At just over 200 kilometers from South Korea, the coastal city of Fukuoka has served throughout its history as a gateway to the Japanese archipelago. Over the centuries, new arrivals have entered the country via Fukuoka’s port, bringing with them knowledge, religion, social change and new ideas. Those ideas often take on a life of their own, becoming hybrids that return to the outside world with a Japanese twist.
One of the latest ideas to get the Japan treatment after arriving in Fukuoka is the DAO (decentralized autonomous organization). Local football club Avispa Fukuoka has incorporated the blockchain-based governance mechanism to build out its fanbase, increase supporter engagement and provide an extra source of revenue.
The team currently sit eighth in the J1 League, the top tier of Japanese football, making the club the only high level sports club in the world to operate an internally run DAO — a model its operators say has wider uses beyond football.
“We believe that all professional sports clubs, not just our club, are suited to the DAO model,” said Yoshihisa Hirata, deputy marketing manager at Avispa Fukuoka and a spokesperson for the Avispa Fukuoka Sports Innovation DAO.
“We’re creating new value not just by offering fans the chance to support the club financially. We’re also asking them to participate in club management, make proposals and take part in various projects,” Hirata said.
Digital fandom, which includes the use of virtual reality as well as blockchain technologies like fan tokens, DAOs and non-fungible tokens (NFTs) to bring supporters closer to their favorite teams, is a global growth market. Market research platform ReportLinker values the sector at US$29 billion annually with an expected compound growth rate of 18.1%. That would take its value to US$103.2 billion by 2030.
But Japanese fans accustomed to the traditional ways of doing things may have a hard time buying into those technologies, said sports writer and Japanese football expert Dan Orlowitz.
“They’re easy ways to generate revenue, which is of course what most of these clubs are looking for,” Orlowitz said via email. “You might get the internet-savvy otaku [computer geeks] onboard, but what about the old ladies who spend their mornings watching the U-18s train?”
Clubs will be reluctant to create an “underclass” of fans who aren’t able to actively participate in these new experiences, Orlowitz continued.
“I’m skeptical as to the potential of local use — right now Japanese fans value boots on the ground and grassroots community engagement more than anything else, and I just don’t see DAO/digital fandom replacing that anytime soon,” he said.
Mechanism behind Avispa DAO
Avispa created its fan token during the coronavirus pandemic in 2021 when ticket sales were down due to a ban on fans in stadiums. A number of Japanese sports clubs including Avispa and fellow J1 team Shonan Bellmare partnered with Tokyo-based digital crowdsourcing platform FiNANCiE to produce fan tokens as a new source of revenue.
February’s joint launch of the Avispa DAO was a way to take the fan token project to the “next level,” said FiNANCiE sports division manager Tatsuya Yasui.
“Sports clubs often need outside support to launch new projects or innovate because they operate with limited personnel and funds,” he said. “The DAO mechanism brings in fans and other supporters who make those activities possible.”
The thinking behind the mechanism in the case of the Avispa DAO works like this: the club issues a token, which the fans buy, raising its value. DAO members then use their accumulated tokens to participate in polls and other forms of decision making.
The prospect of increased participation in club activities — the more relevant to the local community the better — attracts a variety of token holders. These are not just Avispa fans, but local community members, regional government officials and anyone with an interest in either sports, crypto or Fukuoka, regardless of where they live.
This again increases the value of the token, providing the club with both additional funds and supporters committed to the club. The DAO buys back tokens at a profit to the holders, who re-invest those gains in more tokens for more perks, more access, more say in decisions — and the cycle continues.
A group of ten current players serve as ambassadors, extending the reach of the DAO’s activities and increasing its appeal to fans. Right back and DAO ambassador Musato Yuzawa told the regional Nisshi Nippon Sports Newspaper in July that “the feeling of belonging to the team has grown stronger” for the players involved in the DAO. Among other activities, Yuzawa has taken part in leafleting campaigns raising awareness about DAO initiatives in Fukuoka.
As the DAO grows, its club and community activities expand and its members diversify, the idea goes, with an increasing cross-section of society exposed to Web3. That then inspires others to set up their own socially-conscious DAOs for further growth of the national Web3 industry.
It’s a growth model that chimes with the Japanese government’s recent pivot toward Web3 — a new phase of the internet built around decentralized blockchain technologies, the metaverse, and non-fungible tokens (NFTs).
DAOs can be a “turning point” for revitalizing Japan’s graying economy and regional depopulation, a government-affiliated Web3 white paper said in December. But it also highlighted the difficulties in operating a DAO, particularly in identifying exactly where the new technology can be put to use — an issue that Hirata admits has affected the running of the Avispa DAO.
“We started out thinking we could build an innovation model in Fukuoka that we could then introduce to the world,” Hirata said. Despite successes including two new Web3 sponsorship deals announced Sept. 7 and a 75% increase in the Avispa token’s price over the past six months, he added that it is now unclear what the DAO should do to make further gains.
“What even is a DAO anyway? What is a token?” he said.
【プレスリリース📝】https://t.co/v6dutDU6mu— FiNANCiE（スポーツ） (@FiNANCiESPORTS) September 7, 2023
The questions are a deliberate oversimplification. But they speak to the challenges faced by those looking to operate a DAO anywhere in the world, particularly in Japan where the government’s enthusiasm for Web3 technologies has yet to translate into widespread adoption. One poll from Japanese marketing agency Dentsu in March found that only around 30% of the population can identify what is meant by the term “Web3.” Of that group, only 10% were confident in their definition.
“It’s really difficult to get things going when Web3 is still pretty much unknown in Japanese society,” Hirata said.
“There are so many things we want to do with the Avispa DAO. But it’s still our first year and we really need to just focus on raising awareness and establishing our operational foundation,” he said.
For Tatsuo Oku, a blockchain evangelist and a member of the Tokyo-based Blockchain Collaborative Consortium, the lack of a blueprint for DAO adoption in Japan is preventing the idea from taking root. He pointed to the multitude of DAO models both inside and outside the country, each one based on a different definition of what a DAO is depending on the views of its founders.
What the Japanese Web3 space needs, he said, is a “central driver and contributor to make DAOs a reality.” Without that, he said, Japan’s fledgling DAOs are in danger of folding.
Chance to lead
The question, then, is can the Avispa Sports Innovation DAO take on that leadership role, not just as an example for other DAOs, but as a new model of digital sports fandom?
Since the Avispa DAO’s launch in February, J2 football club Thespakusatsu Gunma and the Saga Ballooners basketball club have adopted the DAO model for themselves. FiNANCiE revealed on X, formerly Twitter, on Sept. 5 that the Avispa and Thespakusatsu sports DAOs currently top its in-app community building chart.
Japan’s J1 League is dominated by club’s owned by the nation’s largest companies. Global auto giant Nissan Motor Corporation, for instance, has an 80% stake in current champions Yokohama F. Marinos. At US$46 million, the club’s annual revenue is a fraction of the US$780 million generated by English Premier League and European Champions League title-holders Manchester City, who lead the football world in terms of revenue generation.
But it’s still a significant increase on the US$22 million generated by self-proclaimed “citizen’s club” Avispa Fukuoka. Without the support of a large corporate owner, the club’s revenue is the second lowest in the J1 League and less than J2 side Yokohama FC. It’s also a yo-yo team with the longest league history without winning either a league title or one of the domestic cup competitions.
“We are reaching a point where it’s difficult to win the J1 without spending, say, Yokohama F. Marinos money,” said Japanese football expert Orlowitz. “For clubs like Avispa it’s about spending smart, not big, and (ideally) developing academies to the point where they can become a selling club.”
Avispa have already had success in terms of nurturing homegrown talent. Youth system graduate and Fukuoka native Takehiro Tomiyasu, a Samurai Blue national team defender at last year’s Qatar World Cup, played for the first team before embarking on a successful career in Europe, including at current team Arsenal F.C. in the English Premier League.
One of the promises of the Avispa DAO is to give token holders access to the academy and the decisions, financial or footballing, that could help produce the next Tomiyasu. It’s a way for the club to spend smart rather than big, with the need to do so set to become more acute from next season.
J1 League chairman Yoshikazu Nonomura has identified Japanese clubs’ lack of an international fan base as a factor limiting the J1’s growth. To help build teams big enough to generate the kind of domestic and overseas fan bases needed for the league to catch up with Europe, he announced in January that the top nine teams in 2024 will share an additional 2.1 billion yen (US$14.21 million) on top of the broadcast revenue and other funds distributed throughout the league.
In eighth spot, five points above 10th-placed FC Tokyo with eight games to go in the current season, Avispa Fukuoka will need all the help it can get to stay within that privileged bracket. And while the DAO’s operators say they do not see the governance model taking over from private ownership any time soon, Orlowitz said it could at least help build smaller Japanese clubs’ profiles overseas where knowledge of Web3 is higher.
The challenge, he said, will be converting digital support into actual fans. Until then, he said, the promise of greater fan participation in the running of their clubs via DAOs and other forms of digital fandom will remain a “pipe dream.”
If the dream can succeed, FiNANCiE’s Yasui said, the Avispa DAO and others like it can offer a way for sports fans to add value to their favorite team “on the same footing” as the clubs. But Orlowitz remains unconvinced.
“It all sounds nice in theory because I think everyone has a nostalgia for the day when the fans were the club, as opposed to simply being customers, but it’s a really difficult bell to unring,” he said.
Forkast’s ‘Crypto in Sport’ part 1: Real Bedford — Bitcoin, football and the bear market