Adam Fitch: Are cryptocurrency sponsors bad for esports?

While esports is an industry itself, one some claim is worth over $1 billion, it’s also a hotbed of trends. From athletes and musicians rushing to invest in teams to even fast-food companies launching channels to accommodate gamers, it’s trendy to be involved with an industry people believe will be the next big thing. The new trend involves cryptocurrency.

To be fair to cryptocurrency, that whole industry has undergone a big boom itself — even far surpassing the financial status of esports, despite all of the venture capital and celebrity money that have been pumped into it over the past few years. The emergence of NFTs, a technology that assigns a unique ledger to online assets like images and videos, seemed to take over the entirety of the internet earlier in 2021. Many believe that this tech will be behind the ‘ownership era’ of the web, and some are already banking on it helping to evolve gaming itself. As crypto blew up and companies specializing in the technology received unbelievable valuations and investment, esports organizations and tournament organizers have been among the beneficiaries. The headline deal to demonstrate this trend, which has only strengthened since, was a ten-year naming sponsorship agreement between TSM and exchange platform FTX worth $210m.

In the past couple of weeks alone we’ve seen Bybit, a major player in the cryptocurrency ecosystem, sponsor four prominent team brands in esports. Astralis, Alliance, Natus Vincere, and Virtus.pro have all entered multi-year partnerships with the exchange platform.

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While the values of these deals weren’t disclosed — as is the norm in esports — Astralis, who are a household name in Denmark, claimed that it was the “largest partnership deal [they] have entered to date.” This is very telling considering they’re already entered agreements with huge companies like Garmin, Audi, hummel, Logitech, and HP. Other recent examples of the convergence of crypto and esports include FTX and LCS, Coinbase with BIG, Evil Geniuses, ESL, and BLAST, Uniswap and Team Secret, NBX and Nordavind, Rally and Gen.G, and Binance and OG. Oh, and of course we’ve had Socios partner with esports orgs to offer “fan tokens” for quite some time.

Are cryptocurrency sponsors bad for esports?

We need to look at why crypto companies are flocking to esports before judging whether their intentions are good or not, and whether the fact it’s happening is positive or negative. According to Newzoo, esports will have an audience of 474m people in 2021 and many of them are deemed to be young adults. Fifty-seven percent of cryptocurrency bought in 2020, according to Forbes, was by millennials (ages 26-40). There’s a lot of potential crossover here. The same reason helps to explain why sports properties and athletes have rushed to get involved: they want to appeal to young people with disposable income. I’d bet esports organizations, especially after the past 18 months or so, with lockdowns rendering offline competition almost impossible, are keener than ever to consider big-money offers regardless of the companies they come from. Esports is still an industry where investment and building infrastructure are key, with potential financial and mainstream cultural success to follow in years to come, so multi-million-dollar sponsorship offers are always going to be welcomed, whether that be from crypto exchanges, gambling firms, or even Saudi Arabian smart cities.

So, here comes the big question: are cryptocurrency sponsorships bad for esports? Unfortunately, it’s largely subjective. It depends on the particular company that’s being discussed. That said, I believe that education is mightily important with these deals — as is the case with gambling deals. Since investing in crypto costs real money, it has real implications, and that needs to be made crystal clear to the fans and followers who are being exposed to such advertising efforts. There are kids, teenagers, and young adults ardently supporting esports teams and many are impressionable, especially when the overwhelming narrative is “put some of your money in this coin/company and watch it go to the moon!” Both the orgs and their new, wealthy partners need to educate fans on cryptocurrency to not only maximize the potential of their deals but also to safeguard said fans. Just look at the whole FaZe Clan and Save The Kids altcoin shambles to see how easy it is for powerful and popular players and influencers to scam their loyal, perhaps naive fans.

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There are certainly questions of sustainability yet to be answered. While some currencies and technologies have existed for a while, more and more are popping up on what appears to be a daily basis and there’s no doubt in my mind that only a small percentage will ever be successful, sustainable, and devised in a way that negates any nefarious plotting from the ‘founders’. Let’s put the sustainability comment into context. TSM are getting $21m a year, for 10 years, from FTX. Despite the exchange recently being valued at $18b, there are no guarantees that they will last the term. The same goes for TSM, mind you. Regardless, what if TSM are operating under the assumption that they’ll see all $210m and make some big investments (whether into infrastructure or acquiring other companies), and then FTX folds one day? What if FTX is involved in a legal matter that tarnishes their reputation as a fair, reliable exchange and TSM can’t afford to back out of their deal? That’s negative brand association for potentially many years to come.

There are, of course, concerns surrounding the potential negative environmental impact some aspects of the crypto industry have. This is legitimate in and of itself, but it’s also important for key stakeholders to address this to appeal to the youth; newer generations are concerned about the state of the environment and many won’t back initiatives that enact negative change. Simply, a lot of the currencies, NFT initiatives, and other crypto-related technologies will not stand the test of time. Some will also be giant scams will the sole goal of making the founders a sh*t ton of money in very little time. Scammers are present in most industries, of course, and as crypto becomes more commonplace in the mainstream, you’d expect the legitimate ones to rise to the top and the scammers will only exist in the murky underbelly of the industry. Crypto’s sustained prominence in culture seems guaranteed to me and, subsequently, its presence in most industries — including esports — will only grow. That’s a whole new sponsorship category for orgs to enjoy delving into and as long as education is at the forefront and we can rely on companies in esports to do their due diligence on who they get into bed with, it seems like a big W (as the esports boomers would say) where I stand.