The Company Spending $500 Million On Sports Sponsorships
The Company Spending $500 Million On Sports Sponsorships
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Hey Friends,
The Crypto industry has taken the sports world by storm.
With investors searching for inflation-hedged assets after over $20 trillion in economic stimulus was allocated globally last year, and the continued rise in retail-based day trading, the crypto market exploded over the past year.
For example, the market cap of all crypto assets, including stablecoins and tokens, has risen from $395 billion to $2.5 trillion over the last 12 months.
Long-term investors have benefited, of course. Bitcoin is up nearly 400% over the last year, and Ethereum, the second-largest crypto asset by market cap, has appreciated more than 900% during the same period.
But it’s not just Wall Street making money, as several high-profile athletes have also been vocal about their crypto investments.
NFL lineman Russell Okung announced last year that he was taking 50% of his $13 million annual salary in Bitcoin, while Saquon Barkley decided to take 100% of his $10 million-plus yearly endorsement income in Bitcoin also.
Both Okung and Barkley are up about 100% on their investment so far.
Still, the biggest winners might be crypto exchanges, who, in addition to other products, collect a fee for every trade they process on their platform regardless of whether assets prices go up, down, or sideways.
Take FTX, for example. As one of the largest crypto exchanges in the world, FTX has seen its annual revenue jump from $85 million in 2020 to a projected $1 billion in 2021.
They have also raised roughly $1.5 billion from investors, are valued at $25 billion currently, and their CEO, Sam Bankman-Fried, is now the youngest billionaire in the United States, worth nearly $23 billion at just 29-years-old.
FTX Fee Revenue
2020: $85 million
2021(E): $1 billion
As a result, FTX has aggressively exploited sports as a marketing vehicle to expand its business domestically and internationally. This year, they have signed sponsorship agreements with the Miami Heat, esports franchise TSM, Major League Baseball, and others, collectively worth roughly $500 million in total.
But I still think people are underestimating the value & impact of these deals.
I won’t pretend to be a marketing expert, but let’s use the Miami Heat deal as an example. FTX is paying $135 million over 19-years, or $7.1 million annually, to change the Heat’s arena name from American Airlines Arena to the FTX Arena.
There is value in name recognition, of course, especially for a relatively new company within a relatively new industry. Still, placing that value aside, FTX might earn a return on this investment based solely on new account sign-ups.
For example, I went to the Miami Heat season opener the other night, and FTX was everywhere. Their name was on the arena, the court, and throughout the concourse, as members of their executive team sat courtside and were announced pre-game.
But they also did much more creative things. Each of the 20,000 fans that attended the game received a free t-shirt with a QR code. When scanned, the QR code gave them access to an NFT that could only be accessed via the FTX platform once you created an account.
Also, apparently ushering in a new-age giveaway structure, FTX gave every single fan within one section $500 in crypto during the third quarter.
The catch? You had to download the FTX app to receive the funds.
Here’s how I think about it — after spending the last three to five years attempting to acquire the highest-upside customers by infiltrating traditional financial marketing sectors, these crypto companies have moved onto the next logical point of attack — sports.
Why? Because they are global, have a diversified fan base, and now, have become uniquely tied into financial markets through the rise of sports betting, day trading, and Reddit’s WallStreetBets.
FTX isn’t the only company executing this strategy well — Crypto.com has spent a similar amount of money on deals with Formula One, the UFC, and others — but with some crypto exchanges paying hundreds of dollars to acquire customers currently, this seems like a trend worth tracking.
As always, I’ll keep you updated.
I hope everyone has a great day, and we’ll talk tomorrow.
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Huddle Up is a daily letter that breaks down the business and money behind sports.
Join more than 49,000 professional athletes, business executives, and casual sports fans that receive it directly in their inbox each morning — it’s free.
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