Cryptocurrency companies are forced to shell out massive bonuses in sports sponsorship deals as pro teams assess the risks of getting burned – as some of them did during the dot-com bubble.
Crypto.com, a Singapore-based crypto trading site, reportedly paid $ 700 million for the Staples Center in Los Angeles naming rights for 20 years, more than five times what Staples paid for the same rights in 1999.
And in March, FTX, a Bahamian-based crypto exchange, shelled out $ 135 million to rename the home of the Miami Heat. That’s more than triple what American Airlines paid for naming rights in 1999.
Arena owners are in a position to demand more money from venture capital crypto firms as these are relatively unknown names in an unproven industry, experts say.
“If you want to make a deal with Mercedes Benz, that’s for sure,” said Joe Favorito, professor of sports management at Columbia University. “If you’re looking for a non-traditional naming rights deal, you’re probably asking them for a lot more money. ”
That’s because arena owners remember stadiums named after long-dead tech companies, such as PSINet Stadium in Baltimore and CMGI Field in Boston, which had to be renamed after their homes imploded. namesakes when the dot-com bubble burst in 2001.
“During the bubble there were companies that bought buildings and went bankrupt and that was an extremely disappointing and disturbing thing,” said Favorito, who added that removing the name of a defunct company from a stadium can also damage a franchise’s brand and reduce its appeal to future sponsors.
As a result, crypto firms with unproven track records must come up with deals so large that team owners “can’t take anything else,” says Chris Lencheski, a former Comcast executive who has worked on naming deals. arena. He compares the dynamic to the “tobacco premium” that cigarette companies had to pay for sports offerings in the 20th century.
Beyond arena naming rights, crypto companies are also spending a lot on other sports deals.
Tampa Bay Buccaneers quarterback Tom Brady and his supermodel wife Gisele Bündchen starred in a $ 20 million ad campaign for FTX in October, while U.S. crypto exchange Coinbase paid an undisclosed amount to become the very first NBA crypto sponsor in the same month.
Crypto.com also paid $ 175 million in July to put its name on Ultimate Fighting Championship posters and merchandise for 10 years. StormX, a startup that pays crypto cash back on online purchases, signed a multi-year agreement to adorn the Portland Trail Blazers jerseys with a logo patch in July.
“These companies are in a mad rush to get their name known and put their stake in the ground,” said Woody Thompson, executive vice president of sports marketing and entertainment company Octagon.
The high prices that venture capital cryptocurrency firms are willing to pay for advertising space will likely increase advertising costs across the board, forcing traditional advertisers like car, retail and drinks to shell out more money, Thompson said.
“This is what happened with the dot-com boom,” he noted.
As lawmakers and regulators debate how to oversee the burgeoning crypto industry, teams and arenas in the Washington, DC area are attracting particularly high interest from crypto companies and companies. ‘other new fintech companies, according to Favorito.
“In Washington, the people who go to games are lobbyists and senators and you want to be front and center with them in their space,” he said. “No one has really talked about the casual lobbying that happens during a hockey game or a football game. ”
Crypto.com, FTX and StormX did not respond to requests for comment. Neither the Portland Trail Blazers, the UFC, the FTX Arena or AEG Worldwide, which owns the Staples Center.
Coinbase spokesman Andrew Schmitt declined to provide details on the company’s NBA deal.