Sports sponsorship has undergone a significant transformation in recent years, with brands and sponsors seeking more comprehensive marketing and branding experiences. This has led to large sponsorship deals, such as Nike's endorsement deal with LeBron James, and an increasingly crowded advertising space of multiple sponsors for one athlete or team.
Yet, recent trends in sponsorship are seeing a reduction in sponsorship from traditional alcohol and gambling firms, and a move towards more unconventional sponsors, such as cryptocurrency companies.
In recent years, the reduction in the number of alcohol and gambling sponsors involved in sports has reflected a trend towards responsible advertising and potentially acted as a precursor to recent shifts in both legislation and an indication of further self-regulation from sporting bodies. This has been indicative of the changing attitudes of both consumers towards these industries and their association with sports. With a growing emphasis on health and wellness, many sporting brands are no longer comfortable associating with products that are considered harmful to people's health, both physical and mental.
In have stepped others, including cryptocurrency firms. These companies offer a new and untapped market for sports organizations, and their sponsorship can provide a new source of revenue and a unique marketing opportunity through associated fan engagement such as NFTs.
However, as a relatively new and untested industry in the advertising world, it brings a high degree of risk and uncertainty. The recent collapse of FTX (a U.S. cryptocurrency company), which is still under investigation, highlights this. This has led to cancelled sponsorship or financial loss for several brands and individuals including Naomi Osaka, Steph Curry, Tom Brady, Miami Heath and the Golden State Warriors. Some of these individuals are also investors or more significantly, from a legal perspective, Brand Ambassadors. Any association with investments that have not performed well could impact the brand’s ongoing reputation value for other partners as well as opening themselves up to further legal claims.
Additionally, non-payment of promised sponsorship funds from Digitalbits to football clubs shows that the appetite across sporting brands and individuals to partner with crypto companies may not always bring with it reliability.
These examples highlight the need for sports organisations to carefully consider the risks associated with sponsorship and fan engagement deals from such companies, and to carefully choose sponsors that align with their values and those of their fans.
In addition to the risks associated with sponsorship payments, there are also other risks associated with sponsoring cryptocurrency firms, such as possibility of frauds and scams tarnishing a sports brand’s reputation. Also, there’s the possibility of legal action from the association or promotion of fan engagement material. This could be much more significant, with financial services regulations being more stringently applied in several territories.
These types of risks are not unique to cryptocurrency firms and sponsorship failure through non-payment or insolvency regularly hits sporting brands. Further examples include:
If you’re a sports organization aiming to mitigate these risks and make informed sponsorship decisions, we suggest you consider the following six points:
Sponsorship deals bring significant benefits to sports organizations. But, it is important to choose the right sponsor and be aware of the risks associated with sponsorship associations beyond the immediate financial elements on non or late payment.
