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Crypto and Sports: A Match Made in Heaven?

Crypto and Sports: A Match Made in Heaven?

Explainers Essentials

07 Jan 2022

As crypto is heading towards mainstream adoption, industry participants are continuously looking to branch out to new markets to reach more users.

The nearly $400 billion global sports market is one of the most favored targets of cryptocurrency businesses. Interestingly, this is a place where the digital asset industry has already found quite some success.

Since 2020, crypto projects have struck key partnerships with top sports and esports clubs that have launched their fan tokens on the blockchain. At the same time, more athletes and teams are introducing their own NFT collections, while digital asset businesses are signing high-profile sponsorship deals within the sports industry.

In this article, we will explore the connection between crypto and sports, along with the top three trends that digital asset projects can leverage to attract fans.

Let's dive in!

Crypto and Sports: a Match Made in Heaven?

We have seen quite some buzz around cryptocurrencies on the sports market, with businesses of the prior industry achieving significant milestones in this field. But why sports? What do crypto projects find so enticing in this sector?

First, in addition to being a nearly $400 billion market, the sports industry has a massive fan base. According to a recent study, only soccer, baseball, and volleyball have over 2.6 billion followers, which is roughly the third of the world's population.

In addition to their loyal support of their favorite clubs, teams, and athletes, new research suggests that sports fans have a great appetite for crypto. Based on the poll's results, while 47% of the respondents stated that they were familiar with cryptocurrency, 27% of the polled sports fans said they owned some digital assets.

Interestingly, only 23% of non-sports fans were familiar with coins, while self-proclaimed "avid sports fans," esports fans, and sports bettors featured 66%, 70%, and 72% familiarity, respectively.

Of course, as the poll was conducted recently among US sports fans, it already includes the impacts of crypto businesses that have been aggressively targeting fans with their ads and promotional campaigns. At the same time, the study confirms the effectiveness of these digital asset marketing campaigns.

However, it is not only fans and the advertising activity of crypto businesses that connect the two industries, as sports clubs and teams have been increasingly engaging with digital assets lately - from launching fan tokens and new NFT collections to signing high-profile deals.

Due to the pandemic, sports clubs and leagues have seen their revenue falling significantly, especially the share they collected from ticket sales. According to a Bloomberg report, the NBA, MLB, and NFL had faced a combined sales decline of $13 billion throughout their 2020 seasons. At the same time, mostly affected by lockdowns, social distancing, and difficulties regarding travel, athletes and clubs face new hardships in connecting with their fans.

While sponsorship deals with crypto companies provide a significant revenue boost, launching NFTs and fan tokens supercharges engagement. In the following sections, we will take a look at these three trends more extensively.

Crypto Sponsorship: 5 High-Profile Sports Deals in 2021

While cryptocurrency firms were initially mocked on social media for their activities in this field, they have struck many high-worth sponsorship deals in 2020 and 2021.

Their goal is simple: to bring crypto to the masses through an industry that features a massive user base. And, as we have explored in the last section, these marketing campaigns have already beared fruit for them, as sports fans are becoming more engaged with digital assets.

Interestingly, we have noticed one key highlight: exchanges are the most active in sponsoring sports clubs and leagues. Probably the reason behind this phenomenon is that these platforms feature established ecosystems, which serve as the gateway between newcomers and the crypto industry.

From partnerships concerning apparel and athletes to naming rights of stadiums and sports centers, we have seen quite some development in this field.

For that reason, it's time to see the most high-profile sponsorship deals between crypto and sports industry participants, which we have collected below:

  1. FTX buys naming rights for the Miami Heat's arena: In March, FTX signed a $135 million deal with Miami-Dade County to acquire the naming rights to a stadium that serves as the home of the popular NBA team, Miami Heat. The stadium, once called American Airlines Arena, is now dubbed FTX Arena.
  2. Staples Center renamed to Arena: In November, struck an estimated $700 million partnership with AEG to rename the iconic Staples Center to Arena, which is the home of the NBA’s Los Angeles Lakers and LA Clippers, the NHL’s LA Kings, and the WNBA’s Los Angeles Sparks.
  3. SoFi to own stadium naming rights for 20 years: While it's not a "dedicated" crypto company, SoFi features cryptocurrency offerings within its financial ecosystem. Most importantly, the startup spent $625 million in June to own the naming rights to SoFi Stadium, the home of American football teams Rams and Chargers.
  4. Coinbase signs partnership with NBA: While the details are unknown, Coinbase had struck a partnership with the NBA in October, which included a multi-year deal with the Women’s National Basketball Association (WNBA), NBA G League, NBA 2K League, and USA Basketball.
  5. Algorand partners with Drone Racing League: In a surprising move, Algorand signed a $100 million partnership with the Drone Racing League in September, which allows the crypto project to take over DLR title rights from the sixth season.

NFTs Have Great Potential in Sports

As you can see in the previous section, crypto companies are spending heavily to conquer the sports industry through sponsorships. However, it's not the only way for clubs and athletes to make money in the digital asset world or for cryptocurrency projects to attract fans.

And an excellent method to achieve this is by leveraging one of the most significant and surprising crypto trends of 2021: NFTs.

To recap, non-fungible tokens are digital assets that are limited in quantity, unique, and irreplaceable, representing anything from memorabilia and digital artwork to virtual land, in-game items, and personal data. Since they are recorded on the blockchain, they can be verified and traced. For these reasons, NFTs offer real ownership for their holders that can be authenticated at any time.

In addition to billionaires, well-known artists, and celebrities, many athletes and sports teams actively participate in the NFT space. Non-fungibles have great potential here. Besides serving as simple collectibles fans can grab, there are also sports-themed NFT projects that expand the assets' functionality with real-world use-cases.

Sorare is an excellent example of the latter. Featuring the official licensing of over 200 clubs, the project allows users to leverage their sports trading cards in the form of NFTs to play fantasy football and manage virtual teams.

At the same time, the NFTs of athletes and teams can also be incorporated into sports-themed play-to-earn blockchain games to be utilized by players.

Fan Tokens: Empowering Sports Fans and Incentivizing Engagement

The first significant connection between the crypto and sports industries was likely achieved via fan tokens. In short, fan tokens are digital assets issued by sports and esports clubs (and potentially athletes) that empower holders with a wide variety of rights, perks, and benefits.

Examples of such can include:

  • Use tokens to influence various decisions of teams (e.g., which song to play when a player scores a goal during a match)
  • Participate in giveaways and win rewards frequently
  • Convert fan tokens into real-world experiences (e.g., meet and greet with a player)
  • Buy club merch at discounted price
  • Gain access to exclusive group chats and club channels

However, fan tokens do not only reward fans but also their issuers. In addition to generating revenue through an alternative channel – which analysts estimate can be as much as $350 million –, clubs can leverage these digital assets to incentivize their supporters to engage more with their teams and players.

Since fan tokens create a win-win scenario for fans and clubs, they have been adopted by many popular teams, especially in the European football scene. The Chiliz project and its Socios fan engagement platform, the original creators of fan tokens, have already partnered with the likes of F.C. Barcelona, Paris Saint-Germain, Juventus F.C., Los Angeles Lakers, and the UFC.

Crypto's Road to Conquering the Sports Industry

Considering its size, the massive number of fans, and the numerous ways to serve market participants with digital asset solutions, the sports industry is just the right place for crypto projects to target after exhausting its "original" market of cryptocurrency enthusiasts.

While critics have initially mocked their attempts, digital asset companies have started a full-fledged "arms race" to conquer the sports market with high-profile sponsorship deals, with top exchanges competing to strike prominent partnerships with clubs and athletes.

At the same time, sports teams and leagues are increasingly joining the NFT space as well as leveraging fan tokens to enhance fan engagement and boost their revenue from alternative sources.

And, taking into account the numbers gathered through various polls and studies, crypto market players have achieved quite some success in this field. For that reason, don't expect this trend to stop anytime soon.

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