Crypto Sponsorships of Formula One Racing Dwindle With Downturn

of the biggest sponsors of F one. Companies ranging from FDx to Crypto dot Com have spent millions of dollars on flashy deals, and around of F one teams have at least one crypto partner, Crypto dot com even as a one hundred million dollar deal with the Formula one creup itself. But in this current market, how long can crypto firms keep splashing the cash? And is it even worth it? Bloomberg Senior editor Anna Era, there's so much talking crypto about utility, right, do we actually need crypto?

What is it for aside from trading? And Bloomberg crypto blogger Emmy Nicole and met a fan at the Silvis and GP in the UK over the summer, who spent more than twenty thousand tokens on being able to go to the race with a Asta Martin like v I p experience here today to discuss the future of cryptos fast cast sponsorships. Hi, Emily, thank you for joining me today. Thanks for having me. So we're going to chat about your story, which was a long one in the making.

You did a lot of reporting for it. Um can you start off by giving us a sense and setting the context for what's going on with Formula one in crypto companies. If you're somebody who watches Formula One like I was, I discovered it like many other people through the Netflix show Drive to Survive, which probably to a Formula one fan is like heresy to say, but anyway,

that's how I found it. Hit Netflix show Drive to Survive has brought Formula one Racing to a huge new audience, particularly in the US, weaving together the sports, fierce rivalries and electrifying accident And I realized through watching through the seasons like since to sev onwards, that we were seeing more and more crypto names pop up. With each season. You were seeing more and more companies appearing on cars appearing on uniforms, and I was like, they were definitely

rising as a brand in the race for sure. And what piqued my interest about it is because Formula one is a sport where it costs a lot of money to be a sponsor. It's something that costs way more than any other sport pretty much. It's one of the pricest things to do. And so as crypto companies started to kind of accrue wealth as the ball market really set in, they kind of spent the early days of the bare market building up some of that wealthy one

was the year they could really spend. This was obviously like a really big way to make a splash, to say, Okay, we've got a Formula one sponsorship. I'm going to sponsor my favorite team, or I'm gonna sponsor this Grand Prix and get the title rights. And we've seen hundreds of millions of dollars spent on this race. Now, obviously that was the ball market and that was then. Today the situation is quite different for crypto companies than the crypto markets.

So how has that sort of changed with regards to Formula One. We've definitely seen fewer sponsors. I think making a big splash. There have still been some for sure, because I think especially with sponsorships in sport we've done.

We've kind of talked about this before on the podcast as well, but it's the kind of thing where there's like a little bit of a hangover because these deals are signed, and they're signed for many years in one and they'll pay for it all up front on occasions, so you kind of get all the all the money and one go. Um. And so this is something that like you might even see crypto names hang around for a while and they're they're not really contributing or having

a great time in the markets. But there's definitely been a bit more reticence among crypto companies to consider how they're spending their money and where um. And so some companies like FTX, which sponsors the Mercedes team, said things like, well, you know, we want to value these things on an annual basis to really get an idea of like what this is costing us and how much it's benefiting us going forward. And how has sort of regulation affected crypto

sponsorships of Formula one. I think the situation change have changed a bit with the single poregram pre yeah. I think this was the year that rules around advertising crypto really started to kick in because that was an easy

thing for regulators to do, right. Financial promotions are pretty like pretty standard laws as they come, and so adding crypto to the basket of high risk investments was an easy thing to do, and that made it more difficult for sponsors to be able to say with certainty, oh yeah, I'll be able to display my logo at France Grand Prix, and I'll be able to do it in Italy, and

I'll be able to do it in Singapore. Um, And so that meant that there was like some negotiations had to be made or some changes had to be made depending on the location. So in France you didn't see any crypto sponsors kind of around the track or sometimes

even they dropped off the uniforms in the cars. In Singapore it was just on uniforms and cars and not around the track, which for one team in particular McLaren, they chose them to cover their car in their crypto sponsor Okay exp for Singapore because that was the one place they could put it. Have These sponsorships actually helped crypto companies like what has been the return on investment, they're super prisy. Um did they help them get more customers?

And does that actually even matter these days when you know volumes have dropped if you're an exchange, like you know, should they should? I mean, I know it's not for you to, I guess say, but would have been wiser to maybe keep the money in there and their carfs? Are we talking about companies that have so much money anyways that it kind of doesn't really matter. It's not maybe the types of crypto firms that would have gone down,

it's like really the big big players. Yeah, I think definitely in the earlier days, the crypto sponsors that were getting involved in F one may have been companies you hadn't really heard of. So we've definitely had a few crypto sponsors over the years appear enough one and then quietly drop away from F one um and not really

much explanation was providing. If I would say those names to you now, you wouldn't really recognize them as companies like bit to you for example, which was a Turkish exchange, which really isn't on many people's radar anymore. That they were McLaren's first crypto sponsor and I think that was one of the teams that was the first sign of

crypto sponsor ever for Formula one UM. Now they have Crypto Exchange okay X, which told me that since doing the deal, there's definitely been like, you know, a bit of an uptick overall this year, they've had their revenues go up, and the deal with mccaren is a big step forward in that UM and FDx they said that there has been a noticeable increase in new customers since, and I think just getting on people's radar is important.

But the appeal of F one is that not only is it an expensive support sponsor, it's an expensive support to be a fan of. It's really expensive to get tickets if you can manage it at all. If you want to go to a race that's not the one in your hometown, you're going to have to pay for

international travels. That's really expensive too, And even just to watch it on your TV is really expensive because branding rights and well sorry, broadcasting rights for everyone UM are like highly competitive, and TV channels will pay lots of money to be able to broadcast F one. So either you're going to go down to your local pub or bar and watch it there, or you're going to pay for that kind of exclusive streaming access to watch Formula

one live. All of that means that crypto companies are able to tap into a slightly wealthier set of buyers or clients. Um, they're also able to do things like maybe reach a younger set. Since the advent of Netflix, it's definitely broadening out the age range and appeal of

f one. Do you think I mean that it's just about the types of fans that they can engage, or it's just even getting a sense for themselves so feeling more like we've made it, you know, like going for these big like like marquee deals, Like is it is it really necessary? I definitely think it's a bit of both, right, Like, so yes, there is maybe a wealthier fan than you

can access. And then also we've made it because we can take our clients to like some flashy race and you know, really like treat them and drops them up

to the dines um. But also I think like one thing that I would I wrote throughout the piece was that it's like this has become a bit of a status symbol and crypto, you know, like being able to say that you're one of the top companies that has a sponsorship with Matt Damon, or you have an F one sponsor, or, you sponsor, you have your name on the top of a a football stadium or a basketball stadium.

These are all like landmark things that some of the crypto industry's biggest companies are now chasing and saying, oh, we have this, and now more than ever, it's almost even more important because if we take crypto dot Com as an example, anecdotically anyway, they are probably the biggest spender on sports sponsorships. They've spent hundreds of millions of dollars across different sports, but Formula one is one of

their biggest ones, is one of their first sponsors as well. Um, they've really tried to make their stamp on that and this year for crypto dot Com has been pretty difficult, so having that to fall back on has been really good for them. I think in terms of image, they can say things like, Okay, so you saw that headline that says we laid off a bunch of staff, but look our names on top of the Miami GP, so things can't be all that bad. Did you get a sense of whether they pre paid for them, or that

a lot of these still have to be paid. I think they. So there's there's definitely like a when you speak to teams anyway. So like I spoke to Zach Brown, who's the CEO of McLaren Racing and he drives the team there. Um, they are definitely conducting more due diligence than they might have done in the past. So they're keen to make sure that the companies they do deals

with can afford it that they're good for it. They're probably going to keep the payments going if they don't even pay up front in the beginning, which I think some might. Um, we have heard reports of other script re sponsor in the past who maybe didn't make all the payments they were meant to and then that sponsor

quickly went away. And even speaking to marketing experts who do these kinds of deals for Formula One teams, they say things like, well, you know, if you stop paying, it's pretty common enough one to just drop a sponsor at the drop of the hat, and you'll it won't be until you know, we see the cars unveiled in mid February next year that we'll really see who was able to continue holding onto that sponsorship from this year to next. We'll be right back with more from Bloomberg

crypto blogger Emily Nicole. So we also heard about sort of crypto fan tokens for F one teams as well as n f T s. What's going on with that that? Actually? Did anything actually happen? Quite a few teams have launched n f T collections and quite a few teams have fan tokens. Not all teams though, so it's worth noting that,

you know, some teams are being more cautious. But for those that I don't know what a fan token is, it is a crypto asset like it's a tradeable thing, but it's something that is tied to a team and generally can be earned. There's a bit like a reward or a loyalty point. So there are certain teams that, for example, don't make their Formula one to trade team tokens tradeable on next Exchange. You can only earn them

with the provider that makes the token. You can earn them through engaging in the app, doing things like voting on someone's helmet or participating in a poll um and then you can spend those tokens on things. So I met a fan at the Silverson GP in the UK over the summer who spent more than twenty thousand tokens on being able to go to the race with a Asta Martin like v I p X experience. UM. But

that didn't cost him any money. He earned all those tokens through engaging in the app for probably a very long time, UM, And that's how he did it. That's not to say that fan tokens aren't like that homogeneously though. Everywhere in football, for example, it's been very controversial that fan tokens are tradeable and excelling exchanges, and so their price fluctuates. And what's been happening as they gain more steam and more people are buying them is actually it's

become a way to bet on a team's performance. You know, you think they're going to win a game, you probably think the prices token is going to go up, so maybe you buy some when it's lower. Similarly, I think they're gonna lose a game, it'll go down. UM. And that's been quite concerning for regulator as well, thinking about, you know, whether the fantokens should be considered as akin

to sports bedding and gambling or financial instruments. So you know, you met a real life fan who used a real life token, Like what was the sense you got from that person? Like they found it worthwhile? They must have been pretty excited to be there. Like, you know, because there's so much talking crypto about utility, right, do we actually need crypto? What is it for aside from trading?

And it seems in this case like some at least one guy got to go to watch a race, even though maybe he had to spend like a million hours on his phone but playing with an app. But you know, it might have been worth it. He might not have been able to. I don't even know if you can buy tickets for the v i P experience, So you know, what was the sense you got? I think you probably could buy tickets if you had a lot of money, Okay, yeah, yeah, yeah,

I know. Yeah, but even for like a base ticket for for example, it's like three hundred pounds, I think if you're able to get in in the very like initial drops um And for him, he was like this is a once in a lifetime thing, like to be able to do it at this level of like v i P access and see all these people, see these teams. The seats, by the way, they were pretty like standard, but you know, the bit of all of the nice

stuff around the day was really great. And so for him, he was like I would never normally get this opportunity. And the race was on a Sunday, and he got access to the ticket on like the Friday afternoon, like it was like a last minute thing. Oh, I can spend my focus if I want to go and see this race and be able to participate with a team that he supports UM in a way that he wouldn't have had access to normally. And so I'm not normally like the crypto advocate UM, but in this instance it

was like a really great opportunity for this guy. And as long as there's I think, like mystigating measures on, you know, like if you're having to invest real money and this stuff, then then that's always going to be a benefit, right, especially to have one teams who are just thinking of ways like how can I re engage with my fan, how can I re engage with consumers in a way that benefits us as a team, benefits us as an industry, but also comes with relatively low risk.

So now I want you to take out your crystal ball, which I know like during this love doing being addressed myself. But what what do you what do you think is going to happen in the next few months? What are we going to see? Are going to see more like beachy type which is a weird name to say, but um type sort of pull outs? Will we see more sponsorships?

Like what was the sense you got? Because you I mean you you ended this like you published a story quite recently, so you know, but you started reporting it. I guess was it still bullmarket days when you started reporting it or no, it was okay, so it was always during the crash, okay, so yeah, so it wasn't looking all great, but maybe they weren't quite up to speed with what was going to happen. But you know, what,

what do you think is next? I think that I mean, one person I spoke to who helps arrange these sorts of deals predicted that probably at least two of the crypto sponsors that we have now across the I think it's something like eight or nine F one teams that have sponsor to the minute in crypto, and we'll probably

drop off for next year. I know who will they be. UM. But that said, that doesn't mean that I think especially certain teams have learned the hard way about doing a deal with a sponsoring industry that can be as volatile as crypto and so hopefully this year when they were signing them, they would have been a lot more homework done so like McLaren for example with Okay, because they had that deal approved by a fifteen person strong external

advisory board before they would say yes to having another crypto exchange as a sponsor. There's definitely been a bit of a learning curve. But if one teams anywhere a kind of getting there with the idea that you know, if we have a big sponsor, we need to make sure they're good for the money. UM. But as I kind of said earlier, there's always going to be that kind of like natural turnover that happens, and enough one. They've always been pretty quick to replace you if you're

not long no longer serving their needs. All right, Thank you, Emily, thanks for having me. You can find more of Emily Nichole's reporting on the Bloomberg Terminal on Bloomberg dot com and on Twitter at Emily J. Nicole, at E. M. I L Y J N I C O L L E. On the next episode of Bloomberg Crypto. How did a Florida citrus farmer named William John Howie end up being one of the most important men in crypto even though he died. Why are companies like Ripple fighting the sec

over something known as the Howie Test? The stakes are high, as they always are somehow when Florida is involved. Tune in tomorrow for the juice. This is Bloomberg Crypto, a daily podcast from Bloomberg and I Heart Radio. For more shows from I Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Send us your comments, questions, or suggestions for the show to Crypto at Bloomberg dot net or find us on Twitter. We're

at Crypto. The supervising producer of Oberg Crypto is Vicky Verglina. Our senior producer is Janet Babin. Our producers are Mohammed Faruk and Sharon Barriro. Our associate producers are Ty Butler and Moses on Them. Desta wonder At is our engineer. Original music by Leo Sidron. I'm Stacy Marie Schmal. We'll be back tomorrow,