A King’s Currency
On Jan. 16, the Sacramento Kings announced that they would become the first NBA franchise to accept bitcoins. Starting March 1, fans will be able to buy tickets and merchandise in exchange for the virtual currency. The team, stationed in the capital of California, is no stranger to using new technology within their business. One of their recent marketing strategies uses Google Glass to give fans the vantage point of their favorite player during a dunk or defensive set. They have also utilized the Google technology to assist the coaching staff during games.
However, if successful, their acceptance of bitcoin may have the biggest implications for the rest of league and the sports world.
Launched in 2009, bitcoin is a virtual currency that allows for direct transactions between consumers and merchants without the use of banks. It allows for an anonymous and untraceable purchase between two parties. Currently, there are three ways to acquire bitcoins: through a bitcoin virtual marketplace, mobile transfers and mining. In a bitcoin marketplace, users can purchase bitcoins in exchange for different currencies. The market price for one bitcoin on Feb. 28 was $572.05. The public also acquire bitcoins through mobile apps that allow for the transfer the currency. Lastly, people can acquire the currency by mining which involves using software to generate new bitcoins.
Like any business decision, accepting the bitcoin comes with gains and risks. The Kings’ ownership changed a year ago to prevent the relocation of the franchise. With new management, the timing is perfect for the Kings to introduce new technology and practices within their business.
The Kings hope that the introduction of the bitcoin will make transactions more convenient for NBA fans. Utilizing bitcoin will make allow fans take advantage of the currency’s anonymous and unregulated transactions thus allowing them to leave their wallets at home. Bitcoins will also allow fans to purchase merchandise without waiting for the currency to be assessable. Unlike banks, bitcoin transactions do not have waiting periods around weekends or holidays. Therefore, transactions will be able to be processed during days that banks when banks are closed.
There are also several disadvantages to the accepting bitcoin. Bitcoin have been known to be volatile with constantly fluctuating exchange rates. If the value of the bitcoin were to plummet, the Kings franchise could be at risk to lose money. There are further risks regarding the inflation rates of bitcoin. The most recent December consumer price index stated that inflation was at 1.3 percent while bitcoin is at a 98 percent deflation rate. Essentially, the bitcoin currency is declining in value against the dollar. Furthermore, by nature of the currency, the rate of new bitcoin generation is slowing over time which is predicted to further deflate the value of bitcoins. Although these risks have not detoured proponents of the currency, West Virginia Senator Joe Manchin has been lobbying for a ban on bitcoins.
From comparing the potential gains with very real risks, bitcoin does not seem like a secure decision for the Kings. While intended to increase the ease of transactions, the average basketball fan will most likely continue to use cash, debit or credit cards. While, bitcoin’s recent rise in popularity makes the decision worthwhile, I believe that the venture will not be as successful as expected.
Ultimately, it is hard to believe that bitcoin will replace the current prominent forms of payment. Bitcoin does not offer additional transactional convenience except to the select few users of bitcoin. For the Kings, bitcoin seems to be a high-risk, low-reward decision considering the immense fluctuations in value. However, if the acceptance of bitcoins proves to generate greater revenues, the Kings will be commended as innovative early adopters in the NBA causing other teams to adopt similar policies.