How FTX Should Generate Value Through $300+ Million In New Partnership Deals

BY ADAM GROSSMAN

FTX has generated significant attention through its new naming rights partnership announcements with both Team SoloMID (TSM) and the Miami Heat for a total of $300+ million. An audience analysis of both deals demonstrates how FTX should be able to generate value through these partnerships.

As context, FTX is a relatively new cryptocurrency trading platform. The partnership that created the most interest in the sports business industry is the FTX deal with TSM. The $210 million partnership “is the largest of its kind in competitive gaming history.” The amount in both total dollars and on an annualized basis is comparable to naming rights deals in more “traditional” sports and leagues.

It was not only the size of the deal, however, that generated so much attention. As part of the partnership, TSM has changed its name TSM FTX. It is relatively uncommon for a corporate partner to be included in a team’s name (with many racing teams being notable exceptions).

What is more common in naming rights deals is for a sports team to name its venue after a partner. That is what the Miami Heat has done in renaming its venue to FTX Arena as part of a reported $135 million partnership to make the company the “Official and Exclusive Cryptocurrency Exchange Partner of the Miami HEAT.” 

Why would FTX engage in two separate naming rights deals? One of the criticisms of naming rights deals is that they can reach the “wrong” audience. More specifically, the audience of a team may not align with the company’s customers which depresses the value of an overall deal.

We used our Audience Inference Platform (AIP) to understand whether FTX can maximize its reach to the “right” audiences through its new deals with TSM and the Heat. AIP can examine and determine audience profiles by using natural language processing and Block Six Analytics (B6A) proprietary algorithms. Essentially, we can determine who people are across multiple attributes based on what they say in organic posts on social media.

The results of our analysis of FTX, TSM, and the Heat are in the table below.

The summary of this analysis is that both organizations should help FTX better reach its desired audiences. One interesting finding, however, is that both organizations can help FTX achieve these goals in different but complimentary ways.

More specifically, both TSM and the Heat enable FTX to reach more diverse and male audiences that align with FTX’s demographics. However, TSM is more effective in reaching younger demographics while the Miami Heat is more effective in reaching affluent demographics. Having the ability to reach these combined audiences at scale is one reason why FTX would want to engage with both of these properties.

To clarify, we do not know if FTX completed this type of analysis when making its decisions on its partnerships. With the TSM partnership, for example, The New      York Times reported that FTX chief executive Sam Bankman-Fried “said he quickly saw the parallels between his company and TSM after a series of Twitter messages with Andy Dinh, a TSM founder and chief executive.”

There will also be challenges in activating the TSM partnership. Riot Games had previously stated that Valorant and League of Legends Championship Series (LCS) had “limitations” on certain partnerships including cryptocurrency. While Riot approved the deal, “TSM FTX had to accept certain carve-outs for NA esports including the exclusion of the new name branding during Riot esports broadcasts and no on-jersey branding.”

Even with these current restrictions, however, FTX partnership aligns with similar reasoning that other, large companies are following in making esports investments that we highlighted in past posts. In particular, companies want to leverage esports to reach the demographics that FTX seems likely to want to reach with TSM.

So how does the Heat deal partnership figure into this analysis? In another previous post on naming rights partnership, we highlighted that companies with relatively lower levels of brand awareness are those that can maximize value from naming rights deals. That is specifically because a primary benefit of naming rights deals is their reach and maximizing reach is a primary goal of these companies.

While it is more well-known globally, FTX has relatively low brand awareness in the U.S. The Heat sponsorship enables FTX to take advantage of both the domestic and global reach that the Heat can provide while reaching different subsets of its target audience than its partnership with TSM.

One question that we commonly receive particularly as the sports industry (and the world more generally) emerges from COVID-19 is what industries and companies can potentially benefit from sports partnership. Using AIP to understand how companies such as FTX can use partnerships to engage with their target audiences at scale from naming rights partnerships is one example of how we answer this question.