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Earlier in the year the Sacramento Kings were sold to Vivek Ranadivé, the technology mogul credited with digitizing Wall Street. Since then the Kings have infused what Ranadivé calls "NBA 3.0" into the Sleep Train arena and the fan experience. Perhaps the most revolutionary tech implementation is the team's acceptance of Bitcoin as payment, a first in pro sports.
A little background -- the Bitcoin, currently boasting a $289 million daily transaction volume, and complementary fund processor Bitpay operate very similar to online pay service giant PayPal. The core difference is that Bitcoin funds do not need to be tied to a bank account or to an individual; in short it is a decentralized digital currency. PayPal, on the other hand, is a regulated financial institution that links funds to your bank account.
It is important to note that PayPal fees are based on a percentage of sale whereas Bitpay charges a flat fee. This lower cost provides the Kings the prospect to increase net revenue.
The Kings will allow tickets and merchandise to be purchased through Bitcoin. A primary benefit to implementing this system is the virtual point of sale capabilities it creates. The Kings can track and monitor purchasing activity. After mining this intelligent data, management can make more informed decisions on inventory, promotions, micro-target marketing, and customer relationship management efforts. When combining this knowledge with other trends in ticket and merchandise sales like dynamic pricing and paperless ticketing – the Kings are one step closer to Ranadivé's NBA 3.0 vision, which includes "using the franchise as a social network."
"We are maniacally focused on creating the most seamless experience for our fans in all facets," Ranadivé said in a team official statement. "A major tenet of the NBA 3.0 philosophy is about utilizing technology for the betterment of the fan experience, and this is another step in that process."
Does Bitcoin count as revenue?
The potential customer relationship management, or CRM, opportunities that come with Bitcoin also bring forth some complications. The most glaring is the collective bargaining agreement's uncertain classification of revenue when it comes to payment systems like Bitcoin. NBA teams operate under the auspices of revenue sharing. In short, according to an elaborate formula and in the spirit of maintaining competitive balance, money is moved from the wealthiest teams to the neediest.
Certain revenue streams are identified as either locally or nationally earned. For example, revenue generated by the sale of licensed products in the home arena, team-owned retail outlets, and on the team website is captured as local revenue. Revenue generated by the sale of licensed products in all other locations is captured by the league and treated as national revenue.
Digital payments, like that of Bitcoin, blur the lines of distinction for local or national revenue. This is an important development because under the new collective bargaining agreement, a focus is on the inclusion of locally generated dollars from large-revenue teams to be spread to low-revenue teams. Therefore, the question of what constitutes local revenue will reappear as high-tech payment systems continue to evolve.
Aside from league concerns, Sacramento fans are responding to the franchise's improvement efforts. Last month the King's sellout crowd set a world record for the loudest sound produced indoors. It seems the advancements Ranadivé has implemented have reinvigorated the Kings fan base. Some reports claim he is currently exploring the in-game use of Google Glass by members of the coaching staff.
Regardless of what comes next, these changes are sure to be hot topics in 2014 and closely followed industry trends.
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