(Bloomberg) — At the Formula 1 Grand Prix in Miami in May, dizzying displays from the crypto companies sponsoring the sport were unmissable, with Crypto.com’s blue brand covering every conceivable surface along the race track.
When Singapore hosts the most popular motorsport this weekend, the visibility of digital assets will be much more subdued. The Monetary Authority of Singapore will allow teams to display the logos of their crypto sponsors only on cars and uniforms during the Singapore Grand Prix, but no advertising will be permitted around the track or in the local area.
This change underscores the changing mood around crypto, both from a regulatory and financial standpoint. Jurisdictions in Singapore, the UK and France have stepped up scrutiny this year after digital asset prices plummeted, billion-dollar projects collapsed and major market players went bankrupt. As a result, F1’s new crowd of advertisers are finding ways to make their mark without moving too boldly.
The cryptocurrency rout in recent months, which has wiped out an estimated $2 trillion in value since November, has left crypto brands more cash-strapped but still eager to maintain what they’ve already invested to keep a foothold. foot on the world stage.
Jeremy Walls, a senior executive at the Miami site who helped broker the deal with Crypto.com, said current market dynamics could cause crypto companies to “be a little more thorough and thoughtful” about deals. they sign in the future.
“I still see people doing crypto partnerships now, maybe it’s not the pace it used to be,” Walls said.
Partnering with an F1 team has become a status symbol for crypto companies, a flashy multi-million dollar prop that signals wealth and success at a time when market prices reflect otherwise. Around 80% of F1 teams have at least one crypto partner, in addition to Formula One Group itself, which has its own $100 million deal with Crypto.com.
Zak Brown, director of McLaren Racing, said F1 teams “don’t want to be left behind” when a new sponsor or trend emerges. McLaren signed a five-year deal worth hundreds of millions of dollars with crypto exchange OKX in May and will debut a special crypto-themed car for Singapore and Japan circuits, under guidelines stricter advertising.
Aston Martin Lagonda Global Holdings Plc F1 team marketing director Rob Bloom said the need to rebrand sponsors to suit different locations is normal in sport. Some places require bans on the marketing of alcohol or tobacco, for example, where companies like Philip Morris International Inc. have historically shown the shape or color mark of their cigarettes without displaying a logo.
Apart from logos emblazoned on drivers’ uniforms and cars, F1 teams are also getting into crypto. Several now offer fan tokens — team-specific crypto-assets that can be earned, traded, and used to pay for experiences or rewards — and non-fungible tokens assigned to individual car parts.
What makes F1 a promising proposition for sponsors is its global and loyal following. Next year’s competition is set to reach a record 24 races in 21 countries, held over a nine-month period. Fans are also generally wealthier thanks to the sport’s high cost of entry, where tickets start at hundreds of dollars and TV stations pay hefty fees for exclusive broadcast rights.
Whether crypto firms will be able to maintain the pace of esports transactions remains unclear, with declining demand for digital assets now taking their toll. Crypto.com and Bybit were among several big companies that laid off staff earlier this year, while firms like FTX opted to value their F1 partnerships on an annual basis, according to Avi Dabir, the exchange’s vice president for business development.
Since signing with Mercedes, Dabir said FTX has seen a “noticeable” increase in new customers, as well as increased interest from existing customers who want to take advantage of F1 racing access.
F1 is no stranger to volatility. McLaren driver Daniel Ricciardo, currently signed as a brand ambassador for OKX, is set to leave his team at the end of this season, his third change in five years. Brown said marketing images for next year with the swap may need to switch to a new driver or focus more closely on the car itself.
McLaren also had a former crypto partner in Turkish exchange Bitci.com, which at the time was the first to run a fan token for an F1 team. The deal was quietly completed in February after less than a year, Bloomberg reported at the time, along with two other Bitci.com deals with European soccer clubs after it failed to make payments to some partners.
“It’s the one we got into pretty quickly,” Brown said in an interview. “You need to do your homework to understand” a crypto deal. As a result, the subsequent partnership with OKX was reviewed by a 15-person external advisory board, he said.
Due diligence has become even more important this year amid a series of major crypto meltdowns, in addition to increasing regulation. McLaren is now exploring a new fan token with OKX, which it hopes to launch in 2023 after taking its time to ensure “really robust” development, the director of licensing, e-commerce, esports and gaming has said. the team, Lindsey Eckhouse.
Although racing team sponsorships are generally more expensive than other sports, Steven Kalifowitz, chief marketing officer of Crypto.com, said his deals with F1 were among the first the exchange has made.
“I was really looking for ways to meet a global audience and get to them quickly,” Kalifowitz said. F1 really offers that in a way that I don’t really think any other sport can do.”
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But with crypto stuck around yearly lows and the general economic environment signaling potential deterioration, the future of F1’s multi-year deals hangs in the balance. It’s typical in the sport that partners come and go, if a sponsor suddenly can’t raise the millions of dollars needed to stay in the race, said Ted Dobrzynski, chairman of F1 sponsorship agency VIAGP.
“They are going to have to regroup and the market will balance out next season,” he said, predicting that at least two crypto brands could drop their deals due to market instability. “When the cars are shown to the world in February next year, you will see who is missing.”
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