As the world of sports continues to evolve, it’s likely that sports rights holders will continue to partner with crypto companies that are willing to invest significant amounts of money.
However, in light of the events surrounding FTX, it’s expected that the nature of these deals will undergo a transformation. Moving forward, there may be a shift towards more cautious and strategic partnerships, with a greater emphasis on ensuring stability.
This could lead to a more nuanced and diverse landscape for sports and crypto partnerships, where both parties can reap the benefits of this mutually beneficial relationship.
At the same time, this shift may also bring new opportunities for innovation and growth, as companies look to differentiate themselves from the competition through unique deal structures.
Why Have things Slowed Down?
The controversies surrounding FTX, the Miami Heat’s arena, the Major League Baseball (MLB), and Voyager Digital’s partnership with the NBA’s Dallas Mavericks, have raised concerns about the stability and sustainability of these partnerships.
As a result, it’s likely that we’ll see a slowdown in the number of these deals being struck and a shift towards more cautious and strategic partnerships. This could lead to a more carefully considered and thorough approach to these partnerships.
Nevertheless, this slowdown in partnerships may also offer new opportunities for growth and innovation as companies look to differentiate themselves from the competition and provide unique and creative solutions for their partners.
Despite the recent slowdown in the crypto market, some companies within the industry are still looking to establish partnerships with sports brands. However, these companies are approaching these deals with more caution and a strategic mindset.
FTX’s Collapse Was one of the Catalyst Behind the Slowing Down of Partnerships
FTX secured a landmark deal in March 2021, signing a 19-year agreement worth $135 million for the Miami Heat’s arena’s naming rights. For those who don’t know, the arena was previously called the American Airlines Arena.
During the first half of 2022, crypto companies were spending generously on sports partnerships, estimated.
However, by the end of 2022, the crypto industry’s spending on these deals saw a significant decline. In the latter half of the year, as the crypto winter intensified and was further compounded by the collapse of FTX.
This serves as a clear indication of the impact that market conditions can have on these partnerships and highlights the need for caution and strategic thinking when entering into these arrangements.
The Increasing Need for Robust Agreements for Crypto and Sport Collaborations
The crypto industry’s spending on sports partnerships remained relatively flat throughout the year, with Crypto.com falling from the 5th to the 13th on the list of highest annual spenders.
In 2021, Crypto.com made a big splash by acquiring the Los Angeles Arena’s naming rights, which was previously called the Staples Center, in worth $700 million.
Despite this, the company continued to invest in its sports partnerships, such as its Super Bowl ad in February, its five-year deal with the Australian Football League, and its sponsorship of the FIFA World Cup.
However, it’s uncertain whether Crypto.com plans to renew its sponsorship for the next World Cup. Additionally, some of the company’s longer-term deals could also be in jeopardy.
Due to the recent fallout of FTX’s sponsorships, prospective crypto sponsors may face more stringent questions about their ability to generate revenues and adhere to agreed-upon payment schedules.
They may also find that some of the premium long-term sponsorships, such as naming rights to a stadium, may not be readily available.
How Companies can Earn Trust Moving Forward
Many people have suggested that standard termination rights for a company in the event of insolvency or breach of laws, along with broad warranties and indemnities, should be included in these deals.
Additionally, there should be robust termination provisions, allowing for immediate termination in certain circumstances, such as the crypto brand bringing disrepute, which should be part of the agreement.
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