Last year saw an influx of sports organizations signing deals with crypto exchange companies. Now, with the crypto market in crisis, the gold rush mentality has come to an abrupt halt. The Drum takes a look as part of our Sports Marketing Deep Dive.
2021 could well be remembered as the year crypto went mainstream. Bitcoin, the world’s leading cryptocurrency, reached an all-time–high of over $68,000 in November. That same month, the total crypto market valuation surpassed the dizzying figure of $3tn. The future for cryptocurrency looked bright.
Flush with success, a number of crypto exchange companies took out ads during the most recent Super Bowl, each costing millions of dollars. One of them – an FTX ad featuring Larry David – seemed to imply that the invention of crypto was historically significant as that of the wheel or of coffee and that anyone who was unable to appreciate that was a goofy, out-of-touch curmudgeon. The other, a Crypto.com ad featuring Matt Damon, encouraged viewers to “embrace the moment and commit” by investing in crypto.
FTX Arena, home of the Miami Heat / Adobe Stock
But it wasn’t just during the Big Game that crypto companies flexed their newfound wealth. A number of them also signed major deals with prominent sports organizations. For example:
In March 2021, crypto exchange site FTX signed a deal reportedly worth $135m for the naming rights to the Miami Heat’s arena, changing it to the FTX Arena.
In June 2021, Crypto.com became the official crypto sponsor of Formula 1.
In October of that year, Coinbase became the official crypto exchange site of the NBA, WNBA and NBA G League (the NBA’s minor league).
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In November, at the height of the crypto boom, it was announced that the Staples Center in Los Angeles had been renamed the Crypto.com Arena.
Also in November, the MLB’s 2021 American League MVP Shohei Ohtani was named as a brand ambassador – and given the nickname “The Great Cryptohtani” – by FTX.
In February 2022, the Washington Nationals signed a deal reportedly worth over $38m with the blockchain company Terra, which includes in-stadium advertising and the construction of the Terra Club, described in the press release as a “premier club space behind home plate”.
In April of this year, the Dallas Cowboys became the first NFL team to enter into an official partnership with a crypto company when it signed a deal (reportedly valued at $6.5bn) with Blockchain.com.
Why the sudden rush from crypto companies to partner with sports entities? For all the same reasons that up-and-coming brands have always sought to market themselves through the sports world – the massive audience and the fan loyalty that brands can tap into by associating themselves with a particular league, team or athlete. Sports are the big leagues of marketing. The Super Bowl, in particular, can help launch a brand from obscurity to superstardom.
The sports world, in other words, provided crypto companies with the keys they needed to unlock the hearts and minds of the masses. “[Sports deals] make a big splash in the marketplace and that’s exactly what [crypto] brands need,” says Jim Andrews, founder and chief executive of A-Mark Partnership Strategies, a firm that specializes in helping brand marketers navigate partnerships. “This is a murky area and there are still tens of millions of people who don’t really understand what crypto is… [these deals] help them build familiarity with their brand names.”
Then, beginning in the spring of 2022, the sunny skies grew darker and the so-called ’crypto winter’ set in. Fueled in part by soaring inflation, scores of investors began to pull out of risky crypto investments, causing the value of leading coins like Bitcoin to plummet. Fortunes were erased. Many of the celebrity crypto evangelists were conspicuously and suddenly silenced. Leading crypto exchange companies began to lay off scores of employees.
There are many in the crypto world who insist that the current crash is nothing to be all that concerned about. It’s par for the course, they’ll say; just hold on for dear life (HODL) and “buy the dip“. Coinbase even aired an ad, ’Long live crypto’, during the NBA Playoffs in May that essentially argued that it’s foolish to stop betting on crypto just because the market is going through a little rough patch. On the other hand, there are economic experts who will say that this crash is fundamentally different and more severe than previous downturns.
Time will tell which side is correct. If the crypto market does bounce back, crypto evangelists will be (at least temporarily) vindicated and we’re likely to see a slew of ads from crypto companies pushing the message of: ’We told you so.’
At present, the world is holding its breath and waiting to see what happens to the crypto market. It’s certainly unlikely that any major sports organizations will sign deals with crypto exchange companies as long as the latter are scrambling to keep their heads above water. “We’re not going to see the deals we saw in 2021 being signed in 2022,” says Andrews.
That’s not to say, however, that the contracts that were born last year completely threw caution to the wind. Many of those who oversaw their drafting and signing had undoubtedly gone through the bursting of the dotcom bubble and were, therefore, aware that a new tech market can suddenly take a turn for the worst. Contingency plans were likely carefully inserted into the contracts.
But the bull market mentality that seems to have pervaded much of the sports industry in 2021 is likely to now be replaced by a more bearish sobriety. Andrews says that the past few months have delivered a “sense of reality” and that “everyone’s going to be a little more circumspect” moving forward. “Eyes weren’t quite as open last year as they’re going to be this year,” he says.
Brand association is also a double-edged sword. Last year, naming your sports stadium after an up-and-coming crypto exchange site covered your team in an aura of bullish success. It’s decidedly less auspicious for your sports arena to bear the name of a company that’s struggling for survival. “For sport teams, if their stadium is named after a cryptocurrency – a currency that has either failed or has the potential to fail – then that reflects on the team itself,” says Brandon Brown, an assistant professor of sport management at the New York University School of Professional Studies.
The aforementioned deal between the Washington Nationals and Terra provides a particularly illuminating example of the shifting dynamic between the crypto and sports industries. Terra – a blockchain ecosystem that’s primarily oriented around the stablecoin TerraUSD – was in some respects the first domino to fall in what eventually became a general implosion across the crypto market. Stablecoins are designed to remain tied to the value of the US dollar, but beginning in May of this year UST and its sister coin Luna went into (in the parlance of the stock market) a death spiral.
It isn’t entirely clear at this point what caused TerraUSD to crash, but crash it did and now the Nationals have found themselves in a tough position: do they continue to cover their stadium with the Terra logo, thereby promoting the company and encouraging fans and visitors to invest in a demonstrably risky cryptocurrency?
Again, it’s too early to tell. But the unfolding of the deal is undoubtedly being watched closely by many players in the crypto and sports industries.
Check out The Drum’s latest Deep Dive, The New Sports Marketing Playbook, and learn the tactics employed by the world’s biggest sports organizations and their star athletes to stay top of their game.