- 19-year deal takes over naming rights from American Airlines
- The crypto exchange is entering long-established trend of finance firms putting their names on sports venues
In the latest sign that digital asset companies are in the midst of a major moment, FTX is now the first cryptocurrency exchange to sponsor a professional sports arena in the United States.
FTX, a digital assets derivatives exchange, finalized a 19-year, $135 million deal with Miami-Dade County in Florida to take over naming rights of National Basketball Association team Miami Heat’s stadium, formerly known as American Airlines Arena, according to reports.
Playing in the big league
The crypto exchange is entering a long-established trend of finance firms putting their names on sports venues. Of the 122 professional sports teams across the NBA, National Hockey League, National Football League and Major League Baseball, 85 play in stadiums with purchased naming rights.
FTX follows the digital bank SoFi, which bought the naming rights to the home of the Los Angeles Rams and the Los Angeles Chargers in 2019 for a reported $400 million over 20 years, making it one of the largest-ever naming rights deals in history. The company is now preparing to go public via a SPAC backed by billionaire investor Chamath Palihapitiya, which was announced in January.
The FTX deal falls just below some of the largest ever big-league naming rights deals, including Citi Field ($400 million over 22 years), MetLife Stadium ($425 million to $625 million over 26 years), Scotiabank Arena ($639 million over 21 years) and Chase Center ($300 million to $400 million over 24 years), according to Sports Business Journal.
FTX may be the perfect fit for bitcoin-bull Miami Mayor Fancis Suarez, but city commissioners are less enthusiastic when it comes to digital assets. Commissioners pumped the brakes last month on Suarez’s proposal to pay employees and invest city treasury funds in bitcoin, although they did elect to launch a multi-language digital asset education program.
Launched in May 2019, FTX has quickly grown into one of the top cryptocurrency derivatives exchanges. It has a 24-hour trading volume of more than $7 billion, according to data from CoinGecko.
A tough sell
Sponsoring arenas can cost companies millions, but it can be a lucrative investment, particularly in cases where the team performs well and the city attracts major talent.
But today it’s a tough sell. NBA teams played the majority of the 2020 season in Orlando to keep players isolated, and while teams are now back in their hometowns, capacity is limited. The Heat stadium is limited to 10%. Normally, the arena is a popular concert venue, but it is unclear when major artists will resume tour schedules.
March 2020 marked the beginning of a major slump for businesses all over the world, particularly airlines, but for bitcoin and other cryptocurrencies, it was just the beginning of a major turnaround.
The hunt for a new sponsor
American Airlines’ $42 million deal, made in 1999, expired in December 2019. Miami-Dade then became responsible for paying a $2 million annual fee to arena manager Basketball Properties Inc. until a new title sponsor was found. The county had already factored the fee into their 2021 proposed budget.
After deducting required payments to the Heat and arena managers, FTX will be paying about $90 million to the county over the course of 19 years. Miami Dade will collect all of the naming rights revenue, but will continue to pay $2 million annually as part of the 2018 agreement.
The deal does not offset the county’s arena expenses. FTX’s payments will instead be put toward efforts to combat gun violence and poverty
The hunt for an arena title sponsor has been ongoing for years. Miami-Dade hired the Superlative Group, a sponsorship analytics and naming rights sales firm, back in 2018 in an attempt to find a replacement for American Airlines.
Unsurprisingly, American Airlines reported a 65% year-over-year revenue loss in the fourth quarter of 2020, marking the end to the lowest-earning year in the company’s history. The American Airlines Center in Dallas is now the only arena carrying Texas-based American’s name.