Come Christmas Day, the venue now known as Staples Center will be renamed Crypto.com Arena after the cryptocurrency and payment platform bought the naming rights to the longtime home of the Los Angeles Lakers, Kings, Sparks and (for now) Clippers for more than $700 million. Industry insiders have long assumed sports betting would be the category that drives sponsorship revenues to new heights. But SponsorUnited founder and president Bob Lynch said there is no doubt that “crypto [and blockchain] will far exceed sports betting within the sponsorship space” over the next decade.

JWS’ Take: The $700 million-plus figure is the most a corporate sponsor has ever agreed to pay on a stadium naming rights deal. SoFi, the previous record holder, committed $600 million in 2019 to place its name on Los Angeles’ football stadium. Of course, SoFi Stadium was a new building. Crypto.com Arena is more than 20 years old.

Based on other NBA and NHL arena naming rights deals (see: Ball Arena, ~$8 million/year; Capital One Arena, ~$10.5 million/year; Chase Center, ~$20.5 million/year), it certainly appears as if Crypto.com is overpaying, at a reported $35 million per year (on average). But as Lynch explained, the company is buying more than naming rights. “They’re essentially buying equity,” which would be particularly valuable in an industry that is still widely doubted, he said. “The Lakers and Clippers have global exposure, media value and mentions that give instant brand legitimacy with top-of-mind awareness through national/global TV exposure,” he added. The venue will host LA28 events too.

They are also buying social media reach. Collectively, the Lakers and Clippers have more followers than the bottom third of NBA clubs combined (74% of those followers belong to the Lakers).

There is an arms race going on within the crypto space. So, the company may simply be willing to pay the freight to be an early leader. “It could be a bit of a loss leader for them,” Lynch said. Crypto.com did not respond to request for comment.

The steep price for the naming rights to a two-decade-old building is undoubtedly going to be used by venue owners as a data point in future negotiations. But Conrad Wiacek (head of sport analysis & consulting, GlobalData Plc) thinks the deal is more likely an outlier than the new baseline. “I can’t see a brand in another sector, especially within the traditional sponsorship sectors, getting anywhere close to those sorts of numbers,” he said. Brands in unlicensed industries tend to have the deepest pockets (in part, because regulations come with costs).

If U.S. sports teams and venue owners are going to try to chase deals with crypto companies (SponsorUnited says week in and week out, it’s the most searched category on its site), it’s just a matter of time before one signs a pact with a less-than-reputable company. Manchester City was recently forced to terminate a newly signed deal with a purported decentralized finance brand (3Key Technologies) after questions of the company’s legitimacy were raised. FC Barcelona prematurely ended a partnership with the upstart NFT marketplace Ownix after finding out someone associated with the company had been arrested for crypto-related fraud.

While there could be some reputational risk associated with the crypto category (because it is so new), there is almost no financial downside to doing a partnership—particularly with sports teams and venue owners starting to seek a greater commitment up front. The logic goes: “If Crypto.com is still here in 20 years, we’ve made $700 million. If they’re gone after five, we’ve gotten $150 million, and we’ll go re-sell the rights anyway,” Wiacek said. AEG did not respond to request for comment.

Crypto and blockchain companies have invested heavily in sports sponsorships over the last 12 months. GlobalData reports deal volume worldwide has increased +488% YoY (from 32 deals in 2020 to 188 deals in 2021), while the amount spent has skyrocketed +3488% (from $16.86 million in ’20 to $605 million in ’21). Wiacek said no other sector comes close to that kind of growth trajectory, and as the industry matures in the U.S., he expects participation and the amount of dollars spent to climb further. SponsorUnited reports that globally, there are 176 crypto brands with sports sponsorship pacts in place (up from 29 in 2020).

There are several reasons, in addition to the growth trajectory cited, to believe crypto/blockchain will be the most prolific sports sponsorship category over the next decade. For starters, there should be more opportunities for companies within the category to participate. “Sports betting has one silo that it is in. But crypto is integrating into cashless systems [inside the venue],” Lynch said. “It is integrating into team e-commerce. It is integrating into gaming and the metaverse. It serves a more functional purpose across a lot of different areas.”

The number of crypto and blockchain companies looking to invest in sports sponsorships is also going to be dramatically larger. Because of the costs associated with customer acquisition and the need for regulatory approval, “there are probably about 10 brands dominating the sports betting space,” Lynch said. “But in crypto, the number of potential brand [partners] is almost unlimited” as the barriers to entry are so much lower.

The category opportunity is greater too. Across the big five leagues, financial category share of spending at the team level is six times that of its sports betting counterpart (the opportunity expands when including league deals). According to SponsorUnited, financial companies collectively will spend $674 million on sports sponsorships (13.83% of the TAM) this year. Sports betting outfits will spend just $110 million (2.26% of the TAM).

China aside, few regulations on crypto exist. So, while state licensing holds up sports betting operators from going all in and league rules limit potential tie-ups with athletes, crypto and blockchain companies are free to invest as they see fit.

Wiacek also expects that as the U.S. sports betting market matures, operators will begin to lean more heavily toward advertising over sponsorship. “I’m basing that on what we’ve seen in the U.K.,” he said.

While sports betting remains a fast-growing sponsorship category in the U.S., opposition to it has begun to emerge in some more mature markets. “In Europe, [sports leagues and governing bodies] are moving away from allowing gambling and betting brands to sponsor sports properties,” Wiacek noted.

That does not mean a pullback is on the horizon in the U.S. Europe is a distinctly different market. “The naming rights sector isn’t as developed. For U.S. sports teams, the stadium or arena partnership is a major asset. In Europe, we don’t really have that,” Wiacek explained. As a result, with leagues like the EPL and LaLiga banning front of the shirt sports betting brand placements, there are simply fewer viable assets for operators to invest in.