There are a number of developments in the sports world that have occurred in the last 1-2 years that will have a direct impact on how athletes can monetize their careers, and motorsport is no exception. From American college athletes now being able to control their NIL (Name, Image, Likeness) rights to athletes dropping NFTs to support their careers, these are still early days but it is important that drivers understand the ever-changing landscape and how this could affect you.
As a word of caution, it is important to note that NFTs and the cryptocurrency space are quite volatile, especially these days during what some call the “crypto winter“. For example, as of this writing Huddle Up points out how “the non-fungible token (NFT) market has been in a freefall. After seeing a record ~$17 billion in trading volume across all platforms in January 2022, we’ve seen a significant drop in volume virtually every single month since—with August currently not even on pace to reach $800 million in total trading volume.” It is also important to be cognizant of the fact that governments around the world are still trying to figure out how to regulate these technologies, despite the fact that government regulation is anathema to the whole concept of decentralized finance.
With that being said, consider this a brief taste of what is currently happening in the motorsport space and a primer to get you thinking about what you can do in this new world. I also showcase a few articles on what is happening in the wider sports and entertainment ecosystems to give you a feel for what is going on so that you can determine if these developments can apply to you as a race driver.
Name, Image and Likeness Rights
The topic of an F1 salary cap started me thinking of the pros and cons this approach would have for young driver development. My initial reaction was that it would have a negative impact on their development as investors would not be willing to invest as much in young drivers if the payout did not give them an adequate ROI. That is the feeling of F1 drivers such as Max Verstappen. But I am starting to revise my thoughts on this and I will explain why here.
In a recent Green Notebook column, Joe Saward tackles the issue and argues that such a cap may in fact give young drivers even more commercial opportunities than today. The key is in them controlling their NIL (Name, Image, Likeness) rights. “The key is that the stars can make money from endorsements and so investors who put money into youngsters will still get their share of the overall returns. They will not go hungry. These days driver may not be keen to run their own commercial operations but they can afford to pay people to do so, rather than relying on the teams. Drivers can thus earn a lot and if they want more than the salary cap allows them, they can work a little harder to get it. It is actually more of a free market than is currently the case… So what it really means is that that there would be a realignment of the money flows, rather than a loss of revenue. It will add more value to the teams because they will have to pay out less, but it will not impact on sponsorship revenues, as long as the sport remains popular…“
So what exactly are NIL rights? According to Who’s Who Legal, “NIL rights are grouped under the right of publicity, which generally “prevents the unauthorized commercial use of an individual’s name, likeness, or other recognizable aspects of one’s persona. It gives an individual the exclusive right to license the use of their identity for commercial promotion.”” Essentially it allows a driver to control their image instead of a racing team and market those rights to potential sponsors and investors separate from any contract with the team. This opens up a number of intriguing possibilities.
NIL Rights and NFTs
For example, in Marketing NIL rights in an NFT world, attorney Brian Natter explains that “NFTs represent a new marketing opportunity for athletes and celebrities to profit from their NIL rights. Athletes are becoming their own marketing platforms, and athletes and unions are negotiating for these rights to fall outside of the scope of collective bargaining agreements.” While the article is looking at NIL rights and NFTs in the context of college and professional sports in the United States, you just have to look at what race driver Ellis Spieza is doing with NFTs and the sustainable blockchain to understand the potential. And keep in mind that according to Decrypt, Sports Fans are Twice as Likely to Buy Bitcoin, Ethereum, and NFTs. “The world of sports is becoming more saturated with cryptocurrency advertisements, sponsorships, and collaborations every day, and those appear to be pushing more people into the Web3 space. A recent Seton Hall University survey of 1,500 U.S. adults shows an increasing overlap among sports fans and people who’ve purchased NFTs or cryptocurrencies such as Bitcoin and Ethereum. The poll found that 57% of households with an avid sports fan have owned digital assets, more than double the rate of households without one, at just 24%.”
How This Applies to Motorsport
If you take the example that electric racer Ellis Spieza has embarked on with his NFTs on the sustainable blockchain, his approach opens up even more possibilities as it marries NIL rights, NFTs and sustainability, an issue of increasing concern to sports fans and investors, thus opening up the possibilities of green tech sponsorship and B2B opportunities. Ellis is racing primarily electric powered race cars and karts, so the sustainable blockchain aspect is really on point with who he is and what he is doing. As he explains in One Electric Racing Driver’s Guide To Sustainable Blockchain:
As a driver, your helmet is a big part of how you express your individuality, style, and yes, your sponsors. For two seasons I’ve driven with a plain white helmet, but in 2022, I’m finally getting some paint! Seeing my favorite drivers have different helmet designs for every race of the season is really exciting, especially tribute helmets (Senna!) or ones created for different causes. But buying multiple helmets and having them painted is something most drivers simply don’t have the time or money to do (prices for a single painted helmet are in the thousands) AND there is an impact to the environment for every helmet manufactured, shipped, and painted. So, for my 2022 race season, we decided we’d launch a series of helmet designs as NFTs.One Electric Racing Driver’s Guide To Sustainable Blockchain
Bianca Bustamante is a 17-year-old Filipina racer who is using NFTs to achieve her dreams and make history. In March, Bustamante secured a coveted spot on W Series’ Academy team where she has been competing in eight FIA Formula 1 World Championship support races. She is the first Filipina racer to drive in the all-women championship. As NFT Now explains, she is part of the Dark Horse NFT project. “Bustamante launched the NFT Access Pass to secure funding for her rapidly-progressing motorsports career, as well as provide her fans with an exclusive look at exactly how she’s working towards her F1 dream.”
Race Driver Laura-Marie Geissler has launched the first NFT funded Racing team. The NFT project aims to get funds for female motorsport athletes through NFT sales, instead of them relying solely on sponsors. According to NFT Evening, “The unique NFT set includes a 360° render of the livery, a high-res top shot of the design. The buyer’s name will also be on Laura-Marie’s real LMG GT No.1 race car. In addition, her signed Arai GP-6 helmet will be shipped to the winning bidder following the auction.” As Ledger Insights points out: “The solution to this problem is difficult to execute but simple to identify: female drivers need a source of revenue that does not rely on sponsors. Amsterdam Berlin’s project with Geissler is looking to provide just that. “No more being forced to look pretty for the cameras – just pure, self empowered, female racing,” says Geissler’s website.” And as NFT News points out: “The LMG racing team has made the bold decision to forgo all external sponsors, and the team plans to fully sponsor Geissler’s race season through the sale of NFTs. At this point, Geissler is 100% putting her racing career in the hands of fans and NFT enthusiasts.”
While these are all bold decisions, it is just not on the track that boldness is rewarded. An important thing to keep in mind when it comes to NFTs is that these are all part of the story that you want to tell as a driver. NFTs are a way to creatively monetize that story which is important since you are also a business.
Teams are also using this new technology. While teams in series like Formula 1 traditionally hold a driver’s NIL rights, this new landscape will encourage drivers and teams to act together in mutual self-interest as mentioned by Joe Saward in his Green Notebook column. What is good for the driver will inevitably be good for the team and drivers will be able to act in a more entrepreneurial mode, something which they have less incentive to do know since the team calls all the shots.
Losing traditional NIL rights will not lessen the opportunities for teams. In fact there are numerous opportunities that are just know starting to come to the fore. In addition to example of Laura-Marie Geissler above, there are a number of other fascinating developments. While plenty of teams like Dawson Racing are launching NFT collections, some teams are taking a step beyond that into decentralized autonomous organizations (DAO) such as CortDAO and MotorDAO. And then you have the Racing Heads Track Club which are using NFTs to fund access to highly exclusive events, special E-games tournaments, special tours around Europe, private track days around Europe, discounts for tickets at world class races/private events and more.
As in all area of motorsport, changes are rapidly approaching. From how the car is powered to the increase of purpose-driven marketing to the role that sim racing plays in driver development, the opportunities are enormous. NIL rights combined with NFTs are just one area where a driver has the opportunity to promote themselves and their sponsors. Decentralized autonomous organization are yet another. It is a new era and will be fascinating to watch it develop.