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Is Web3 the Future of College Athletics?
Interview with Malcolm Lemmons of The Hype Report
Trey Layton
March 03, 2023
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Happy Friday, folks.
At this point, wake me up when things are settled in the West.
Not even a week after it was reported that the Pac-12 was leaning towards signing its new media rights deal with Apple TV+, a new report has emerged claiming that the conference is ACTUALLY nearing a deal with… (we’re sure this company is real? not one of those “imagine dragons” or “candace” jokes?) ION, a cable company with 61 regional networks.
Your grandparents might know them as the home of cinematic masterpieces such as NCIS, NCIS: Los Angeles, and NCIS: New Orleans. If it ain’t broke, right?
Until things are officially signed and delivered, it’s probably best to just acknowledge but not internalize these updates. Both sides have their PR teams working overtime like LeBron on the Cavs to hurt the other’s case for more/less money as the conference continues negotiations with all parties, including Apple and Amazon.
Admittedly, the conference doesn’t hold much leverage, and it’s facing two pretty unappealing options:
Take less money from an ION or maybe ESPN and have mass distribution (y’know. between episodes of Law and Order)
Or secure a bigger revenue payout for its members from a streamer but have games that nobody sees because fans are unwilling to subscribe for terrible football, further hurting the conference’s already damaged national image
If you’re ever stuck between choosing to either be seen alongside Blue Bloods or The Morning Show, well. Good Luck, George.
The ground is shaking… ears are ringing… Spaghetti on my sweater already or something…
No, it’s not an earthquake. Instead, it’s the thundering War Chant echoing out of Tallahassee as the Noles yearn for a bigger paycheck.
Last week, in a meeting with the Board of Trustees, Florida State AD Michael Alford reportedly informed the room that the cost of pulling a USC and bolting the ACC would be a hefty $120 million. The alternative? Wait until the current agreement with the conference expires in 2036(!)
Alford pointed out that the school was unhappy with the conference revenue distribution policy whereby despite FSU generating 15% of overall revenue, the school receives the same diluted 7% yearly payout as Boston College. No offense, Eagles.
It’s also important to point out that rather than the ACC being some CFB manifestation of Marx’s vision, this distribution system is utilized by about every conference in the country.
Why even put himself through the strenuous mental gymnastics that is recognizing that 15 is bigger than 7 (you laugh, but after seeing most of these coaching contracts, this is a massive step forward for ADs)?
Because this 1/14-sized slice of the pie equals a minuscule $17 million annually, an amount which will soon set it behind rivals like Florida by roughly $50 million every single year.
Alford went on to claim that the school would only need 3 years to pay back this exit fee, but I do question his numbers on this one. The school doesn’t have the rights to its own content for more than a decade as part of the ACC’s infamous Grant of Rights. What exactly is it providing to a potential conference suitor?
More likely, and the approach which it seems FSU is really targeting, is a restructuring of the ACC’s media rights. The current agreement isn’t sustainable. While it’s unlikely that the Noles (and Clemson) will get the proportional revenue distribution makeover they so desire, changes will have to be made, or the entire conference will fall into line with the Pac-12… potentially only finding its games between Xmas movies on Hallmark in its next media rights negotiation.
Quick update on A&M. After breaking another barrier preventing direct player compensation and having the first official booster club enter the NIL space, it appears the NCAA recognizes the Pandora’s box that this could open.
The organization issued a thinly veiled warning shot at schools, stating that schools could not directly pay players, nor could they provide benefits to affiliated organizations to use as rewards for enticing NIL donations. Didn’t even have the courage to @ them.
When it’s not the Aggies being the target of CFB’s NIL-era wrath, it’s the Miami Hurricanes. It should come as no surprise, then, that the Canes are the first school in history to be hit with NIL recruiting violations. Yay team!
John Ruiz, billionaire founder of MSP Recovery and devoted UM alum, has been arguably the biggest individual name in NIL since its inception, constantly dominating headlines with his flashy deals for the school’s athletes, many of whom have signed deals with him before they’ve even signed with the school.
Unfortunately, this finally got him into trouble, and interestingly enough, it was women’s basketball that proved to be the incriminating event.
Haley and Hanna Cavinder have been social media sensations for years, even prior to enrolling to play at Fresno State a few years ago. The twins entered the transfer portal after last season, and Ruiz decided that the duo would look best in green and orange as he had the two over for an impermissible dinner before they had committed to take their talents to South BeachCoral Gables.
The NCAA decided it has had enough of the Godfather of NIL, and it hit the school with sanctions. Head coach Katie Meier was forced to sit for three games, and there were some minor recruiting penalties like reduced official visit allotments. However, none were too painful.
More importantly, there was no punishment for Ruiz himself, something many are crying about on Twitter. The punishment many had in mind was a disassociation, a measure which would have barred him from interactions with the team and special seating in the stadiums. This would have been about the worst the league could have done, but in issuing the penalties, it warned that the next violator might not be so lucky.
While notable for being the first of its kind, there’s not much to see here. The pre-NIL investigation into Tennessee for paying recruits with cash hidden in McDonald’s bags is far more interesting imo.
As for real consequences, I’ll believe it when I see it.
Possibly the nicest thing I’ve done for you people is putting you on Malcolm’s work. Even before you read the interview, do yourself a favor and check him out on Twitter and subscribe to his newsletter.
Too excited to warm you up. Let’s get into it.
Earlier this week, I sat down with Malcolm Lemmons, former pro basketball player-turned expert on how tech is changing the world of sports. He’s founded multiple companies in the space and has become a go-to resource for businesses, coaches, and most importantly, athletes on interpreting the changing world around us and embracing this change.
Most recently, Malcolm has devoted himself to covering all things web3 and has started The Hype Report to cover everything happening in the intersection of sports and this exciting new technology.
“Web3? Ain’t that the Monopoly money that the curly-haired guy got arrested for?” asks 99% of the population.
Frankly, the space hasn’t done much to dispel these accusations thus far. However, this innovation actually has the power to shape all things brand, economics, and community forever.
Posting the YouTube video. Really encourage you all to take the full 20 minutes to watch because I promise that you’ll learn a ton. However, in case you’re in a time crunch, I’m also summarizing our conversation below.
Also really looking forward to your feedback on the interview format. I enjoyed doing this, and if you guys want more content like this, let me know. Maybe I’ll get Nick Saban next week?
Key Segments:
How do you think web3 could have impacted your own career as a player?
“I think the space is still figuring itself out. During the pandemic and even coming out of 2022, we saw this hype train (no pun intended) of like NFTs being sold for millions of dollars and so much conversation but not really understanding the value or the utility behind what NFTs can be. I think the conversation is kind of formulating in the space really trying to figure itself out for what it can be long term”
“When it comes to college athletes and even my experience, it was a totally different ball game, and then what it is now with NIL, I think when athletes start to think about how they can utilize things such as NFTs to build a brand, you have to look at it from the perspective of how can I engage my fanbase or my audience and provide them with a vehicle to deepen the connection that I have with them? How can we utilize this technology to to build a deeper connection with the people who love us the most? And so I think that's where teams, leagues, and even athletes need to be looking.”
How much traction has this technology gained so far among college athletes?
“It's still very early. Some programs have started to explore what they can do with NFTs, specifically, and even virtual settings. Two universities that come to mind are Clemson and BYU. BYU launched an initiative where they had a a platform specifically for NFT holders to purchase certain memorabilia and collectibles of their players.”
“We're now in this phase where everybody's experimenting and seeing what they can do to increase that engagement with their fans, but we're still a long way off before it becomes mainstream where people really understand what a digital wallet is, so there’s still this big learning curve that we have to get over before we start to see widespread usage by universities and athletes utilizing blockchain.”
Do you think there is a technological barrier to widespread usage and experimentation?
“I think partially. I think more so is the language that we use. A lot of the language that people who have been in the space for a while use can be somewhat of a barrier to entry because things such as ‘non-fungible tokens’ can be intimidating for your average person to understand or to even want to learn more about. We have to reshape and reframe the way we're communicating blockchain and how we're onboarding more people into the space.”
“How are you positioning your product in a way that somebody doesn’t even realize they're being onboarded into web3? It's about how we're communicating it and how we are onboarding people into the space where they're not even realizing that they're using web3.”
How do you think NIL has impacted the college athletics landscape?
“I think NIL has been super beneficial not only for the athletes but also the social impact. Athletes using and partnering with brands that have a charitable aspect tied to it and giving back to the community, or athletes using brand partnerships to help their teammates who might not have the same following or opportunities.”
“I think we still have has a long way to go in terms of removing bad actors from the space and putting some more regulation around it. I think that it's important to make sure that this new rule is being upheld accordingly, but as it kind of figures itself out, I think in hindsight, we'll see NIL being beneficial for all parties involved.”
Combining that with web3, how can the two be combined to really capitalize on each’s potential?
“Athletes can utilize this technology not only to build their brands but to help other people. For example, an athlete starting an NFT collection can tie in utility, like a meet and greet, and the funds can be funneled to the athletes’ favorite charity, and then when those things are resold, because of Blockchain technology, those royalties can go back to the charitable organization.”
“Athletes can utilize web3 to not only have a social impact, but also to build a deeper relationship with their fanbase and to connect with the people who are going to follow them during their careers and even afterwards. So a lot of it is just about thinking outside of the box and partnering with people who can align with that vision. Building a team around you that can help you build these projects.”
What are some of the areas of web3 that you think have the most potential but have yet to really be explored yet?
“The metaverse has a lot of use cases, and brands have started to explore that. The World Cup had a lot of activations like with Roblox and Visa and Budweiser. They did a lot of experimenting, and the feedback was really great. Looking at how digital and virtual experiences are trending upward within sports and having fans engage in a virtual setting, I think the industry is going to be huge in the next five to ten years.”
“With NFTs, digital assets can provide everything from ticketing to having exclusive access to rewards and loyalty. There are so many different things that teams and leagues are doing when it comes to utilizing NFTs to create deeper connections with their fans.”
“I think we have to take a step back, everybody building in the space or implement these different technologies, to understand like what problem are we solving for our audience? For our consumer? How are they going to utilize this in their daily lives?”
What do you see as the endgame for the technology’s role in sports?
“In the perfect world, every team will be issuing NFTs.
Along with a physical ticket, there will be NFTs for ticketing. You would be able to provide the team with more data on every consumer, so they'll be able to create personalized experiences. For the user, you can have access to exclusive opportunities for meet and greets, reward points, loyalty, you name it. The experience would be streamlined and more efficient for both sides of the equation.”
“When it comes to athletes and their fans, athletes will be utilizing this technology to build deeper connections, to raise funds for their favorite charity, or creating experiences for their closest fans. These deep connections will also provide them opportunities in life after sports.”
What advice do you have to any athletes looking to take advantage of the potential of web3?
“Building your brand and just do your research. Due diligence is everything. I spent six plus months just reading, following people on Twitter, diving into white papers, reading articles, and just learning. You've got to know what you're getting into before you get into it.”
“People are going to say ‘Oh, don't invest in crypto’ but have you done your research? It's the same thing with the stock market. You’ve got to know what you're getting into before you get into it. You're going to make mistakes either way, but you can mitigate those mistakes by having the knowledge that you need to have beforehand. It'll take you where you
need to go.”
Truly great stuff, and the summary couldn’t do the conversation justice. Encourage you all to check out the full vid, and connect with Malcolm and follow his work.
Again, if you liked this change of pace, let me know. If you’re tired of watching me nerd out about this stuff, let me know, and I promise I won’t be offended. You’ll just get blocked and reported, nbd.
Cheers to another day,
Trey
