Cryptocurrency companies are being forced to shell out massive premiums in sports sponsorship deals as professional teams weigh the risks of getting burned — like some of them did during the dot-com bubble.
Crypto.com, a Singapore-based crypto trading site, reportedly paid $700 million for the naming rights to the Staples Center in Los Angeles for 20 years — more than five times what Staples had paid for the same rights in 1999.
And in March, Bahamas-based crypto exchange FTX ponied up $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 able to demand more money from venture capital-flushed crypto firms because they’re relatively unknown names in an unproven industry, experts say.
“If you want to do a deal with Mercedes Benz, that’s safe,” Columbia University sports management professor Joe Favorito told The Post. “If you go after a nontraditional naming rights deal, you probably ask them for a lot more money.”
That’s because arena owners remember stadiums named after long-gone tech firms such as Baltimore’s PSINet Stadium and Boston’s CMGI field — both of which had to be re-christened after their namesakes imploded when the dot-com bubble burst in 2001.
“During the bubble, there were companies that bought in on buildings and went bankrupt and that was an extremely disappointing and troubling thing,” said Favorito, who added that scrubbing a defunct company’s name from a stadium can also damage a franchise’s brand and can reduce its appeal to future sponsors.
As a result, crypto firms with unproven track records have to make their offers so big that team owners “can’t take anything else,” according to Chris Lencheski, an ex-Comcast executive who has worked on arena naming deals. He compares the dynamic to the “tobacco premium” that cigarette makers had to pay for sports deals in the 20th century.
Beyond arena naming rights, crypto companies are also spending big 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 American crypto exchange Coinbase paid an undisclosed amount to become the NBA’s first-ever “crypto sponsor” the same month.
Crypto.com also paid $175 million in July to plaster its name on Ultimate Fighting Championship posters and merch for 10 years. StormX, a startup that pays out crypto cash-back awards on online purchases, signed a multiyear deal to adorn Portland Trail Blazers jerseys with a logo patch in July.
“These companies are in a mad dash to get their name out there and put their stake in the ground,” said Woody Thompson, executive vice president at sports and entertainment marketing firm Octagon.
The premium prices venture capital-flush crypto companies are willing to pay for ad space are likely to raise advertising costs across the board, forcing traditional advertisers like car, retail and beverage companies 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 booming crypto industry, teams and arenas in the Washington, DC, area are seeing especially high interest from crypto companies and other new financial technology firms, according to Favorito.
“In Washington, the people who are going to games are lobbyists and senators and you want to be front and center with them in their space,” he said. “Nobody’s really talked about the casual lobbying that goes on at a hockey game or a football game.”
Crypto.com, FTX and StormX didn’t respond to requests for comment. Nor did 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 of the company’s NBA deal.