In recent times, various platforms have emerged, promising investment opportunities in athletes.
Although they may seem analogous to traditional stock market investments, a closer examination reveals significant distinctions. Most of the "stock markets" fall under three main categories—loan-based systems, performance-dependent platforms, and fractionalized shares all which have major flaws preventing any from operating as a true investment.
In order to determine whether these companies are truly a stock, we must scrutinize whether they genuinely measure up against established stock market investments, and compare to blue-chip companies such as Apple.
1. Loan-Based 'Investments': Big League Advantage and the True Cost of Borrowing
Companies like Big League Advantage operate on a loan-based model. Athletes receive an upfront sum, but at a substantial cost—a percentage of their career earnings. This approach closely resembles a potentially predatory high-interest loan rather than a genuine investment. In stark contrast, true stock investments in companies like Apple yield returns based on the company's performance and growth, independent of personal financial agreements.
Furthermore, there's no actual stock, utility, or interest that is transferred. In these situations, athletes are targeted, loaned money, and required to pay a percentage of their paychecks forever. Always read the contract.
A true investment would align with the overall economy the athlete creates, not pre-tax revenue. Apple would never give shareholders a percentage of sales prior to accounting for expenses.
2. Performance-Based Platforms: Betting on Athlete Output
Platforms like Mojo facilitating fantasy or gambling activities, involving athletes essentially bet on their performance. While this can yield returns during active playing years, it's contingent on continuous participation. Unlike traditional stock investments, which derive value from a company's entire operation and longevity, athlete-based platforms are inherently transient, ceasing once the athlete retires.
This poses two issues, the first being these platforms essentially being gambling platforms with investors "wagering" on an athlete's performance with the platforms also requiring registration with gambling commissions.
In this scenario, the stock is useless after the athlete is retired. A true stock for an athlete would not be dependent upon their statistics nor would cease to hold any value upon retirement. Yes, the value should dip after retirement, but certain athlete economies hold strong well after retirement which shouldn't render the stock completely useless either.
Consider Michael Jordan whose shoe sales are still breaking records, and whose memorabilia and secondary sales are stronger than any active NBA player. Many athletes gain much greater wealth well after their playing days, which speaks to the strength of their brands, with team ownership and production companies becoming part of their portfolios.
see: Lists | Athlete Production Companies
A true investment would incorporate the actual brand of the athlete, not just their performance.
3. Tokenization and Fractionalization: Collateralizing a Career
Efforts to tokenize or fractionalize athletes involve creating shares based on projected earnings. This approach has merit, as it attempts to establish a tangible value tied to the athlete's career. However, it's important to note that these investments still entail taking a percentage of sales, not functioning as true investments.
No company has been able to effectively do this, with many attempting to tokenize having to deal with SEC filings and athlete contracts making this extremely complicated. The now defunct Fantex attempted to do this, but had too many moving parts and was also attached to future earnings making it not widely adopted by athletes or fans.
This method has the greatest potential, but getting athletes to sign up would be very difficult to make mainstream unless there's a way to accomplish this completely outside of an athlete's salary.
Fractionalization passes scrutiny, but a buy-in from athletes would be required in order to get their participation. This could happen with a mutually aligned incentive that both shareholders and athletes share and contribute to just like an actual stock.
Everyone wants to invest in their favorite athletes, we already do in multiple ways all the time, but wouldn't it be more awesome if we were able to invest, get a return, and share in the success of our favorite athletes?
Moving Toward Athlete Commodities: Extending the Shelf Life of 'Stock'
A more sustainable approach would involve viewing athletes as commodities, factoring in not only their active playing years but also their potential for post-retirement success. Athletes like Michael Jordan and LeBron James continue to generate revenue long after their playing days, with merchandise, memorabilia, and endorsements.
A genuine investment into an athlete would tap into these diversified revenue sources, rather than being dependent on day-to-day activities and performance. LeBron James the athlete may not be at his prime, but LeBron James the brand is stronger than ever, and a true investment opportunity would reflect this enduring strength.
In conclusion, while these platforms offer unique ways to engage with athletes, they fall short of truly replicating the stability and longevity of established stock market investments.
To create a more authentic athlete 'stock,' we need to shift toward a model that factors in an athlete's entire career, including post-retirement ventures. Only then can we genuinely compare these investments to the tried-and-true stocks of companies like Apple.
How to do it is very protected information, but the ability to do it in a way that benefits both athletes and fans is on the horizon with the creation of JoxStox.
We can all agree, it should definitely be a thing.