Technology companies are likely to thrive in sport sponsorship and take advantage following the collapse of cryptocurrency, according to a new GlobalData report.
The Sports Trends and Predictions 2023 – Thematic Intelligence study reveals that many of the lucrative cryptocurrency deals that were struck within the sports sponsorship sector in 2021 took a significant downturn in 2022 due to price drops and market crashes.
However, the scandal surrounding the beleaguered cryptocurrency exchange FTX seemed to be the death knell.
Cryptocurrency’s inherent instability was always likely to be a negative factor in the industry’s future success in sports sponsorship. Price volatility has plagued cryptocurrency since its inception, and such fluctuations have now had serious ramifications for the sports sponsorship industry, according to GlobalData.
Tanveer Aujla, analyst at GlobalData, commented: “There have always been warning signs attached to cryptocurrency, thanks to the lack of meaningful regulation and legislation associated with the industry.
“Sports teams jumped at the chance to sign deals worth of millions of dollars, but are now being forced to reconsider their sponsorship strategies following the collapse of several crypto-related deals.
“The suddenness of crypto’s collapse must serve as a warning to the sports industry about the dangers of chasing the money and diving head first into deals with brands that may not exist in a year’s time.”
FTX recently asked a judge to cancel its sponsorship deals as part of its bankruptcy court proceedings. Lawyers for the firm filed a motion to cancel more than 23 marketing agreements with a federal bankruptcy court in Delaware, where the proceedings are taking place.
This includes FTX’s biggest sponsorship deal, a 19-year, $135-million arena naming rights agreement with the Miami Heat, of North American basketball’s NBA.
FTX had also asked for its partnerships with the Golden State Warriors and Major League Baseball (MLB) to be terminated, while the likes of the Mercedes Formula 1 team and Furia, the Brazilian esports organization, have also either suspended or terminated their deals with the firm.
While crypto deals will continue to be struck in 2023, their values will be significantly lower than they would have been, and sports teams will likely be looking at partnering with technology brands instead.
Aujla said: “The technology industry is among the most rapidly developing in the world, and ventures such as the metaverse will see sports teams wanting to work their way into relevant deals on the ground floor.
“If the metaverse ever comes to fruition in a meaningful way, sports teams will want to be able to market related partnerships to their fans.”
While the metaverse seems almost speculative in its current stage, Meta is reportedly spending billions, with the company likely to make losses as it attempts to realize its ambitious vision of a virtual world. GlobalData notes that the likelihood of sport sponsorship agreements centered around the metaverse is very likely to increase in the following years.
Aujla added: “While the metaverse is still far from a sure-fire success, the long-term stability and performance of companies involved in metaverse development has been far superior to the majority of crypto brands.”
In a recent interview with GlobalData Sport, David Thomas, Southampton’s chief commercial officer, explained how all soccer clubs should be exploring opportunities in the metaverse and web 3.0.
He said: “What web 3.0 is doing is opening up a whole new world, and I'd describe it as the new world of participation and engagement. Therefore, every football club has to look at web 3.0 because if we don't then we're not going to have a new generation of fans coming through.”