Should Your Attraction Sell Crypto/NFT Tickets?

Lago Mar Crystal Lagoon waterpark in Texas City, Texas recently announced that they are selling 2022 Season Passes that leverage “blockchain NFT technology.”

NFT ticketing sounds exciting and forward-thinking, but there are a number of concerns that should make an attraction manager think twice. NFT Tickets don’t presently offer any additional value for either venues or for guests, and there are some serious considerations that need to be explored.

What are NFT Tickets?

A blockchain-based NFT ticket or season pass is one where the information used to validate the authenticity and ownership of the ticket is stored on a “public” blockchain instead of in a proprietary database.

Also, NFT tickets can only be purchased using cryptocurrency.

NFT stands for “Non-Fungible Token.” Mostly you’ve heard about NFTs (if you’ve heard about them at all) in the context of unique, digital collector’s items that you can “own” (but not really own) on the internet. “Non-Fungible” basically means either that something can’t be copied, or if it is copied, the copies aren’t legitimate (have no value) because they aren’t the original.

A media number shown as a barcode on an eTicket generated by your e-commerce system is, in many ways, a non-fungible token. The only important difference is that instead of using your ticketing system’s proprietary, confidential database to validate the authenticity of the barcodes and keep track of who owns what, an “NFT” is going to use a public database referred to as a “blockchain” to maintain this information.

A blockchain is simply a ledger that keeps track of who owns the original. It ties each NFT to a specific crypto wallet so that anyone can validate who has the original and who is trying to peddle a fake copy.

…which, by the way, actually speaks to the other difference between your ticketing system barcodes and NFTs on the blockchain: your tickets can be purchased with cash or credit cards, but NFTs can only be bought with cryptocurrency using crypto-wallets.

Benefits of Blockchain-Based NFT Tickets

Crypto/NFT proponents will give you five reasons that blockchain-based NFT tickets are better that “regular” tickets: First, it will allow you to collect fees whenever people resell your tickets. Second, it will clear up any confusion about ticket ownership. Third, it will allow you to give your NFT ticket owners special benefits. Forth, they are digital collectibles that people will be able to hold on to; Fifth, they reduce your costs.

My impression is that these are “straw-man benefits” based on comparing NFT tickets to paper tickets from 1989. Modern eTicketing systems offer all of the benefits of NFT tickets. But let’s review each benefit in turn.

Ticket Transfer Fees for Venues

One of the most intriguing benefits of NFT-based ticketing is the opportunity for the venue to automatically collect a fee when one person sells their ticket to another person. This is handled through something called a “smart contract” and doesn’t require any extra effort on the part of the venue except during the initial configuration.

Example: Let’s say Bob sells his concert ticket to John for $100. With NFT-based tickets, the following steps would take place automatically:

  1. Collect $100 in crypto from John (the buyer)
  2. Change ownership of the tickets from Bob to John;
  3. Send a $2.50 fee to the ticket venue
  4. Send a $2.50 fee to the blockchain-based transfer tool
  5. Send Bob (the seller) the remaining $95 in crypto

This is a huge win for the venue — presumably, they received $100 when Bob originally purchased the ticket. Now they got another $2.50 without doing anything at all. This is huge!

There are four reasons that it isn’t as good as it sounds.

First, this process is inconvenient for both buyer and seller. What you’re not seeing here is that before John could buy the tickets, he first had to setup a crypto wallet, an OpenSea account, and perhaps a cryptocurrency exchange account. Then he had to transfer his $100 into crypto (and pay the exchange fee). Once Bob receives the crypto payment, he is then going to have to transfer the $95 in crypto into regular dollars (and pay that fee too).

Second, you’re giving up 2.5% (in this case) to a third-party transaction facilitator (like OpenSea). Why? Wouldn’t it be cheaper and easier just to set up your own ticket exchange program (based on dollars, not crypto) where you can allow ticket owners to resell their tickets and then instead of collecting $2.50, you could just receive the entire $5. And you can control the conditions of the sale.

Third, why wouldn’t Bob just Venmo John $100 directly? It is rare that actual “ownership” of a ticket matters — most attractions are not going to ask you to produce a picture id, let along a crypto wallet, before they’ll let you into the venue. The ticket either works or it doesn’t.

Now we should be careful on this point. One of the biggest selling points for NFT ticketing systems is the guarantee that the same digital ticket isn’t being sold eight times, or that the original ticket itself is legitimate. These are things that can indeed be verified on the blockchain.

But it’s also why the Ticketmaster resale service works so well. They created their own exchange and their own database. They collect a fee for the transaction. All without anyone having to set up a crypto wallet or exchange cash for crypto.

Forth, why would you ever let customers resell their season passes, even if you got a fee? Multi-day tickets only work as a concept if they are credibly non-transferrable. Nobody should get to use their pass to visit three times in one season and then just sell it to their neighbor, who can use it and then sell it to another neighbor. We do everything possible, including using pictures and biometrics, to prevent these sorts of transfers.

Clear Visibility Of Ticket Ownership

Another benefit many NFT proponents will tout is that with NFT tickets, there will be no question of who owns a ticket because it’s on the public blockchain. Anyone can see who owns what, so there will never be any ticket ownership disputes.

This is one of those NFT benefits that sounds good but has no meaning as it relates to tickets or season passes. Venues have their own database. They don’t need to use a public blockchain to know who bought/owns a ticket.

How often is determining ownership even an issue for venues? Usually, when it happens, it is because of either a secondary market sale (which is usually prohibited) or because someone has published a picture of their ticket on the internet. Neither of these issues is the concern of the venue.

Ability to Give Pass Holders Special Benefits

NFT ticket proponents will say that one of the best reasons for using the blockchain is because it will allow venues to offer special benefits to their Pass Holders.

From the article:

Uri Man, CEO of The Lagoon Development Co., which developed the Lago Mar venue, says the NFT pass offers perks that a regular pass doesn’t. For example, the NFT pass lets you enjoy special activities at the state’s largest crystal lagoon, such as setting sail with a professional captain or going kayaking.

Theme parks and waterparks have been using eCouponing to offer numerous benefits — of all different types — to Pass Holders for at least ten years. Before then, they used paper coupons. Your Season Pass benefits program will capture no discernable improvement by using the blockchain and NFT to administer benefits.

Even if you did use the blockchain to help you authenticate who was meant to receive each benefit, you’re still going to have to track usage, which means you’ll need a proprietary database anyway. Adding NFTs to the mix won’t make things easier.

NFT Tickets Reduce Costs

Proponents say that using an NFT-based ticketing program will reduce your costs, since you won’t have to use a proprietary ticketing system. Depending on the ticketing system you may be using, that might be true, but make sure you do the math. A 2.5% surcharge to sell your tickets through OpenSea eventually gets pretty huge.

Even if it is cheaper, you’re still going to need a ticketing system to manage your inventory and access control. And you’ll still need a CRM system to track who bought what, and a cash control package to manage integration with your accounting team. Again, make sure you do all of the math.

Concerns About Blockchain NFT Tickets

There are several reasons you need to think carefully about whether it makes sense to sell blockchain-based NFT tickets.

NFT Tickets Are Harder to Buy

Most attractions are looking for ways to make it easier for potential guests to buy tickets. To buy an NFT-based ticket, your customers are first going to have to (a) set up a crypto wallet; (b) buy crypto (and store it in their crypto wallet).

To be fair, for consumers who already have crypto stored in crypto wallets, allowing people to purchase their tickets and passes using crypto is an added convenience. But for the vast majority of the world, at this point in time it is not.

NFT Tickets Can Only Be Sold Through NFT Brokers

Lagoon Houston doesn’t sell their NFT passes through their website — they sell them through OpenSea, one of a very small number of NFT brokers. OpenSea charges a 2.5% fee for each purchase. Note that this fee is on top of any “gas” fees (crypto transfer fees) that you and the customer may have to pay, and potentially on top of credit card fees.

Consider that if you sold the Pass on your website, neither you nor your customers would have to pay any of these fees (except maybe credit card fees). View the Lagoon Houston sales page on OpenSea

You’ll Still Need a (Separate) Ecommerce System

Why offering NFT-based tickets might appeal to some of the folks who currently own cryptocurrency, if you plan to sell tickets to everyone else, you’re going to have to continue to maintain your regular ecommerce platform and your regular ticketing system.

You’ll also need to make sure that any NFT-based benefits you offer are integrated with and can be accomodated by your ticketing system and access control system.

All NFT Ticket Transactions are Publicly Visible

Do you want to see how many Lagoon Houston NFTs have been created, sold, and transferred? Do you want to see who bought them and who sold them at what price? All of this information is publicly visible.

Most businesses consider such information proprietary. While it may be somewhat useful for your customers to see how many other people are buying (and reselling) your tickets, it’s definitely useful information I’m surprised you are comfortable having online.

Ticket NFTs Are Transferable!

I won’t spend a lot of time on this one since I covered it above and if you run an admission-based venue you already know all of the challenges of allowing tickets and season passes to be transferable between consumers.

Even if you do want to allow transfers, crypto-based NFTs do not offer any benefits that you couldn’t achieve through your own ticketing system-based exchange system at a much lower cost.

Single-Use NFT Benefits Will Be Hard to Manage

One of the benefits that Lagoon Houston offers is the one-time use of four buddy passes. So….is that for the first owner (the first person to buy the minted NFT) or is it valid for each owner? Can I buy a Lagoon Houston NFT, bring four friends, and then sell the NFT to someone who can also bring four friends?

Crypto NFT Prices are Volatile

Lagoon Houston has four different types of Season Passes available for purchase through OpenSea — three at 0.05 ETH (Ethereum, a cryptocurrency) and one at 0.06 ETH. That’s about $148 and $177, respectively.

One ETH (at the time of this writing) is currently worth $2,966. Two weeks ago (Apr 3) it was worth $3,500 and a month ago, it was worth $2,500 Last July it was worth $1,786.

That means that the selling price of the season pass has fluctuated between $125 and $175 over the last month.

Presumably, Lagoon Houston is going to have to carefully manage their prices, raising them and lowering them depending on the price of Ethereum.

Crypto Wallets Aren’t Identities

One of the ways that attractions ensure that multiple people aren’t sharing the same season pass is by tying the identify of one individual to each pass. This is, at the very least, done by collecting a name that can be used to validate the identity of the pass user if there is doubt (by having them produce a picture ID, for example).

Attractions that are more secure will use biometrics or a photo linked to each pass in order to ensure that the pass cannot be shared.

While it is true that a blockchain-based NFT ticket/pass will tie only to one crypto wallet, it won’t tell you who owns the wallet. It definitely won’t have their picture or fingerprint. You still know nothing about who the ticket/pass belongs to (except for a wallet ID).

Which means that regardless of whether they bought their pass via your website or via OpenSea, you’re still going to have to get them to register. And if they do resell their NFT, you’re going to have to keep track of that too and have the new person register.

Crypto/NFT Security is Questionable

Cryptocurrency and NFTs are not very well regulated right now and people are being robbed all the time. According to Web 3 is Going Great, almost $10 billion worth of NFTs and cryptocurrency has been stolen over the last couple of years. And there is literally no way to undo the transaction if someone has their tickets or passes stolen.

While these issues will eventually work themselves out, large organizations that sell tickets want to be very cautious with cryptocurrency and NFTs at this time.

A Few Final Thoughts

NFT admission tickets right now don’t make sense. It doesn’t scale well, it costs more, and it is much more inconvenient for your customers — most of whom probably aren’t using cryptocurrency.

To the degree that the benefits of blockchain-based ticketing are meaningful to you, the truth is that you can get the same benefits delivered faster, easier, and with less risk by using your own ticketing system with a proprietary (confidential) database.

Blockchain-based ticketing is currently being promoted by three groups: First, there are those who are trying to sell blockchain-based ticketing system. No explanation is required as to why they think you should switch to NFT tickets.

Second, there are those who are heavily invested in cryptocurrency who are trying to find legitimate uses for cryptocurrency (other than as a speculative investment vehicle). The more people who want crypto, the higher the prices go — and one way to get more people to want crypto is to make it useful for purchases.

Third, there are those who love to do cool, hip, neat things. These people want to be on the cutting edge and want to show that they are cutting-edge thinkers. Crypto, they say, is the wave of the future. A lot of marketers fall into this group.

I’m all for new technology. I am. But it has to have utility to the organization and the guest. Blockchain NFTs may make sense for some businesses, but they don’t offer any benefits that you can’t already get from your ticketing system.