Over the next decade, the global sports world is going to shift on its axis and the shift will be to Asia. This change will present both immense opportunities and challenges to European and American sports organisations.
Sport as cultural and commercial force has centered on Western leagues and teams since the 1960’s. When the industry and consumers think of iconic teams, competitions and athletes, thoughts turn to the likes of Manchester United, Messi, the Lakers, the Champions League, the Monaco Grand Prix and the New York Yankees. While these sporting properties will remain incredibly powerful they, and indeed large parts of the sports industry, will be more dependent on revenues emanating from Asian markets.
China, now the world’s second biggest economy, is leading the reorientation. As a centralised economy, people take notice when the Chinese Government speaks and the Beijing bureaucrats have indeed spoken. The current administration, led by Football crazy president Xi Jing Ping, has publically stated the ambition to build the world’s biggest sport economy. This would result in an industry worth $850bn in size by 2025. Estimates suggest that sport economy only represented 0.6 percent of China’s GDP in 2012, with the comparative figure in the United States was 2.59 percent.
Unlike similar statements in the West, this is not a political sound-bite. Already, the roll out of 20 00 football programs has commenced in Chinese schools. This objective will be achieved in the next five years, with a longer term target of 50 000 schools over ten years.
From a broader engagement perspective, the number of Chinese who are defined as Football Fanatics, will drive dramatically change the economics of world Football.
When the Chinese Government speaks, the private sector in China responds. Wanda, a business that traditionally focused on property development, is on an aggressive growth trajectory with the acquisition of the World Triathlon Corp, European Sport and Media agency InFront and a stake in Atletico Madrid. Late last year Shanghai-based CMC Holdings made a $400m investment in City Football Group, the owners of Manchester City, New York City, Melbourne City and Yokahama Marinos.
The other major factor in China’s impact on global sports is the gradual deregulation of the media sector. Historically, almost all sports content has been placed on the Government controlled sports channel, CCTV5. This has stifled the value of rights deal and removed innovation from the media sector. Over the past couple of years the emergence of alternatives is prompting the interest of global sports administrators. For example internet steaming platform, Le TV has aggressively acquired rights for Major League Baseball, the ATP tour and the US Golf Open. All three organisations would have financially benefited significantly from having an alternative to CCTV5.
The impact and implications for European and American is immense. As broadcasters in China build reach and advertising revenues their appetite for premium sports content will be immense. This will mean more broadcast money, but will also mean changes to the way American & European leagues and competitions are run. Expect more sports content to be played in China and not just pre-season competitions and friendlies. The Chinese want the best and their economic power will necessitate moving premium content to the Middle Kingdom.
China will not be alone in its shaping of the global sports industry. We are already seeing how India is having a massive influence on global cricket. Reports suggest that 80% of the International Cricket Council’s revenue originate from Indian sponsors and broadcasters. This economic power has resulted in India being the key player in the global administration of Cricket. The establishment of the Indian Premier League has created a massive battle for talent. The huge salaries on offer to players, now mean that some are forgoing national representation to chase the lucrative club contracts and endorsement deals on offer.
India’s influence does not stop with Cricket. The International Premier League was developed and funded by Indian interests and launched in 2013 with 5 teams playing across Asia and the Middle East. While not officially sanctioned, the tournament attracts the best players in the world and its stature was enhanced when Coca-Cola bought a stake in the controlling body.
While on the subject of Tennis, it is not ridiculous to suggest that a market like China should lay claim to the fifth Tennis Grand Slam. In the same way that Formula 1 augmented the traditional events of Silverstone and Monaco with new events, why wouldn’t the Grand Slams want an event in what will be the world’s largest economy. The Chinese would justifiably argue that they deserve the absolute best content. The money men would argue that the Grand Slams can’t afford not to be there.
The move to an Asian orientation has already started. A Rugby World in Japan in 2019, an Olympics in Tokyo in 2020, a Winter Olympics in Beijing in 2022. This run of events in Asia would have been unthinkable 15 years ago. Now it is a basic reality for the sport industry where the economies of traditional markets are flat and incremental growth will be coming from emerging Asian markets. This trend has only accelerated with political volatility in Russia and the implosion of the Brazilian economy.
Western Sport organisations will need to move from having an Asian strategy, to building their global strategy with Asia at its core. To do otherwise will put them at risk of missing massive growth opportunities.