Ferrari's Formula One team cuts deal with cryptocurrency sponsor
Falling market and the bankruptcy of the FTX exchange have made sports companies cautious about sponsorships from firms in the cryptocurrency industry
Scuderia Ferrari, the racing division of the luxury car maker, has terminated its partnerships with blockchain project Velas and chip maker Snapdragon, RacingNews365 reported, citing sources familiar with the matter.
The partnership between Ferrari and Velas, which began in 2021, called for $30 million in annual funding, aimed at increasing fan engagement by releasing themed NFTs and included the placement of the Velas logo on Charles Leclerc and Carlos Sainz's race cars and suits.
According to the newspaper, the race team did not comply with the conditions that would allow Velas to create NFTs, and the cryptocurrency company, for its part, is experiencing difficulties with the finances. According to the publication's source, the parties are considering terminating the partnership through the courts.
As for the deal with Snapdragon, the termination is mutual, and an official press release about the termination of the agreements is expected in the next few days, according to the publication.
The rejection of Velas and Snapdragon as sponsors threatens financial losses for Scuderia Ferrari. Partnership with Velas cost $ 30 million a year, and Snapdragon paid the Italian team about $ 25 million and provided technical support. Thus, according to journalists, Velas and Snapdragon brought in about a quarter of Ferrari's commercial revenue for 2022.
The racing team is one of a number of sports teams that have turned down sponsorships from cryptocurrency companies in the past few months.
The plunge in cryptocurrencies and the bankruptcy of FTX have made sports companies more cautious about sponsorships from firms in the digital finance industry, according to the Financial Times. Interest in entering into such agreements peaked at a time when clubs and championships were trying to recoup funds lost due to event cancellations following the coronavirus lockdowns.
Before filing for bankruptcy in November, FTX put its logo on Major League Baseball umpires' uniforms and on Formula One Mercedes cars driven by Lewis Hamilton and George Russell. And in a 19-year, $135 million deal in 2022, the Miami Heat basketball team's stadium was renamed FTX Arena, with American soccer star Tom Brady as FTX brand ambassador.
In February 2022, data company Nielsen predicted that the value of cryptocurrency, blockchain and digital asset sponsorship deals would reach $5 billion by 2026, nearly nine times what it was in 2021.
However, the collapse of FTX set back the trajectory of cryptosport sponsorships by as much as five years, Haider Rafiq, head of marketing at OKX Crypto Group, told the magazine. He predicts a slowdown in new sports sponsorships because there aren't that many cryptocurrencies that can "afford $50 million, $100 million, $300 million deals within a few years." According to Rafiq, the OKX platform, which sponsors Premier League champions Manchester City and the McLaren Formula One auto racing team, plans to remain active in this area.
In addition to the loss of credibility due to the collapse of FTX, a December report from sports media company IMG and its digital agency Seven League said that the collapse in cryptocurrency prices has weakened the appetite for NFT sports. The report notes that the "transformation" of sports fans into NFT enthusiasts has been "much slower than expected."
Analysts suggest that sports clubs are likely to change their approach to token use. Teams will direct innovation less toward making money and more toward improving relationships with fans and customers.
One exception to recent trends was the recent sponsorship deal between South Korea's largest crypto exchange, Upbit, and Italian soccer club Napoli. The platform will be the club's official partner for the 2022/23 and 2023/24 seasons.