Who could have seen this coming?
There has been plenty written in recent weeks about the ongoing chaos in the cryptocurrency market, where the value of even some of the best-known, much talked about and promoted coins have been crashing at breakneck speed.
When all of this started to happen just over a month ago some forewarned that it was only a matter of time before there would be a knock-on effect for sports sponsorship; others pointed out that the market volatility wasn’t necessarily damaging those businesses that had been signing the more lucrative deals. But it now appears that the impact is being felt across the board.
Both Coinbase, whose deal with the NBA is reportedly worth US $ 192 million over four years, and Crypto.com, which in November signed the most valuable arena naming rights agreement in history, have made significant layoffs amid the downturn.
Coinbase CEO @brian_armstrong announced today the difficult decision to reduce the size of the Coinbase team by 18%. More details and rationale in Brian’s email to employees, which has been made public for all to see ➡️ https://t.co/SpdZU3KdpS
– Coinbase (@coinbase) June 14, 2022
Meanwhile, a New York Post report this week revealed that FTX, the crypto exchange which has signed several deals in the last 18 months, including a US $ 135 million agreement to sponsor the home of the Miami Heat, pulled out of talks with MLB’s LA Angels over a jersey patch deal. The newspaper says another partnership between the NBA’s Washington Wizards and a crypto company recently collapsed. The report adds that both agreements fell through ‘as the market crumbled’.
Cryptocurrency partnerships have always been tailed by a moral conversation yet perhaps the biggest issue where rights holders are concerned is whether they are going to see the money they have been promised. One justification I’ve seen offered is that there have always been controversial sponsorship categories, whether they be tobacco, fast food or betting. But then those aren’t built on a currency as unpredictable as crypto appears to be.
At this point, executives at those sports properties who erred on the side of caution will be feeling pretty pleased with themselves. Those that rushed to sign deals with crypto firms to plug revenue gaps in the wake of Covid-19 might be looking on nervously.
Indeed, the hundreds of millions splurged by companies from the cryptocurrency sector has perhaps painted a more favorable post-pandemic picture of the health of the sports sponsorship market. Just look at the NBA, which according to IEG saw its sponsorship revenue grow 12.5 per cent last season, much of which was driven by more than US $ 130 million from the crypto category.
Several sponsorship executives I have spoken to in the past year have expressed great excitement about the cryptocurrency sector and the results of a SponsorPulse survey published only weeks ago showed that nearly half of respondents viewed the crypto category as the biggest growth opportunity.
This may yet turn out to be a temporary slump, but in the immediate term it’s difficult to see too many major deals being announced between crypto firms and sports properties, a trend that has perhaps driven up sponsorship fees and created competition in the marketplace. The question then becomes what happens next if that money dries up for good?
The so-called ‘crypto winter’ is happening amid a wider economic downturn, one that is seeing the cost of living go up as inflation soars. In that kind of setting senior executives are likely to be placing greater scrutiny on advertising spending, which could make marketing dollars more difficult to secure.
Very (very) occasionally we release one of our Corporate Sponsor reports publicly…
Report 79: What happens when brands stop advertising? Read it now (for free) on our website. https://t.co/2669ZeVL9E @ProfByron @UniversitySA #evidencebasedmarketing pic.twitter.com/zUyKnVirS9
– Ehrenberg-Bass (@EhrenbergBass) August 10, 2021
Still, though, this isn’t as existential as it sounds. Research by Ehrenberg-Bass shows that brands who stop advertising in a crisis tend to suffer for it so there are still going to be opportunities with more ‘traditional’ brands out there. Some proponents are even predicting a ‘crypto spring’, and one consequence of all this could be that it separates the more legitimate players in the space from the rest. Maybe, after last year’s initial rush, things will simply regress to the mean.
But in times like these it feels as though sports properties should be prioritizing long-term security as much as they are short-term gains. Recent evidence suggests that crypto sponsorships do not afford both of those things.
Has the marketing industry gone too far with purpose?
That is reportedly the opinion of Marc Pritchard, the chief brand officer at Procter & Gamble (P&G), one of the IOC’s TOP partners which has sponsorships across a variety of sports.
As reported by The Drum, Pritchard told the VivaTech conference in Paris: “The marketing community has stepped up to focus on community impact. They’ve stepped up on equality and inclusion and now sustainability.
“But the industry in general has just gone too far into the good and potentially not paying enough attention to growth.”
It’s an interesting position to take, especially for a company behind campaigns such as ‘Thank You, Mom’, and a viewpoint that is arguably swimming against the current. But it is a point still worth considering as brands across all industries appear to be putting more resources behind purpose marketing, particularly in sport.
As always with these things it’s probably important to ask whether it is the right strategy for your brand, otherwise you risk your message getting lost amidst everything else.
If you’re wondering about sport specifically, though, I recently wrote about how AC Milan, F1, Nissan and The Jockey Club are approaching the challenge of integrating purpose into their sponsorships.
Naomi Osaka was one of two women to feature on Forbes’ 2022 list of the world’s highest-paid athletes and that was only because of her US $ 58 million worth of endorsement deals with the likes of Beats Electronics, Nike and Tag Heuer.
Now the Japanese tennis star seems set on helping other athletes achieve their commercial potential through her newly launched Evolve agency, which this week signed Australian Nick Kyrgios as its first client.
That announcement was quickly followed up by the news that the 24-year-old is teaming up with LeBron James and Maverick Carter’s SpringHill Company to launch a new media venture, capping a busy week for Osaka’s fledgling business empire.
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