Cryptocurrency companies have invested billions of dollars in sports sponsorships in 2021, but this year’s slowdown has caused the cash flood to dry up, The Post reported.
While the so-called “crypto winter” is tightening and companies are looking to cut costs, companies that spent a lot on sports deals last year are now looking to cut costs.
FTX cryptocurrency exchange, which spent $ 135 million to rename the Miami Heat in March 2021, withdrew from talks to provide a patch on the MLB Los Angeles Angels shirt in recent weeks as the cryptocurrency market knocked down, sources with direct knowledge said. The Post.
Another patch deal between the NBA’s Washington Wizards and a cryptocurrency company also failed recently, according to sources.
Both deals were canceled as the market collapsed, sources said. The Washington Wizards patch has been seen as particularly desirable for cryptographic companies as politicians and regulators overseeing the space attend their games.
Los Angeles declined to comment. FTX and the Washington Wizards did not respond to requests for comment.
Columbia University professor of sports management Joe Favorito told The Post that he would be “shocked” if major new cryptographic sponsorships are carried out during the current recession.
“The money that wasn’t spent will already be reduced, as we saw during the dot com bubble,” he said.
The decline in spending comes after major cryptocurrency exchanges clogged with sponsorship deals in 2021 in an effort to lure sports fans, many of whom had cash in a tight labor market, fresh after the government’s generous stimulus of the pandemic. .
In addition to renaming Miami Stadium, FTX paid an undisclosed fee to become MLB’s “official cryptocurrency exchange,” spending $ 20 million on an October ad campaign starring Tampa Bay Buccaneers quarterback Tom Brady and his supermodel, Gisele Bündchen, and paid $ 6.5 million. for a Super Bowl commercial with Larry David, among many other sponsorships.
Although FTX did not make any layoffs during the current crash, its founder Sam Bankman-Fried seems to feel the pain of the current slowdown as its net worth has fallen by billions.
FTX is far from the only cryptocurrency company that has spent a lot on sports deals.
In October, the cryptocurrency exchange giant Coinbase paid an undisclosed amount to become the NBA’s “exclusive partner on the cryptocurrency platform.” In February, the company raised about $ 14 million for a one-minute Super Bowl announcement.
Last week, the morning after it aired a television ad during the NBA Finals, Coinbase laid off 1,100 employees, about 18% of its workforce. Coinbase shares have fallen 75% this year.
Coinbase did not respond to a request for comment.
Similarly, the Singapore-based exchange Crypto.com disbursed $ 700 million in November to rename the Staples Center in Los Angeles, where the Lakers and Clippers play. The company also defeated a Super Bowl ad starring LeBron James, as well as another TV ad starring Matt Damon.
Then, on June 10, privately owned Crypto.com fired 260 employees, approximately 5% of its workforce.
Both Coinbase and Crypto.com attributed the cost-cutting moves to the current bear market, which saw bitcoin fall below $ 20,000 over the weekend after flirting with $ 70,000 last November. Ethereum fell 70% from its highs, trading at about $ 1,100 on Monday.
The Post reported in November that crypto companies were being forced to shell out more money for sports sponsorships than more established industry companies because stadium owners and teams had bad memories of the dot-com bubble.
Two major stadiums, Baltimore’s PSINet Stadium and Boston’s CMGI Stadium, had to be renamed after the 2001 namesake.
Despite the current turmoil, there is no indication that Crypto.com or FTX are currently seeking to withdraw from their stadium naming rights agreements, according to Chris Lencheski, a former Comcast executive and adjunct professor at the School of Professional Studies. Columbia University has worked on arena name deals.
But if any of the companies sought to back down, they would probably be forced to pay a lot, Lencheski told The Post. Although the professor said he did not know the details of the Crypto.com or FTX Arena bids, he said he had worked on contracts in the past in which a company would have to pay 55% of the remaining pact to come out of a deal.
If Crypto.com withdrew from its 20-year, $ 700 million contract under such conditions, the company would be on the hook for $ 385 million.
“There’s always a negotiated ability to get out,” Lencheski said. “But it has to hurt. The reason it has to hurt is because there’s some damage to the building regardless.”
Both Lencheski and Favorito pointed out that removing the name of a dead or damaged company from a stadium can damage a franchise’s brand and can reduce the attractiveness of facilities for future sponsors.
A Crypto.com spokesman told The Post: “We remain focused on investing resources in products and engineering capabilities to develop world-class products as well as our strategic sports partnerships and we believe they will continue to play a crucial role in our mission to accelerate the world ‘s transition to cryptocurrency. ”
Changpeng Zhao, CEO of Binance, the world’s largest cryptocurrency exchange, appeared to mock his rivals for spending heavily on sports deals in a tweet last Wednesday that came shortly after Coinbase and Crypto.com announced the layoffs.
“It wasn’t easy to say no to Super Bowl announcements, stadium naming rights, big sponsor offers a few months ago, but I did,” the CEO wrote. “Today we are hiring more than 2,000 open positions.”