Virtual money is as good as gold with the Sacramento Kings.
The Kings on Thursday became the first major pro sports team in America to accept the online currency known as Bitcoin – the latest example of the team’s newfound fascination with technology. The team said it has begun accepting bitcoins for merchandise sold in its store at Sleep Train Arena. It will start taking the currency for online transactions, including tickets and merchandise, by March 1.
The announcement made waves in the online world, garnering major attention from tech blogs, business sites and other outlets. It gave fresh legitimacy to a technology that’s dimly understood and still fighting for acceptance among consumers and merchants, while burnishing the Kings’ reputation as a forward-thinking organization.
“It makes them look trendy,” said Rob Enderle of the Enderle Group, a tech consulting firm in San Jose.
The team, though, said accepting bitcoins is simply another means of becoming fan-friendly.
Kings President Chris Granger said the team “has a growing number of tech-oriented fans, and we think (bitcoins are) yet another way to make the experience for those fans more seamless and hassle free.”
Granger said the Kings do not expect bitcoins to be “a major component of our business” at the start, but he expects use of the online currency to grow over time.
Bitcoins exist only on computers. They are “not backed by any government,” Enderle said.
Consumers can buy them through online exchanges. New bitcoins can also be “mined” using special software to solve complicated mathematical puzzles to the satisfaction of others in the Bitcoin community. As of late Thursday afternoon, a Bitcoin was worth $848.56, according to the website Coindesk.
The currency was born less than five years ago in somewhat shadowy circumstances. Its inventor was a person or group – no one is sure which – known as Satoshi Nakamoto. It has developed a reputation in some circles as the currency of choice for online drug dealers, because of the difficuly in tracking transactions. In October, federal authorities shut down Silk Road, an online marketplace for drugs, and later seized $28 million worth of bitcoins from a San Francisco man.
But at a congressional hearing in November, members of the Obama administration defended bitcoins. “We are attuned to the criminal use,” said Mythili Raman, acting assistant attorney general, as quoted by The Washington Post. But “there are many legitimate uses. These virtual currencies are not in and of themselves illegal.”
Bitcoin got a huge vote of confidence in the marketplace earlier this month, when online merchant Overstock.com announced it would start taking the currency.
Now the Kings have added their stamp of approval. The team is partnering with an Atlanta company called BitPay Inc., which will process all of the Kings’ Bitcoin transactions.
“It’s a big deal for BitPay, and it’s a huge deal for the Bitcoin community,” said BitPay Vice President Stephanie Wargo. “I’m sure there’s lots of Kings fans with bitcoins.” Her company processed about $110 million worth of Bitcoin transactions last year.
The Atlanta company converts bitcoins into dollars for merchants like the Kings, though the Kings’ owners have signaled they plan to keep some of their proceeds in Bitcoin instead of immediately converting to dollars, Wargo said.
“It depends on what the rate is,” said team spokesman Adam Keigwin.
Holding Bitcoin potentially would expose the Kings to the wild price fluctuations that have become a hallmark of the currency in recent months. A single Bitcoin was worth about $13 a year ago and soared to as high as $1,147 in early December before falling below $900 recently. On Thursday, it dropped about $25 in spite of the news about the Kings.
“It is not a stable currency by any stretch of the imagination,” said Enderle, who is a Bitcoin skeptic. “It isn’t for the timid.”
Kings Chairman Vivek Ranadive told The Wall Street Journal he thinks the price volatility will diminish as the currency becomes more widely used.
Ranadive, chief executive of Tibco Software Inc. of Palo Alto, has vowed to make the Kings the most tech-savvy sports franchise anywhere. In line with his philosophy, known as “NBA 3.0,” the team has debuted a new smartphone app that lets fans upgrade their seats, navigate the arena and even shake a virtual cowbell. The team also has seen a steady increase in its digital ticketing operations, which allow fans to load paperless game tickets onto their phones. He told The Journal he plans to have the team’s coaches experiment with Google Glass, the eyeglass frames outfitted with tiny cameras and computers.
The Kings’ announcement Thursday brought cheers from Sacramento’s small but growing population of Bitcoin advocates.
“Best news ever,” said Justin Dambacher, owner of a trash bin rental business called Advance Disposal Inc.
Dambacher refers to himself and other Bitcoin users as “the boldest of us who believe.” His firm takes bitcoins, and one of his customers has indicated he will pay for a rental with the currency – a first for Advance Disposal. Dambacher said he thinks other Bitcoin customers are about to surface.
“I’ll get more sales that way,” he said.
Eric Coombs, who runs a Carmichael business called ENC Valet Parking, accepts the online currency although he hasn’t found any customers yet who use it. He is holding a “significant amount” of Bitcoin for investment purposes and recently spent some on two items from Overstock – bed sheets and a cellphone case – to show his support for the company’s decision to take the virtual currency.
“The transaction was seamless,” he said.