The Los Angeles Kings Gamble on Crypto
A big, profitable business owned by very rich people can't resist a big short-term payday
The other day, I attended a hockey game at the newly rechristened crypto.com Arena, formerly known as Staples Center. The home team, the Kings, lost to the two time defending Stanley Cup Champion Tampa Bay Lightning, the best team in professional hockey, 6-4. The fans left disappointed. I left bewildered- not at the home team’s performance, as hockey fans in LA are used to that- but to the decision of the Kings to sell the naming rights of the arena to a cryptocurrency company.
Crypto.com Arena (I’ll abbreviate it CCA through the rest of this piece) is the second most important sports facility in the United States, behind only Madison Square Garden. The latter facility is the ultimate example of the successful branding of a sports arena: various arenas in New York have been named “Madison Square Garden” since the 19th Century. The name persisted even after the facility was moved out of Madison Square (the current version sits right next to Penn Station on 34th Street in Midtown). Numerous extremely famous events have happened at MSG, from the murder of Stanford White, which resulted in a very famous “rich guy gets acquitted” murder trial, to the Fight of the Century, the first meeting between Muhammad Ali and Joe Frazier. It has hosted Final Fours and national indoor track and field championships. Just about every big concert act plays MSG. It currently houses the Knicks and Rangers, as well as perennial events such as the Westminster Kennel Club Dog Show, which benefit from their association with the arena. It calls itself “the World’s Most Famous Arena”, and nobody really argues with it.
And key to this is that while MSG has lots of sponsorships, they never sell the name of the arena itself. It’s always “Madison Square Garden presented by Chase” or whatever. Everyone understands that branding necessitates there be a sports arena on Manhattan Island named Madison Square Garden.
Well, the second most famous arena, at least in the United States, was the arena formerly known as Staples Center, now the CCA. Under the Staples brand name, it had become the home of three major men’s professional sports teams, the NHL’s Kings (whose organization owns the facility) as well as the NBA’s Lakers and Clippers (the Clippers will be moving out soon). It also hosts the WNBA’s Sparks, the Grammy Awards, the MTV awards, and numerous concerts, boxing, UFC, and wrestling matches, and shows. In the past, it has also hosted such things as the NCAA and Pac-12 tournaments and the end of season WTA tennis championships. Pre-pandemic, it was in use more than 300 days a year. It became famous as “Staples Center”.
Staples, of course, was the result of a naming rights deal: the office supply store chain contracted to be the title sponsor of the arena. Which means there was always the possibility that the arena might be renamed after another sponsor. But while you might want to retain that right, that doesn’t mean you should exercise it. The CCA is going to lose all of that successful brand equity that was built as Staples Center. It will take years to get used to the new name. And the new name will never have the cachet that “Madison Square Garden” has (or that other facilities that have long operated under the same name, such as Yankee Stadium, Wrigley Field, and the Rose Bowl, have), especially since it might be replaced down the line.
And part of the problem here is that the people who run CCA don’t seem to have any idea that their arena is actually special because of its location and the number and variety of events it hosted. Arenas in other cities, after all, change names all the time. The Phoenix Suns arena has been named everything from the Talking Stick arena to the America West arena to the US Airways center to the Footprint center. But that’s because the sports arena in Phoenix has little brand recognition anyway; it’s just a basketball arena that hosts the same sorts of things that any small market NBA arena hosts. CCA is a much, much more important facility.
But what’s weirder than simply the fact of the name change is what they changed it to. Most sports arenas are named after safe and steady companies- think “Pepsi Center” or “American Airlines Arena” or “Ford Field” or the series of phone companies whose names adorned the San Francisco Giants’ ballpark. This is not an accident. You want your fans to get good vibes from your facility name, and you want them to associate the team that plays there with products they like (or at least see as respectable).
And indeed, one of the great cautionary tales occurred when the Astros sold their naming rights for their new stadium to Enron, an energy company that was involved in sketchy financial trades which eventually led to prosecution and bankruptcy. The Astros later had to tear out all that Enron branding, at great expense, and rename the park for Minute Maid (a much more respectable sponsor).
In that regard, crypto.com looks far less like Pepsi and more like Enron. Cryptocurrency may at any point get outlawed by governments; it is already the subject of significant investigation, and there’s no doubt that while it certainly has its passionate advocates, it can also be used to fund dark transactions such as for contraband or bribery without a banking trail. In other words, there’s no guarantee whatsoever that crypto.com will be around in 5 or 10 years, or that anyone will want to associate with it. Contrast that with office supply store chains, which seem to be an evergreen, respectable enterprise.
So why are the Kings doing it? Obviously crypto.com offered them a slew of money, more than Staples did, and here we are. But it’s not like the Kings need the money. They are owned by one of the richest men in the world, bring in the sort of revenue that any professional team in a large market does, and the CCA brings in tons of money as well, both from arena events and from the developments surrounding the arena site (which the Kings’ owner also has a stake in). So why do it?
My hypothesis is that this is a classic example of the short term prevailing over the long term. Crypto.com offered them so much money that they were able to prevail over all the qualms of changing the branding of an iconic arena and associating with a firm that could see trouble down the road. And unfortunately, the business world is full of this sort of short term decisionmaking, focused on the immediate financial statements rather than long-term prosperity. But I suspect what the Kings have lost won’t readily fit into any financial statement: the loss of the iconic branding of one of the greatest and most important facilities of its kind in the entire country. The Kings’ loss is almost certainly Madison Square Garden’s, and New York’s, gain.