Cryptocurrency companies poured billions of dollars into sports sponsorship in 2021 – but this year’s recession has drained the flood of cash, The Post has learned.
As the so-called “crypto winter” sees more companies trying to cut costs, companies that spent the last year heavily on sports deals are now looking to cut costs.
Crypto exchange FTX — which paid $135 million to rename the Miami Heat home in March 2021 — pulled out of talks in recent weeks to provide a jersey patch to MLB’s Los Angeles Angels as the crypto market tanked. It was, sources with direct knowledge told the Post.
Another patch deal between the NBA’s Washington Wizards and a crypto company also fell through recently, sources said.
Sources said that both the deals were canceled due to the downturn in the market. The Washington Wizards patch was seen as particularly desirable for crypto companies as the politicians and regulators who oversee the space up their game.
The Angels declined to comment. FTX and the Washington Wizards did not respond to requests for comment.
Columbia University sports management professor Joe Favarito told The Post that he would be “surprised” if there were any major new crypto sponsorships during the current recession.
“If the money isn’t already spent, you’re going to take a cut — as we saw during the dot-com bubble,” he said.
Spending on sponsorship deals in 2021 in an effort to woo sports fans followed a slew of crypto exchanges, many of whom were flush with cash in a tight labor market, fresh on the heels of generous government stimulus from the pandemic.
In addition to renaming the area to Miami, FTX paid an undisclosed amount to become MLB’s “official crypto exchange,” spending $20 million for an October advertising campaign starring Tampa Bay Buccaneers quarterback Tom Brady and his supermodel wife Gisele Bundchen. made, and paid $6.5 million. For a Super Bowl commercial featuring Larry David, among many other sponsorships.
While FTX has not made any layoffs during the current crash, its founder Sam Banksman-Fried has felt the pain of the current recession as his net worth has plummeted by the billions.
FTX is far from the only crypto firm that has spent big on sports deals.
In October, giant crypto exchange Coinbase paid an undisclosed amount to become an “exclusive cryptocurrency platform partner” of the NBA. In February, the company paid an estimated $14 million for a one-minute Super Bowl ad.
Last week, Coinbase laid off 1,100 employees — about 18% of its workforce — after a TV commercial aired during the NBA Finals. Coinbase shares are down about 75% this year.
Coinbase did not respond to a request for comment.
Similarly, Singapore-based exchange Crypto.com reported in November for $700 million to rename the Staples Center in Los Angeles, where the Lakers and Clippers play. The company also splurged on a Super Bowl ad starring LeBron James, as well as another TV spot featuring Matt Damon.
Then on June 10, the privately held Crypto.com fired from job 260 employees, about 5% of its workforce.
Coinbase and Crypto.com both attributed the cost-cutting moves to the current bear market, which saw bitcoin plunge below $20,000 over the weekend after plunging past $70,000 last November. Ethereum is down 70% from its highs trading around $1,100 on Monday.
The Post reported in November that crypto companies were being forced to spend more money for sports sponsorships than firms in more established industries because owners and teams in the field had bad memories of the dot-com bubble.
The two major stadiums – Baltimore’s PSNet Stadium and Boston’s CMGI Arena – had to be re-named after their names exploded in 2001.
Despite the current turmoil, there is no indication that Crypto.com or FTX are currently looking to back away from their stadium naming rights deals, according to Chris Lenchesky, ex-Comcast executive and assistant professor at Columbia University’s School of Professional Studies. . Arena naming deals.
But if either company were to back down, they would be forced to pay heavily, Lenchesky told The Post. While the professor said he is not aware of the details of Crypto.com or FTX Arena deals, he said he has worked on contracts in the past where a company has to pay 55% of the remaining agreement to exit the deal. Will happen.
If Crypto.com were to withdraw from its 20-year, $700 million contract under such terms, the company would be on the hook for $385 million.
“There’s always the potential for exiting conversations,” Lenchesky said. “But it hurt. The reason it hurt is because there’s some damage to the building, no matter what.”
Lencheski and Favarito both noted that removing a dead or damaged company name from a stadium could damage a franchise’s brand and reduce the facility’s appeal to future sponsors.
A Crypto.com spokesperson said in a statement to The Post: “We focus on investing resources in product and engineering capabilities to develop world-class products as well as our strategic game partnerships and believe they will help us to achieve this goal. Will continue to play a vital role in our mission to accelerate the world’s transition to cryptocurrency.”
Changpeng Zhao, the CEO of the world’s largest crypto exchange – Binance – mocked his rivals for spending big on sports deals in a tweet last Wednesday, which came shortly after Coinbase and Crypto.com announced layoffs.
“It wasn’t easy saying no to Super Bowl commercials, stadium naming rights, big sponsor deals a few months ago, but we did,” the CEO wrote. “Today, we’re recruiting for over 2,000 open positions.”