Crypto Companies Put the Brakes on Sports Sponsorship Amid Market Crashby Fintechnews Switzerland June 28, 2022
This year’s cryptocurrency crash, which saw the market lose more than half of its value in the span of six months, is threatening to bring sports sponsorship deals to a halt as crypto companies look to cut costs.
Sources with direct knowledge told The New York Post last week that cryptocurrency exchange FTX recently backed out of talks to provide a jersey patch to the MLB’s Los Angeles Angels. Another patch deal between the NBA’s Washington Wizards and an undisclosed crypto company also recently fell through, the sources said.
Some companies are even facing lawsuits over missing payments. The UK’s Times reported in January 2022 that Iqoniq, a crypto-based fan platform, went into liquidation, owing Spanish football team Real Sociedad a reported EUR 820,000 for their primary shirt sponsorship. English football club Crystal Palace, meanwhile, is said to have begun legal action against the company over missed payments.
Since the beginning of the year, the crypto market plummeted by about 55%, plunging from a total market capitalization of US$2 trillion in January 2022 to now approximately US$900 billion. The market has entered what’s commonly referred to as a “crypto winter”, or a prolonged period of lower crypto prices.
This month, an array of crypto exchanges announced significant layoffs. Coinbase said it was terminating 18% of its workforce; Gemini announced it would part ways with approximately 10% of its workforce; Crypto.com said it was laying off 5% of its workforce; BlockFi announced that it was reducing its 850-strong workforce by 20%; and just last week, BitPanda, Austria’s first and online fintech unicorn, said that it would reduce its headcount from nearly 1,000 employees to 730.
2021’s sports sponsorship frenzy
2022’s spending plunge comes after crypto firms shelled out staggering amounts of cash for sports sponsorship deals last year in hopes to getting their brands in front of wider audiences and wooing sports fans.
In November 2021, Crypto.com signed a record 20-year, US$700 million deal for the naming rights to the Staples Center. The multi-purpose area, which hosts hundreds of annual marquee events and serves as the official home of the US’ National Basketball Association (NBA)’s Los Angeles Lakers and LA Clippers, the National Hockey League (NHL)’s LA Kings and the Women’s National Basketball Association (WNBA)’s Los Angeles Sparks, has been known as Crypto.com Arena since December 25, 2021.
The HK-headquartered crypto exchange, which boasts more than 10 million users, also has a year-five, US$100 million sponsorship agreement with Formula 1, a deal with the NHL’s Montreal Canadiens, and a multi-year partnership with the Paris Saint-Germain (PSG).
Despite recent staff cuts, Crypto.com appears to be continuing its sports sponsorship spree this year, unveiling a deal with Fifa for the World Cup Qatar 2022 in March and a five-year partnership with the Adelaide Football Club (AFC) in January.
Besides Crypto.com, FTX is another prolific crypto startup in the sports sponsorship space, having inked deals with the Miami Heat, Major League Baseball, the Golden State Warriors, the Washington Wizards, as well as Team SoloMid (TSM), a professional esports organization.
Other high-profile sports sponsorships include Coinbase’s US$192 million multiyear partnership with the NBA, OKX’s collaboration with McLaren Racing, and Tezos’ sponsorship deal with Manchester United.
Nielsen, an American information, data and market measurement firm, estimates that sports sponsorship deals from the crypto space grew at a much faster rate than other sponsorship categories, increasing by a staggering 1,100% between 2019 and 2021.
Nielsen expects crypto companies to spend US$5 billion on sports marketing by 2026.
Featured image credit: Edited from Unsplash