On Christmas Day, the venue now known as Staples Center will be renamed Crypto.com Arena after the cryptocurrency and payments platform bought the naming rights to the longtime Los Angeles Lakers house. , Kings, Sparks and (for now) Clippers for over $ 700 million. Industry insiders have long assumed that sports betting would be the category that propels revenues to new heights. But SponsorUnited founder and chairman Bob Lynch said there was no doubt that “crypto [and blockchain] will far surpass sports betting in the sponsorship space ‘over the next decade.
Taking from JWS: The figure of over $ 700 million is the highest amount a corporate sponsor has ever agreed to pay for a stadium naming rights deal. SoFi, the former record holder, pledged $ 600 million in 2019 to put his name on the Los Angeles football stadium. Of course, SoFi Stadium was a new building. Crypto.com Arena is over 20 years old.
Based on other naming rights agreements for NBA and NHL arenas (see: Ball Arena, ~ $ 8 million / year; Capital One Arena, ~ $ 10.5 million / year; Chase Center, ~ $ 20.5 million / year), it certainly looks like Crypto.com is overpaying, to the tune of $ 35 million per year (on average). But as Lynch explained, the company is buying more than naming rights. “They are basically buying stocks,” which would be particularly valuable in an industry that is still widely questioned, he said. “The Lakers and Clippers have global exposure, media value and endorsements that give the brand instant legitimacy with leading brand awareness through national / global TV exposure,” he added. The venue will also host LA28 events.
They also buy the reach of social media. Collectively, the Lakers and Clippers have more followers than the bottom third of NBA clubs combined (74% of those followers are Lakers).
There is an ongoing arms race in the crypto space. So the company may simply be willing to pay the freight to be an early leader. “It might be a bit of a leading product for them,” Lynch said. Crypto.com did not respond to the request for comment.
The high cost of naming rights for a two-decade-old building is undoubtedly going to be used by site owners as a data point in future negotiations. But Conrad Wiacek (head of sports analysis and advice, GlobalData Plc) thinks the deal is more likely an outlier than the new benchmark. “I don’t see a brand in any other industry, especially in traditional sponsorship industries, coming close to those kinds of numbers,” he said. Brands in unlicensed industries tend to have the deepest pockets (in part because regulations have costs).
If US sports teams and site owners are trying to make deals with crypto companies (SponsorUnited says week after week this is the most searched category on their site), it’s just a matter of time before one signs a pact with less reputable company. Manchester City were recently forced to terminate a newly signed deal with an alleged decentralized finance brand (3Key Technologies) after questions about the company’s legitimacy were raised. FC Barcelona prematurely ended a partnership with the new NFT Ownix marketplace after discovering that a person associated with the company had been arrested for crypto-related fraud.
While there may be a reputational risk associated with the crypto category (because it is so new), there is almost no financial downside to partnering, especially with sports teams and owners of. sites that start to seek greater engagement from the start. The logic is, “If Crypto.com is still around in 20 years, we have made $ 700 million. If they left after five hours, we got $ 150 million and we’ll sell the rights back anyway, ”Wiacek said. AEG did not respond to the request for comment.
Crypto and blockchain companies have invested heavily in sports sponsorship over the past 12 months. GlobalData reports that the volume of transactions globally grew + 488% year-on-year (from 32 transactions in 2020 to 188 transactions in 2021), while the amount spent soared + 3488% (from 16.86 million dollars in 20 to 605 million dollars in 21). Wiacek said no other industry comes close to this type of growth path, and as the industry matures in the United States, he expects participation and the amount of dollars spent to increase further. . SponsorUnited reports that globally there are 176 crypto brands with sports sponsorship pacts in place (up from 29 in 2020).
There are several reasons, in addition to the cited growth trajectory, to believe that crypto / blockchain will be the most prolific sports sponsorship category over the next decade. For starters, there should be more opportunities for businesses in the category to participate. “Sports betting has a silo it’s in. But crypto fits into cashless systems [inside the venue]”Lynch said.” It fits into the teams e-commerce. It fits into the game and the metaverse. It serves a more functional purpose in many different areas.
The number of crypto and blockchain companies looking to invest in sports sponsorship is also going to be significantly higher. Because of the costs associated with acquiring customers and the need for regulatory approval, “there are probably around 10 brands that dominate the sports betting space,” Lynch said. “But in crypto, the number of potential brands [partners] is almost unlimited ”, because the barriers to entry are much lower.
The category opportunity is also greater. In the Big Five, the financial category’s share of spending at the team level is six times that of its sports betting counterpart (the opportunity expands to include league deals). According to SponsorUnited, financial companies will collectively spend $ 674 million on sports sponsorship (13.83% of APR) this year. Sports betting agencies will only spend $ 110 million (2.26% of APR).
Aside from China, there are few regulations on crypto. So, while state licenses prevent sports betting operators from going all the way and league rules limit potential ties to athletes, crypto and blockchain companies are free to invest as they see fit. seems.
Wiacek also expects that as the US sports betting market matures, operators will begin to focus more on advertising rather than sponsorship. “I am basing myself on what we have seen in the UK,” he said.
While sports betting remains a fast growing sponsorship category in the United States, opposition has started to emerge in some more mature markets. “In Europe, [sports leagues and governing bodies] no longer allow gaming and betting brands to sponsor sports properties, ”noted Wiacek.
This does not mean that a pullback is on the horizon in the United States. Europe is a distinctly different market. “The naming rights sector is not as developed. For American sports teams, the stadium or arena partnership is a major asset. In Europe, we don’t really have that, ”explained Wiacek. As a result, with leagues like the EPL and La Liga banning sports betting brand placements on the front, there are simply fewer viable assets that operators can invest in.