Crypto firms are reportedly scaling back their spending on sports-related advertising and sponsorship as winter continues to bite in the markets.
Many crypto companies – including Crypto.com and Coinbase – have responded to a sharp drop in crypto prices and trading volumes by announcing they will cut the size of their workforces.
And following a start to the year that saw firms spend big on plum TV advertising slots, including Super Bowl ads, United States media outlets such as the New York Post and the Wall Street Journal reported that major companies have now gone cold on new sponsorship deals.
The Post quoted the Columbia University Sports Management Professor Joe Favorito as stating that he would be “shocked” if any major new crypto sponsorships are agreed upon “during the current downturn.”
The same report quoted “sources with direct knowledge” of the matter as stating that the crypto exchange FTX had “pulled out of talks to provide a jersey patch” on the uniforms of the Major League Baseball (MLB) franchise Los Angeles Angels “in recent weeks.”
FTX last year paid USD 135 million for the stadium naming rights of the NBA team Miami Heat.
The same “sources” also claimed that another patch deal – this one between the NBA franchise Washington Wizards and an unnamed “crypto company” had also been “nixed.”
The report noted:
“The Washington Wizards patch had been seen as particularly desirable for crypto companies since the politicians and regulators who oversee the space attend their games.”
“What money hasn’t been spent already you’re going to see curtailed, just like we saw during the dot com bubble [of the late 1990s].”
The media outlet did not suggest that any companies are currently looking to walk away from their existing deals, but warned that trouble could follow if they did.
In November last year, Crypto.com paid a reported USD 700 million for the naming rights of the Los Angeles sports center that hosts both the LA Lakers and the LA Clippers.
The media outlet quoted sports experts as stating that should Crypto.com want to withdraw from its 20-year deal with the LA sports franchises, the crypto firm “would be on the hook for a whopping USD 385 million.”
Chris Lencheski, an ex-Comcast executive and an Adjunct Professor at the aforementioned Columbia University, was quoted as stating:
“There is always a negotiated ability to exit. But it’s got to hurt.”
Both Crypto.com and Coinbase “splurged” on Super Bowl LVI ads in February this year, with the latter paying some USD 14 million for its one-minute halftime ad.
Last week, crypto exchange Binance’s chief Changpeng “CZ” Zhao appeared keen to show that he had made shrewd decisions on the crypto sponsorship and advertising fronts, with his company still expanding despite the market crunch.
Binance is the main shirt sponsor of the Italian football club Napoli, however. The firm paid around USD 32 million to become the club’s primary sponsor in October 2021.
A potential deal involving a major crypto exchange remains on the table at six-times European champions Liverpool FC, although this looks increasingly unlikely considering the market conditions.
Liverpool’s city rivals, Everton FC, appear to be set to buck this trend, however. The crypto casino operator Stake.com has penned a deal that will see the firm become EFC’s main shirt sponsor in an undisclosed “club record” deal, the Liverpool Echo reported.