NFTs in football? Enter Liverpool FC

4th May 2022

View the PDF of this article here.

In a further example of blockchain technology and NFTs becoming increasingly mainstream, Liverpool FC (LFC) last month announced its own non-fungible token (NFT) collection, the “LFC Heroes Club”. Confused by the terminology? See our videos What is a blockchain? and What is an NFT? for a brief explainer.

Each NFT features artwork of one of 24 LFC men’s team players (depicted here), with LFC NFT owners being promised further benefits such as access to competitions, unique experiences, virtual hangouts and retail discounts. Commendably, LFC’s charity, the LFC Foundation, has received more than £281,000 as a result of the launch through a substantial share of the sales proceeds.

A developing pattern

LFC’s effort is notable as it represents the first time a Premier League football club has launched its own collection of NFTs. That being said, this is not football’s first venture into the developing digital world, with players (and even LFC players) endorsing, buying and selling NFTs, and clubs exploring the benefits of using blockchain (see our previous feature on Manchester City FC’s foray into the metaverse).

As they become more understood and sought after, the interest in NFTs and blockchain is likely to continue, both within and outside of sport. The Premier League is reported to have granted ConsenSys the right to produce NFTs based on still images, with Dapper Labs potentially having the right to produce video-based NFTs which may result in the hugely popular NBA Top Shot model being replicated in football. Trading card/fantasy football NFT-based crossover platform Sorare also continues to grow, recently announcing partnerships with Major League Soccer and the Scottish Premiership.

The LFC Heroes Club

LFC appears to have made efforts to counter some of the criticisms often levelled at NFT offerings: the club sought to communicate the product with a glossy explainer video and included clear warnings advising some caution:

“Heroes Club NFTs have been issued as collectible items and not as an investment. However, we remind you that: (a) the value of Heroes Club NFTs can go up or down; (b) Heroes Club NFTs are currently not regulated investments under the Financial Services and Markets Act 2000…”

and:

“The decision to purchase Heroes Club NFTs requires careful consideration. You should spend only what you can afford and always seek independent advice if you are in doubt. You should not purchase any Heroes Club NFTs if you do not fully understand the nature of your purchase and the risks involved.”

LFC created the NFTs on Polygon, considered to be one of the more energy-efficient blockchains. This is of note considering that blockchain has also been at the centre of debates around energy consumption, drawing criticism for contributing to climate change, whereas some claim its use on a wider scale will actually increase efficiency. LFC even has a dedicated sustainability initiative known as the ‘Red Way’ programme.

Click here to watch our recent webinar “Blockchain and Sustainability – Friends or Foes?”

Despite these efforts, the project was not hugely successful on launch – it was reported that 95% of those NFTs available went unsold. LFC will likely be assessing the reasons for this, whether that be a lack of demand, a lack of understanding, prohibitive pricing or a combination of the three.

Tips when incorporating NFTs in your marketing strategy

It is possible that some football clubs may be feeling compelled to make an NFT offering available: LFC commented that research indicated “almost a quarter of 18 to 34-year-olds would be likely or very likely to participate in official NFT offerings from the club”. This could be seen to represent significant demand and result in a desire to get something to market quickly, but clubs should not overlook issues such as:

• What IP rights are granted to NFT holders and whether these are communicated with sufficient clarity to (1) be compliant with applicable consumer legislation and (2) be effective in preventing misuse beyond how the club expects the NFT to be used (and the club’s remedies in the event that IP misuse does occur)?

• How the NFT offering will be managed throughout the product’s lifecycle – can promises regarding virtual hangouts, ‘giveaways’, exclusive access, etc. be maintained on an ongoing basis? And how does the club bring the NFT to an end?

• How much control is being relinquished to a third party partner – if the club is not creating the whole offering in-house, some reliance is being placed on that third party to ensure the success of the initiative and avoid reputational damage/embarrassment. Can the club continue the offering in the event the relationship with the partner ends or the partner ceases to exist? Has adequate due diligence been undertaken in respect of that partner?

• The extent of any exclusivity being granted to a third party – if the NFT offering results in a commercial partnership with a third party, a football club should be careful about the scope of any exclusivity being granted to that partner as it could be far more prohibitive than may first appear. A partner will want to take as much exclusivity as possible but consider whether it should extend as far as blockchain, fan tokens, cryptocurrencies, even all NFTs – these could all be lucrative revenue opportunities in the future and a broad grant of exclusivity may cut across that.

• What fans may think – LFC’s venture encapsulates what a club’s fans’ response may look like, but it is by no means determinative. Is it possible to seek out the opinions of key stakeholders before going to market?

Want to learn more from our Technology & Digital experts and be the first to receive important updates, developments and events from the team? Then sign up for our newsletter, the Technology & Digital round-up here.

How we can help

Contact Luke to discuss your NFT project further. Want to learn more from our Technology & Digital experts and be the first to receive important updates, developments and events from the team? Then sign up for our newsletter, the Technology & Digital round-up here.

A member of our Technology & Digital Group, Luke Jackson is a contracts lawyer with expertise in both acting for football clubs and advising on technology arrangements. Recent matters include fan-facing websites and apps, fan token launches, procurement of an ‘over-the-top’ streaming platform, NFT advice and purchase of e-ticketing, player analytics and other sport-specific software. Luke is also a go-to advisor for a number of clubs on commercial matters – advising on sponsorships, stadium hire and merchandise procurement and licensing – affording him an insight into the unique challenges faced by football clubs that is rare among specialist technology lawyers.