How the FTX failure is impacting sports sponsorship deals

The failures of Enron and Adelphia left sports franchises scrambling two decades ago, not unlike the situation for the Miami Heat—along with county officials—and UC Berkeley in the wake of FTX’s bankruptcy filing on Friday. One expert who has negotiated naming rights deals laid out why it may not be as easy to replace FTX, at least for the amount the failed crypto exchange agreed to pay. “This is a really challenging time to go out into the marketplace and try to find somebody who’s willing to make the level of investment as FTX, especially for that length of time,” sports marketing consultant Eric Fernandez told Front Office Sports. Related: FTX's crypto implosion poses major marketing concerns FTX negotiated two major venue naming rights deals in 2021. In April of that year, Miami-Dade, which owns the Heat’s home arena, and FTX agreed to a 19-year, $135 million deal for FTX to replace American Airlines as the venue’s sponsor. Miami-Dade County and the Heat said in a joint statement Friday night that they terminated their relationship, and Mayor Daniella Levine Cava told WPLG-TV on Sunday that the county had taken in $20 million before FTX’s bankruptcy. In August 2021, FTX entered into a 10-year deal worth a reported $17.5 million for UC Berkeley’s football stadium. In a statement to FOS on Friday, UC Berkeley’s athletic department said they were “monitoring the evolving business situation with FTX and will determine any next steps.” “You do due diligence on these companies because it’s kind of like a marriage,” Fernandez said. “You are looking at this from a reputation and a chemistry standpoint. “To have both these deals within 18 months fall apart, there are going to be questions coming from within, and they are going to be gun shy about what kind of brand or partner to go after next.” John J. Ray III, who helped Enron creditors recoup billions, was tapped as FTX’s CEO to replace disgraced founder Sam Bankman-Fried. Crypto companies’ once-deep pockets were an attractive option for teams and athletes in a world that took a hit early in the COVID pandemic, Fernandez said. Beyond FTX, Crypto.com also inked a 20-year, $700 million deal to take over Staples as the naming rights sponsor of the downtown Los Angeles arena where the Lakers, Clippers, and NHL's Kings play. “Is the whole financial technology sector going to be impacted?” Fernandez asked. “There are a ton of deals being done now with fintechs for naming rights and jersey patches. There’s a level of diligence that’s going to be done on these kinds of companies to pressure test them to make sure that they’re financially sound.” Ad Age Next: CMO Get your tickets for the Dec. 7 event in New York Register here Crypto’s massive nosedive in value this year sets it apart from the bankruptcies that left franchises scrambling in years past. Illegal accounting practices led to Enron’s demise in 2001. That forced the Houston Astros to find ways through bankruptcy court to get out of that naming rights deal. There was plenty of interest to replace Enron before Minute Maid agreed to a 30-year, $100 million deal in 2002. Adelphia founder and executives became embroiled in a financial scandal that led to the cable company’s bankruptcy, and, in turn, the Tennessee Titans’ need for a new sponsor of their football stadium. The Nashville stadium went purely as “The Coliseum” for four years before Louisiana-Pacific became the naming rights sponsor in 2006. Nissan acquired those rights in 2015. Commercial internet company PSI Net didn’t have a scandal but went bankrupt in 2001, a couple of years into being the naming rights sponsor for the Baltimore Ravens’ stadium. After the stadium went without a sponsor for the 2002 season, its current sponsor—M&T Bank—took over. In 2014, M&T Bank agreed to a 10-year extension that pays around $6 million annually. —A.J. Perez is a senior reporter at Front Office Sports

How the FTX failure is impacting sports sponsorship deals

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