[Asia Economy Reporter Jeong Hyunjin] On the 18th (local time), the 2022 Qatar World Cup final between Argentina and France was held at Lusail Stadium in Qatar. Throughout the stadium where the thrilling match took place, advertising boards featuring the logo of the cryptocurrency exchange 'Crypto.com' were displayed. The advertising boards were also visible in scenes where Argentina captain and 'Football God' Lionel Messi and France ace and Qatar World Cup top scorer Kylian Mbappe ran after scoring goals.
Argentine football player Lionel Messi scored the first goal in the Qatar World Cup final against France on the 18th and is celebrating. Behind him, there is an advertisement board for the cryptocurrency exchange Crypto.com. [Image source=AP Yonhap News]
French football player Kylian Mbappe (right) is running while kicking the ball during the Qatar World Cup final against Argentina on the 18th. Behind him, there is an advertisement board for the cryptocurrency exchange Crypto.com. [Image source=AP Yonhap News]
The advertising boards at the Qatar World Cup symbolically show how deeply cryptocurrency companies have penetrated sports. Cryptocurrency companies have emerged as so-called 'big players' in the sports market, which faced difficulties securing funds after COVID-19, and have actively sponsored sports. However, last month, the bankruptcy filing of cryptocurrency exchange FTX triggered a crisis, and the global sports market could not escape the impact.
◆ How closely are Cryptocurrency and Sports Connected?
Cooperation between cryptocurrency companies and the sports industry has rapidly increased in recent years. According to a report by Bloomberg on the 18th citing consulting firm GlobalData, which tracks commercial contracts in the sports industry, FTX spent nearly $100 million (about 130 billion KRW) on sports sponsorships last year alone. Crypto.com, which became an official World Cup sponsor, invested $144 million in the sports industry last year, and Socios.com, a blockchain platform related to sports, sponsored $132 million over one year.
By sports category, cryptocurrency companies spent about $330.9 million sponsoring football last year. FTX reportedly discussed sponsoring English Premier League (EPL) clubs Manchester United and Liverpool earlier this year. Following football, basketball ($138.5 million), mixed martial arts (MMA, $51.9 million), and e-sports ($43 million) were the next largest recipients.
The reason the cryptocurrency industry poured funds into the sports industry is advertising effect. By sponsoring professional sports with strong fan bases such as football, cryptocurrency companies adopted a strategy to approach the public and increase trust. In this process, sports stars appeared one after another in cryptocurrency company advertisements. FTX’s ads featured NFL’s Tom Brady and NBA’s Stephen Curry, among others.
World-renowned footballer Messi became a promotional ambassador for Socios.com in March. Socios issues digital assets called fan tokens for major football clubs worldwide, including Paris Saint-Germain and Juventus. Portuguese football star Cristiano Ronaldo also signed an NFT partnership with Binance, the world’s largest cryptocurrency exchange, in June and was appointed as a cryptocurrency ambassador.
◆ Sponsorship Contracts Broken and Credit Rating Downgrade Risks
The alliance between the cryptocurrency industry and the sports market continued until the first half of this year. However, the alliance was shaken first by the Terra-Luna incident in May and then shocked by FTX’s bankruptcy last month. With growing concerns about economic recession due to central banks’ interest rate hikes, the crisis within the industry caused liquidity to freeze for cryptocurrency companies, making it difficult to maintain sponsorships in the sports industry.
Bloomberg evaluated, "The collapse of FTX threatens the cooperation between professional sports, which was once profitable, and an industry that viewed their fans as potential customers."
According to GlobalData, Bloomberg reported that the number of sports sponsorship contracts signed by cryptocurrency companies since July has decreased by more than 50% compared to the first half of the year. About half of the 161 sports sponsorship contracts signed by cryptocurrency companies this year are set to expire next year. Peter Latz, a researcher at research firm IEG, told Bloomberg, "There will be fewer new contracts next year."
As cryptocurrency industry funds decrease, changes are already being detected in the sports market. Amber Group, an Asian cryptocurrency trading and lending platform, announced earlier this month that it would terminate its EPL Chelsea FC sponsorship contract. Amber Group announced a partnership with Chelsea in May valued at ?20 million (about 31.35 billion KRW) annually but decided to stop it due to the worsening cryptocurrency market situation.
Additionally, global credit rating agency S&P Global announced on the 9th that it is reviewing whether to downgrade the credit rating of Italian professional football team FC Inter Milan. The cryptocurrency sponsor DigitalBits is experiencing liquidity issues and has not paid a €16 million (about 21.9 billion KRW) bonus. If this situation continues, Inter Milan’s sponsorship revenue could decrease by more than 50% in 2024. S&P emphasized the need to replace the sponsor.
Moreover, the NBA Miami Heat, which had a sponsorship contract including renaming their stadium to 'FTX Arena,' announced last month that it is exploring legal options to terminate the contract.
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