The news of Staples Center becoming Crypto.com Arena hit the sports world like a tidal wave on the night of November 16 last fall. It’s not often you see naming rights deals spark such an outpouring of emotion and nationwide conversation — but it’s not your usual place.
The famous Figueroa Street Arena in downtown Los Angeles takes up the rarefied air reserved for places like Madison Square Garden, Wrigley Field and Old Trafford. Of course, changing the name after two decades would come at a steep price.
Crypto.com paid $700 million for the rights in a 20-year contract, according to multiple reports. That figure is actually “underreported” according to Russell Silvers, chief operating officer of AEG Global Partnerships, a division of arena owner and operator sports and entertainment conglomerate AEG – which owns or hosts more of 50 sports franchises worldwide.
The biggest naming rights deal in sports history doesn’t happen overnight, and we’ll see exactly how it all went down, but first, a little history on the arena that the NBA Lakers and Clippers, NHL Kings and WNBA Sparks call home:
- Construction began in 1997.
- Staples paid $100 million for the naming rights under a 10-year contract.
- The $375 million Staples Center opened in October 1999.
- The Lakers won three straight titles in the site’s first three years.
- Staples acquired the naming rights in perpetuity in 2009.
- By the end of 2020, the Sparks had won three championships, the Kings had won two Stanley Cups, and the Lakers had won six titles as residents of Staples Center.
The trick was to get out of the lifetime deal with Staples.
“To get zero [dollars] your naming rights partner for one of the most iconic places in the world for the rest of your business is not a good deal,” said Nick Baker, also chief operating officer of AEG Global Partnerships, on a call with Silvers and I earlier in March. . “We had to go back to our ownership group, our owner and our board and say, ‘Here’s our idea.'”
The idea was to approach New York-based Sycamore Partners, the owner of Staples, and buy out the naming rights — an effort AEG completed in 2019.
“The value we bought [the naming rights] return was not negligible, but there was definitely a significant return on investment generated on what we sold it for,” Baker said.
Reverse of the pandemic
Around the time AEG hit the market looking for a new partner in late summer 2019, Baker’s son was diagnosed with a rare liver cancer. Baker’s focus shifted from naming rights to family, and then shortly thereafter the pandemic ended live sports in March 2020.
Not only has the pandemic forced AEG to renegotiate 4,000 contracts across its global portfolio, it has also prevented the company from letting potential naming rights buyers experience the electrifying atmosphere of the arena of 20,000 first-hand. squares.
That said, the search eventually resumed – and AEG had firm criteria.
They wanted the discussions to remain secret and stacked the NDAs to make sure. They didn’t want to explore partnerships in categories where they had deals like theirs with Toyota, American Express and Anheuser-Busch.
Beyond that, they had their eyes on the kinds of brands you consider, well, “cool.”
“We wanted it to be a company that was the best and most innovative partner in its industry,” with that industry landing ideally in the technology space, Silvers said.
This is where Crypto.com comes in.
Fortune favors the brave
Singapore-based cryptocurrency exchange Crypto.com has been hitting the sports industry so aggressively that you literally can’t ignore them.
Let’s recap the deals the company, which has 10 million users, has signed since 2021 alone:
- Exclusive FIFA World Cup Qatar 2022 Cryptocurrency Trading Platform
- $175 million sponsorship over 10 years with the UFC
- 5-year, $100 million deal with Formula 1
- Multi-year partnership with LeBron James and his nonprofit foundation
- Serie A football’s premier innovation and technology partner
- Individual deals with Philadelphia 76ers, Paris Saint-Germain, Montreal Canadiens and Aston Martin F1 team
These agreements, along with that of Crypto.com Arena, are a crucial part of the company’s mission to “accelerate the global transition to cryptocurrency”.
“Part of that is communicating to the world that the industry and the technology is mature, that we actually have a real business, and that we’re here to stay,” Crypto.com Chief Marketing Officer Steven Kalifowitz said during an interview. of a separate call. after speaking with Silvers and Baker.
But the Crypto.com Arena deal almost didn’t happen.
“We really got into it with [Crypto.com] in the summer of 2021,” Baker said. A third-party industry figure, whose identity AEG and Crypto.com declined to reveal, attempted to connect the two parties – but there was a problem. “Something that has not been publicly reported is that we were very far down the line with another company – well into contract negotiations.”
When that deal fell apart for “several reasons” and other offers were turned down, Baker and Silvers, with the help of dozens of AEG employees at all levels, moved forward and hired Kalifowitz and his colleague Gilad Rodkin, senior vice president of marketing strategy at Crypto.com.
The rest is history. What is uncertain is the future.
The next episode
Despite all the promise of cryptocurrency, it is also a space rife with controversy – extremely volatile markets, fraud and scandal.
Some in the sports industry have already suffered the consequences of this reality.
FC Barcelona and Manchester City each canceled sponsorships with crypto-related businesses, the same week as the Crypto.com Arena announcement, due to the nefarious activities of their partners.
I asked the AEG team what they thought about signing a two-decade deal with a company in a market that we frankly don’t know will even be relevant – or exist – in the 2040s.
“When you make a deal for 15 to 20 years, regardless of category, there’s a level of risk in a long-term relationship on both sides,” Baker said. “We’ve done a tremendous amount of due diligence on cryptocurrency and felt very comfortable not only with the category, but more importantly, with the people and company we’re doing this deal with.”
What if the crypto market suddenly crashes and does not recover?
“We have built an infrastructure large enough to [the collapse of] no deal would result in catastrophic sanctions for our organization,” he continued.
For his part, Kalifowitz thinks the crypto is getting an unfair rap, pointing out how blue-chip stocks like Facebook, Netflix and Disney have fallen 20%-40% in the past six months, while Bitcoin has risen nearly 3% over the same period, despite falling sharply from its late 2021 highs.
He also welcomes the federal government’s impending regulation of cryptocurrency, because “once the rules are clear, then it becomes easier for everyone to participate in the market.” He compares the current wave of skepticism to reports that the internet was a fad in the 1990s.
“A 20-year deal on an iconic stadium suggests we intend to be here long term,” Kalifowitz explained. “People who set up Ponzi schemes don’t hang around in one place too long, do they?”
The $700 Million Question
To say that naming rights deals are having a moment would be an understatement.
Just across the city from Los Angeles you have SoFi Stadium – home of the Rams and Chargers – and the future Intuit Dome, home to the Clippers in 2024.
- SoFi paid $625 million for the rights over 20 years.
- Intuit shelled out $500 million for 23 years.
- Across the pond, Spotify has acquired the naming rights to FC Barcelona’s legendary Camp Nou stadium in a $310 million deal announced less than two weeks ago.
But where does the money actually go in these massive deals we keep hearing about?
“It basically creates the economy that funds the rest of our business,” Baker said. “Several hundred million dollars of renovations are planned for the next three years at Crypto.com Arena to continue to make it the mecca of live entertainment.”
About a decade ago I saw tours by Jay-Z, Kanye West and Drake at the Staples Center. When I attended Lakers and Kings games at Crypto.com Arena this month — my first time there since those concerts — I was surprised at how well her condition held up.
“We never allowed the building to look anything but state-of-the-art,” Silvers said. “At the end of each season there is a meeting to find out what the building needs each year to improve.”
It is certainly easier to meet these needs with $700 million fresh in the bank.