As the fall semester begins at the NYU SPS Preston Robert Tisch Institute for Global Sport, we often spend time with our students defining what is unique to sports. Among other themes, we focus on include:
- Products that vanish and are always in demand.
- Customers who become fans and establish lifelong relationships as part of a community.
- Companies that build partnerships with owners and, in so doing, develop an ecosystem like no other.
- Incentives that create a tension between winning and profit-making.
- People are income-earning assets whose legacy is part of the brand.
- Transformative social impact that becomes an integral part of the culture.
- Communities and relationships built on trust.
As we continue to work on web3 and the metaverse, we are beginning to think these characteristics are not unique to sports. As it happens, web3 companies understand their natural alignment with the sports world and are investing in making powerful connections. According to Bloomberg, crypto platforms have invested $2.4 billion into sports marketing in the past 18 months. Further, investments by blockchain companies in sports sponsorship are projected to reach $5 billion by 2026.
The Future of Sports Sponsorships
The future of crypto’s marketing activities and sponsorships will depend on two key factors: legitimacy and fan engagement. 2021 was a big year for crypto sponsorships, with events like the $700 million naming rights deal that transformed the Staples Center into the Crypto.com Arena in late December 2021.
Evidence of sponsorships is accelerating everywhere. Red Bull Racing recently sealed a three-year sponsorship deal with cryptocurrency firm Bybit, and Formula 1 car sponsorships are becoming the norm: Alpha Romeo F1 team and cryptocurrency firm Floki; Scuderia AlphaTauri team and crypto firm Fantom Blockchain; and Scuderia Ferrari F1 team and crypto firm Velas Network AG.
Other sponsorships point to the broad swath of sports teams stepping into web3. In February, Manchester United F.C. announced a multi-year sponsorship deal with Tezos valued at $27 million per year. And in mid-September, Manchester City F.C. announced another sponsorship deal with OKX (formerly known as OKEx) that will see OKX add in-stadium branding at the Etihad and Academy Stadia. This might be the first OKX sponsorship deal in sports, but it’s also a big indicator that cryptocurrency companies are finding significant value in sports deals.
Crypto advertising and sports sponsorships make sense for many reasons, with visibility typically being the top driver, especially among new brands and categories. Despite the growing presence of crypto and blockchain tech in the sports industry, familiarity and usage intent among consumers will take time to build. Sports sponsorships rank high in terms of trust, but just under half of NBA fans (48%) are still unfamiliar with NFTs and 43% are unfamiliar with cryptocurrency, let alone see a need for them. However, the prominence of specific brand sponsorships, such as Crypto.com, Coinbase, and FTX, appears to be paying off in both awareness and usage.
Reinventing Fan Engagement
This relationship between sports franchises and metaverse companies is not one way. Sports franchises see the power of web3 in reaching, cementing, playing to, and even expanding fan engagement and loyalty, while taking a “learn as we go” approach to both their level of activity and investment. Web3 interest is occurring across sports leagues and spurring meaningful relationships and sponsorships with partners who have fan influence. These franchises are also looking at web3’s influence, testing its viability, and gauging its impact on their brands, traditional business models, and operations. Some illustrations to improve access include:
- Last season (2021-2022), the NFL invested in NFL Tycoon, a video game in Roblox aimed at teaching the game and business side of football to young fans while providing a platform for innovative social connectivity. Overall, the Roblox video game attracted over 2.4 million unique users from February to April, with over half of those unique users under 18. As a league spokesperson said, the NFL continues to learn more about how the next generation of fans wants to engage with the league within the metaverse, specifically regarding live content and events. Their goal is to create a seamless extension of its real-life experiences into this digital world. Our thoughts are that the NFL, and likely other leagues, will focus on complementary digital experiences that integrate into their physical ones rather than supplementary ones that can only be consumed digitally.
- The NBA launched its “NBAxNFT” Twitter and discord channel this season, calling it the official web3 home of the NBA. It aims to combine all things basketball with NFTs, gaming, metaverse, and web3 ideas as the space grows. The NBA has endless ideas on how the metaverse can continue to drive fan engagement, whether that’s immersive VR ads, purchasing merchandise for avatars, creating both public and private live-screening experiences, etc. Based on this, we feel the NBA will continue to challenge the status quo by exploring all potential areas within the metaverse to find the best way they can engage their audience further.
- The NHL has tested several activation ideas without fully releasing them widely. During the April 21st New Jersey Devils vs. Buffalo Sabres game, the NHL tested several fan engagement technology opportunities utilizing their player and puck tracking technology, NHL Edge. Via a partnership with Immersiv and Verizon, fans could point the screen of their iPhone towards the ice during the game, and the game transformed into an augmented experience showing streaks of color following the puck, face-off probabilities, real-time tracking stats, and more. The NHL’s ultimate goal is to incorporate this AR technology into wearables to make it easier for fans to consume. It sees these opportunities as something that could be used as an alternative stream to a live game.
Across leagues, many more examples of fans being engaged in new ways. The NBA’s recent shift into digital goods, courtesy of the creation of NBA Top Shots with Dapper Labs late last year, is just one example. From a fan engagement perspective, non-fungible tokens (NFTs) have quickly gained momentum as leagues and teams use them for new and engaging ways to provide extended value to fans. NBA Top Shot, for example, is an NFT marketplace featuring officially licensed digital collectibles. After opening to the public in October 2020, NBA Top Shot has become one of the most high-profile NFT successes to date.
By looking beyond NFTs, FCF and other sports teams are beginning to understand that web3 can enrich fans’ experiences by giving them more control. It puts cryptocurrencies in front of millions of fans worldwide while bringing in more money for both industries. These sports deals and partnerships – a marriage some would see as a union of unlikely partners – are helping to build legitimacy for crypto companies by allowing sports fans to further engage with the crypto space on a more personal level.
As consumers and business leaders, we need to view the evolution of the web3 and sports world relationships as an opportunity to learn while uncovering lessons (and challenges) that may be broader in scope and application. For example, we should be mindful of:
- Digital assets (tokenized tickets, NFTs, etc.) that enable fans to interact with their favorite teams and athletes, as well as other ways to "meaningfully connect";
- traditional revenue streams that provide notable growth in the metaverse, such as media rights and sponsorship of digital- or virtual-inspired events and venues;
- the infrastructure allows these assets to thrive, such as a sophisticated tech stack connecting new digital sales data with existing customer databases.
We know that most of what we see in the sports arena has increased fan engagement and team loyalty. While things like crypto sports sponsorships are on the rise, there is still a long way to go for the full integration of both industries. Crypto sports sponsorships present an easy entry towards the end goal of total integration. Things like crypto payments for sports merchandise and tickets or salaries being paid in crypto are still far away but closer than ever.
Long term, it will be vital for organizations to vet sponsors properly and not let revenue impede due diligence. For brands looking to sports for sponsorship opportunities to engage with new audiences, long-term success will hinge on bridging the gap between awareness and conversion. This is particularly relevant for brands in the crypto space, primarily because it’s a new and unfamiliar industry that much of the general public has yet to enter formally.