Socios – Arsenal Must Walk Away From This Deal

Yesterday I wrote about ‘the Arsenal way’ and how that phrase has been devalued over the last 30 or 40 years so that it’s essentially meaningless. Of course it’s not just Arsenal that’s changed; since money started pouring into football nearly all clubs have been dragged into the never-ending race to get more and more money (either from commercial deals or just pumped in by owners) and spend more money, or risk getting left behind.

A lot of this has been at the expense of supporters, who have endured enormous ticket price rises and new ranges of overpriced merchandise every other week, alongside fixtures being moved to suit broadcasters, massive travel costs, a dozen different TV subscriptions and generally sub-standard catering, because clubs feel no shame in gouging fans as much as they can while telling them it’s all for their own good.

The pinnacle of gouging so far is the recent trend for NFTs and links to cryptocurrency, Players and ex-players keep popping up to encourage supporters to buy their ‘valuable’ and ‘unique’ digital offerings, while clubs have gone down the route of contracts with cryptocurrency firms, of which Socios is the most pervasive.

A brief explanation: Very simply, NFTs (“Non-Fungible Tokens”) are digital ‘assets’ (and I use the term loosely) that can be individually owned. So an NFT is an electronic representation of a piece of art (also a loose term) you can buy and only you then own – a bit like buying a physical piece of original art. If you bought the Mona Lisa, only you would own the Mona Lisa, but of course anyone else could have a physical (or indeed digital) copy of it, but we’d be able to tell the copies weren’t the original and weren’t worth as much. Obviously digital items can easily be copied, so with NFTs what’s to stop anyone else having an exact copy of what you own? Well, nothing – but ownership is registered on a technology called blockchain, which ensures that the single ownership is recognised across all computers by means of timestamped keys that can’t be duplicated. Blockchain is also used for establishing ownership of cryptocurrency such as Bitcoin and the ‘Chilliz’ that Socios use. The only difference is that any piece of cryptocurrency is like any other piece of cryptocurrency (in the same way that any ten pound note is like any other ten pound note), and it’s just the ownership aspect that’s protected by blockchain rather than ensuring uniqueness. 

Arsenal and other clubs have made deals with Socios that mean fans have to buy units of ‘Chilliz’ in order to then buy ‘fan tokens’ of the club. The value of both Chilliz and the tokens is variable. The clubs tell supporters they are a way to engage ‘with the club you love’. Your extra special unique chance to vote for what it says on the side of the team bus, or which kit should be worn in an away game where more than one of the current colour options don’t clash with the opposition.

Socios and the clubs they’ve made contracts with want you to believe they are providing you benefits, but there is absolutely no engagement via Socios that Arsenal could not easily have provided anyway using existing channels. Arsenal might make around £5m in the first year of the Socios deal (that’s my top estimate), and I’m sure Socios showed them projections of how that would grow year on year as fans bought more and more tokens and feverishly traded them. That scenario looks more unlikely by the day, with very little interest in trading from normal fans. The traders are speculators, hoping that demand stays strong just long enough for them to make a profit and cash out.

This is the essence of all crypto and NFT schemes where the item you’re buying has no utility and no intrinsic value. So the real purpose of Socios is simple: it’s to make people richer – but not any people, specifically the people who invented the crypto-currency that Socios uses. They want you to buy Chilliz, then buy Socios tokens with that, and they want you to believe that the price of both these things will go up. They want you to think that something they’ve invented has some value, and will have more value soon, so buy it now while it’s cheap. And if enough people believe that the price will go up, then there will be enough demand for the ‘product’ that the price does go up. Then Socios can decide whether to make money by flooding the market with more tokens to meet demand, while taking commission on every trade, or restrict the supply to try and keep the price high and generate interest. And speculators can decide at what point exactly to dump what they own and move onto the next hyped-up non-utility digital token to make a killing there.

The whole scheme relies on a constant supply of new mug punters to come in and buy, always with the promise that the price will go up, whatever level it’s currently at. It’s a classic pyramid scheme rebadged for the digital age.

New schemes are cropping up almost daily, as players and ex-players offer the chance to purchase their range of ‘collectibles’. Do any of them actually understand what they’re doing? Yesterday the Sportemon Go website (presumably a play on Pokemon Go, though I was reading it as Sporte Mongo to begin with) put a message up saying they’ve ceased trading. They’ve apparently made deals with Scottish clubs including Hibs and Rangers, but don’t worry you can swap your worthless token for some other worthless token that hasn’t yet completely collapsed.

If you’re still daft enough to click on ‘Buy’ you get a message that says this:

Does that message make you think this is something worth having? But that’s not Arsenal, so what about the Socios Ts & Cs? They include things like this:

“No guaranteed token functionalities. 

The User understands and acknowledges that the Token Functionalities of a Fan Token are not conclusively defined at the time of its issuance and that the Provider has the right to add additional or remove existing Token Functionalities at any time at its sole discretion and/or based on instructions of the respective Partner. The User further understands and acknowledges that the addition of Token Functionalities by the Provider is not guaranteed, and that Fan Tokens might therefore not provide the User with any Token Functionalities at all.”

So you buy something that they have the right to make completely worthless at any time and you have no redress.

Assuming they haven’t played that card yet, when it comes to voting (or ‘surveys’), Socios have the right to weight the vote any way they like, giving holders of multiple tokens greater weight, but not necessarily in proportion to their holding. In other words, they can make the result whatever they want. It’s lucky the votes are all meaningless because “Fan Token holders will never have the right to vote on any strategic management decisions that are reserved to corporate bodies or vested in directors and shareholders of the collaborating Partner, Provider and/or Operator to receive profits that are generated by the collaborating Partner, Provider and/or Operator or otherwise participate in any revenue streams of the collaborating Partner, Provider and/or Operator.

And let’s not forget the tokens have been marketed as being ‘for life’, when the terms explain that they become worthless if and when Arsenal’s deal with Socios ends. Goodbye, and thank you for your cash, it’ll be very useful.

The terms go on for many pages but the summary is that you, as purchaser and holder of fan tokens, have no rights.

So why did Arsenal get into this deal? How did it get past their due diligence? A letter written by Arsenal within the last couple of weeks includes this: “I can assure you that as a club we conduct appropriate due diligence through independent experts on all our prospective commercial partners and their industries.”

I wonder who these independent experts are? Who is advising Arsenal to go into partnership with a company in a completely unregulated industry, for a product that becomes worthless as soon as the commercial relationship with Arsenal ends? “What happens to the customer?” is surely the number one question on the due diligence list.

The Advertising Standards Authority (ASA) has already taken Arsenal to task back in December, saying that the club had been misleading and “failed to illustrate the risk of the investment”. “Investment?” You mean ‘fan token’ don’t you, Mr ASA? This is just a benefit for fans, not an investment – that’s what the Socios Ts & Cs say…

In March there were news reports that the entrepreneur behind Socios had been busy manipulating markets, and even Arsenal woke up and said they’d ask questions. Have they got any answers?

This evening (3 May) is the last Fans’ Forum meeting of the season, and Josh Kroenke is in town. No doubt he’ll be telling forum members to “Be excited” and say how fully behind the manager he and Stan are, while carefully avoiding specifics of whose money is being used for anything (it won’t be Stan’s – see yesterday’s blog).

He’s going to get questioned on Socios as well. In the last Fans’ Forum (Josh not present) Arsenal just stuck to the official line that ‘due diligence was done’, though what that entailed and how they investigated an unregulated product and industry has not been answered. It’s time for Arsenal to wake up and walk away from this deal because it’s definitely not ‘the Arsenal way’ any of us want.

Twitter: @P_h_i_1

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