Cryptocurrency companies poured billions into sports sponsorships in 2021 – but this year’s downturn has dried up the flow of money, The Post has learned.
As a so-called “crypto winter” sets in and businesses look to cut costs, companies that splurged on sports deals last year are now looking to cut costs.
Crypto exchange FTX – which paid $135 million to rename the home of the Miami Heat in March 2021 – pulled out of talks to provide a jersey patch to MLB’s Los Angeles Angels in recent weeks as the crypto market was collapsing, sources with direct knowledge said. The post office.
Another patch deal between the NBA’s Washington Wizards and a crypto firm also fell through recently, the sources said.
Both deals were called off as the market crashed, the sources said. The Washington Wizards patch was considered particularly desirable for crypto companies since politicians and regulators who oversee the space attend their games.
The Angels declined to comment. FTX and the Washington Wizards did not respond to requests for comment.
Joe Favorito, professor of sports management at Columbia University, told the Post that he would be “shocked” if any new major crypto sponsorships were signed during the current downturn.
“What money hasn’t already been spent, you’ll see cut back – just like we saw during the dot-com bubble,” he said.
The plunge in spending comes after major crypto exchanges struck sponsorship deals in 2021 in a bid to woo sports fans, many of whom were cash-strapped in a tight labor market, hot on the heels of generous stimulus packages of the government of the pandemic.
Along with renaming the Miami arena, FTX paid an undisclosed amount to become MLB’s ‘official crypto exchange’, spent $20 million on an October ad campaign featuring the quarterback of the Tampa Bay Buccaneers, Tom Brady, and his model wife Gisele Bündchen, and paid $6.5 million. for a Super Bowl commercial featuring Larry David, among many other sponsorships.
Although FTX did not carry out any layoffs during the current crash, its founder Sam Bankman-Fried seems to have felt the pain of the current downturn, as his net worth has reportedly dropped by billions.
FTX is far from the only crypto firm to have spent a lot of money on sports offerings.
In October, crypto exchange giant Coinbase paid an undisclosed sum to become the NBA’s “exclusive cryptocurrency platform partner.” In February, the company paid around $14 million for a one-minute Super Bowl commercial.
Last week, the morning after airing a TV ad during the NBA Finals, Coinbase laid off 1,100 employees, or about 18% of its workforce. Coinbase shares are down about 75% this year.
Coinbase did not respond to a request for comment.
Similarly, Singapore-based exchange Crypto.com shelled out $700 million in November to rename the Staples Center in Los Angeles, where the Lakers and Clippers play. The company also splurged on a Super Bowl ad featuring LeBron James, as well as another TV spot featuring Matt Damon.
Then on June 10, the private company Crypto.com fired 260 employees, i.e. approximately 5% of its workforce.
Both Coinbase and Crypto.com attributed the cost-cutting measures to the current bear market, which saw bitcoin drop below $20,000 over the weekend after flirting with $70,000 last November. Ethereum plunged 70% from its highs, trading at around $1,100 on Monday.
The Post reported in November that crypto companies were being forced to shell out more money for sports sponsorships than companies in more established sectors because arena owners and teams had bad memories of the dot-com bubble.
Two major stadiums – PSINet Stadium in Baltimore and CMGI Field in Boston – had to be rebranded after their namesakes implosed in 2001.
Despite the current turmoil, there is no indication that Crypto.com or FTX are currently seeking to exit their stadium naming rights deals, according to Chris Lencheski, a former Comcast executive and adjunct professor at the School of Professional Studies at the University. Columbia University who worked on arena naming deals.
But if either company sought to pull out, they would likely be forced to pay dearly, Lencheski told the Post. While the professor said he was unaware of the specifics of Crypto.com or FTX arena deals, he said he had worked on contracts in the past where a company would have to pay 55% of the remaining pact to get out of an agreement.
If Crypto.com were to walk out of its 20-year, $700 million contract under these terms, the company would be required to pay $385 million.
“There’s always a negotiated possibility of getting out,” Lencheski said. “But it must hurt. The reason it must hurt is because there is still damage to the building.
Both Lencheski and Favorito noted that removing the name of a dead or damaged company from a stadium can harm a franchise’s brand and can reduce the facility’s appeal to future sponsors.
A Crypto.com spokesperson said in a statement to The Post: “We remain focused on investing resources in product and engineering capabilities to develop world-class products, as well as our sports partnerships. strategic and believe they will continue to play a crucial role in our mission to accelerate the global transition to cryptocurrency.
Changpeng Zhao, the CEO of Binance – the world’s largest crypto exchange – appeared to mock rivals for spending a lot of money on sports deals in a tweet last Wednesday shortly after Coinbase and Crypto.com announced the layoffs.
“It wasn’t easy saying no to Super Bowl ads, stadium naming rights, big sponsor deals a few months ago, but we did it,” the CEO wrote. “Today we are recruiting for over 2,000 open positions.”