Here to Stay: Cryptocurrency and NFTs in the Sport Industry
Over the past couple of years, cryptocurrency and NFTs have begun making their way into the headlines, particularly in the sport sponsorship space. Although cryptocurrencies and NFTs (non-fungible tokens) have existed for several years, the two terms have achieved significant popularity and growth in the 2020s and there are seemingly no signs these new trends will stop anytime soon.
To try and thoroughly explain what cryptocurrency and NFTs are would take thousands of words given their complexity, but here’s a basic understanding of how they work and why they are so important. Cryptocurrency involves direct peer-to-peer online payments (aka “digital currency”) that can be exchanged for goods and services backed by specific encryption codes on a blockchain network. To take a deeper dive and explain blockchain would also take thousands of more words, but it’s a thorough verification system that proves the legitimacy of cryptocurrency payments and transactions. NFTs are non-fungible (or unique) tokens (or units of data) stored within a blockchain that proves a digital asset is 100% unique and certifies its value. Collectibles like artwork, literature, and trading cards are all examples of items that are often evaluated and given a monetary value denoting their worth based on such metrics as condition, scarcity, and context. This evaluation process has sparked the desire to obtain NFTs of iconic moments in sports, entertainment, news, and culture. Since the only way to currently obtain NFTs is through the exchange of cryptocurrency, the two terms are closely related and the NFT marketplace’s growth coincides with the increasing popularity of cryptocurrency.
These trends have capitalized on their growth by entering the sport sponsorship space in traditional and non-traditional ways. Much has changed since the “Bitcoin St. Petersburg Bowl,” the first major sports deal between bitcoin, arguably the most well-known cryptocurrency, and ESPN back in 2014. Now that cryptocurrency has become more mainstream, deals have been made across several different leagues, teams, and athletes on a global scale. One of the most visible companies making moves has been Crypto.com, an all-encompassing digital asset management company that has thrived through partnerships as the official kit sponsors with UFC and Sprint qualifying sponsor alongside significant brand awareness with Formula 1. FTX, a cryptocurrency exchange platform, has leveraged its official umpire patch with the MLB and official venue naming rights of the Miami Heat to tap into fan bases within the “core four” of American professional sports leagues. Chiliz, a cryptocurrency rewards platform designed for sport and entertainment audiences, has dominated the European football space and their services are now being utilized with eSports teams. For NFTs, the NBA’s Top Shot marketplace has been instrumental in providing a framework for how collectibles can thrive in this new area. Companies like Panini America added a completely new business arm to collect exclusive digital items of professional and collegiate athletes. The list goes on but what’s key here is the diversity in terms of where cryptocurrency and NFTs are popping up.
An interesting case study with the intersection of cryptocurrency, motorsports, and athlete compensation came back in June of this year. NASCAR Xfinity Series driver Landon Cassill set a precedent as he became the first NASCAR driver to be paid entirely in cryptocurrency as part of a sponsorship with Voyager, a cryptocurrency brokerage firm. Similar deals have been made in professional sports -- Kansas City Chiefs announced that tight end Sean Culkin’s salary would be paid in 100% bitcoin -- but the 19-race deal between JD Motorsports and Voyager was the first of its kind in the NASCAR scene. According to Cassill, the company would pay “‘market rate’ for the sponsorship” but the funds would actually be a “‘portfolio of digital assets” that includes Litecoin and Bitcoin, two of the most well-known cryptocurrencies (NBC Sports). Cassill noted that the versatility in what he can do with the funds works in his favor: “I can trade it out right away before the market changes or hang on to it as the market goes up or goes down, carve out a little bit, pay my bills with it and hold the rest” (NBC Sports). Other than Josh Wise’s Dogecoin “Moonrocket” in 2014 and Kyle Busch’s BitPay collaboration a year later, cryptocurrency was practically a foreign entity to NASCAR until Cassill took the first step to break down that barrier. The door is open now to other professional athletes to step up and become the trailblazers that capitalize on these new trends.
But what’s the next step? Strategic partnerships and creative activation have successfully brought cryptocurrency and NFTs to the forefront of the sponsorship side of the sport and entertainment industry. A big hurdle for crypto was simply exiting the deep corners of the web and earning credibility as a proven way to redesign the way people think of their assets.
Aiding that transition has been the research and development of blockchain technology to drive the move towards digital currency. But, not surprisingly, education and awareness of how cryptocurrency and NFTs function is something a simple sponsorship will solve. So many people want to join the party, but when you do send them an invite, they find it tough to figure out how to get there, what to bring with them, and who will be there when they arrive. To keep the momentum generated by these trends going and for partnerships to realize their full value, education needs to be a priority. Education from athletes, institutions, brands… whatever it takes to make the new and exciting space more accessible for people. People are naturally resistant to change and when they experience mixed emotions (see chart below from bitcoin.com), it’s that much tougher to attract a greater following. Being creative in the ways parties effectively communicate to them why and how they can participate with these trends should correlate to more revenue in the long run.