciation can be comprehended by most finance professionals. Let’s explore “less tangible” examples to really see the power that security tokens unlock — starting with AmericanAirlines Arena in what’s soon to be the token capital of the world…Miami, Florida.
Links in the AmericanAirlines Arena Value Chain
The Miami Heat professional basketball franchise is an institution to the city of Miami. Similarly, the arena in which the team competes year after year has solidified itself as an icon in not only the city, but across the United States as a whole. From basketball games to concerts and live performances, the arena spans all demographics and levels of luxury. The next step in solidifying AmericanAirlines Arena as an upper-echelon entertainment center is tokenizing the following verticals in its value chain:
· Luxury Suites & Boxes
· Season Tickets
· Crowdsourced Venue Improvements
Luxury Suites & Boxes
The Heat organization can tokenize the tickets and rights to the arena’s boxes and suites. This allows them to trade on a secondary exchange which accomplishes two things.
1) It allows the Fair Market Price of the suite tickets to vary and reflect certain opponents and events directly, due to supply and demand with visible liquidity.
2) It eliminates high markup fees that current ticketholders may experience when selling through ticket marketplaces like StubHub, Vivid Seats, and SeatGeek
o StubHub charges a 10% buyer fee and 15% seller fee
o Vivid Seats charges upwards of 15% the total ticket value in fees
o SeatGeek charges a buyer’s fee that varies based on the popularity of the event while charging a 20% seller’s fee
By tokenizing suites and boxes, the Heat are siding with their fanbase over ticket marketplaces. Offering fans a new medium of exchange with less excess fees offers game access to a greater portion of the fanbase and increases the likelihood that fans will finalize ticket purchases and thus follow through in attendance. Partnerships and dealings with the above-listed ticket marketplaces will likely take a hit since the supply of suite and box tickets may decrease on their respective sites, but this is a worthwhile experiment for the organization.
Focusing solely on Luxury Suites & Boxes allows us to determine and improve the tokenization process, rather than trying to capitalize on the entire arena capacity on the first iteration. The organization will be able to see how their suites and boxes are trading in the secondary ticket marketplace, and use the data to improve future execution. Eventually, this process can be rolled out for season ticket holders and general tickets, but the key focus is on the suite and box holders. Since Suite & Box owners are more likely to be involved in the franchise than other general ticket designations, tokenization of these rights will help the Heat Organization collect more feedback and actionable data to better service and interact with the fanbase.
Further, Suites & Boxes can now be seen as investments and even offer a new investment bundle uncorrelated to traditional asset classes. Investors can buy tokens in the Suites & Boxes with the goal of price appreciation on the open market throughout the season. People across the country already make use of sports betting — this can even be seen as a long term bet on the Heat’s season. This also blends two groups with the common goal of a dominant Heat season — ticket holders who are die-hard Heat fans, and investors who would like to see a demand increase in their tickets.
Finally, tokens can offer Suite & Box ticketholders certain voting rights in regards to arena decisions. Examples include new construction/additions, vendors, specialty/promo events, and improvements to the holistic experience. This relates back to fanbase interaction and provides a deeper set of data for the Heat organization to work with.
Season Tickets
As mentioned earlier, using the Suite and Box ticketholders as a baseline for tokenization, this process can eventually be rolled out to the season ticketholders. Season ticket holders may arguably be even more active in the organization than suite holders (ex. Boxes & Suites may be occupied by corporate accounts, businesses, clients, etc.). The same points above apply directly to season ticketholders — especially viewing season tickets as an investment.
Holding tickets for every Heat home game in a season can mean frequent reselling of tickets. Frequent reselling of tickets through StubHub and Vivid Seats means profits are constantly being eaten into by the costly seller’s fee. Tokenized market trading would very likely accompany a much smaller seller’s fee (trade commission) which can really add up over the course of a season. Further, it is unlikely ticketholders can make it to every home game, and often season ticketholders find themselves giving away at least a few tickets or selling them below market value last minute. Being able to see market depth at any given point in time will help season ticket holders plan ahead and maximize their returns.
Crowdsourced Venue Improvements
While the Heat organization may be able to take care of most arena upkeep and improvements internally, there may be future situations in which the organization looks for alternative financing solutions. Rather than obtaining traditional third-party financing, there is an opportunity for the Heat to connect further with its fanbase — its lifeblood.
By crowdsourcing the funds required for a new arena project through a token launch, fans and prospective investors can be incentivized to contribute through perks offered by the Heat organization. A useful analogy here is imagining a university building that is named after a prominent alum. That alum most likely donated an extraordinary amount of money and time to immortalize him or herself with the school. While it is unlikely any typical fan would be able to contribute enough to a professional NBA franchise for similar treatment, a group of fans may be more successful.
Raising funds through a security token launch directed at Miami Heat fans can offer perks of the organization’s choosing, and will likely save the franchise money when compared to a traditional loan or capital structure. One perk could be as follows: “Fans who purchase 10 tokens (valued at $10 each) will receive 2 regular season tickets for the 2021–2022 season. The game will be selected by the organization.” On the surface level, it may look like the organization is giving tickets away and losing money. In reality, 10 tokens equates to $100, which would value each ticket at a $50 breakeven level. Since there is no interest liability to repay tokenholders (like there would be with traditional debt financing), the true breakeven price of a ticket is closer to $55, relative to the cost of repaying a loan. Depending on the game and the section of the seats, the organization can save money on the deal WHILE strengthen its connection with its own fanbase. This is a prime example of the organization investing in itself and its future.
A separate example of tokenholder perks based on levels of involvement can include open practice viewings, player meet-and-greets, and arena tours. The organization can decide upon levels of involvement (essentially, involvement = amount invested) and reward fans based on these tiers. Player meet-and-greets reserved for the upper-tier investors, open practices for the mid-tier, and arena/locker room tours for the lower-tier. These perks shouldn’t come with a significant monetary cost, and therefore may prove to be extremely beneficial for the Heat organization. Once again, not only does this execution reduce the organization’s costs, but it also deepens the relationship with contributing fans, which serves to continue bringing future revenue in.
Partnership Potential: Security Token Group <> Liquiditeam (https://www.liquidi.team/)
Liquiditeam is a blockchain-powered fan engagement and sports tokenization platform. Using the team’s recent deal with soccer club Borussia Dortmund as a framework and Security Token Group’s distinct understanding of Miami, tokenization can successfully be brought to the Miami Heat and AmericanAirlines Arena. Liquiditeam should be able to take care of the token mechanics and execution, while Security Token Market (STG’s data arm) can bring the project to market.
“The city of Miami has so much money flowing around…it’s time some of that money flows into the future.” — Herwig Konings
