China in focus: back to the noughties
Published: 27 Jan 2016
Comparisons between the current growth cycle and that stimulated by the awarding of the 2008 Beijing Games in 2001
13 July 2001 was a red letter day for China as it won its bid to host the 2008 Summer Olympics in Beijing. This set in motion what was to be a sustained period of growth in the Chinese sports industry through the noughty years. The successful bid made everyone take notice of what a giant China would become in the world of sports. A stream of major events such as Formula 1 and Tennis Master Cup followed. It is important to note the all of the events were primarily hosted and underwritten by government in China and private promotion and yet to take off which to a great extent is still true in the present day. It is also true to say given the impressive growth Chinese brands were achieving in their respective domestic markets little outward bound investment and sponsorship was coming out of China but a growing domestic industry was certainly starting to kick-off in earnest.
There was tremendous commercial and governmental investment in and around Beijing 2008 but once the IOC and its bandwagon had packed its bags, the expected legacy boom after the Games never really transpired. The post-Games vacuum coupled with a global economic crisis and a certain amount of sponsorship weariness saw a tightening of budgets which led to considerable lull in the industry.
Fast forward to July 31, 2015 and Beijing led a successful bid to host the 2022 Winter Olympics and have the unique honour of becoming the first city to host both Games.
There has been unparalleled growth over the last few decades but like many other markets the country's sports business has exhibited unique attributes as well as notable trends and cycles and this can also be seen if we compare the similarities between now and the noughties. There is now a revitalized hope that we are on the verge of another great growth spurt but if we look around, it is clearly apparent such growth has already been put into effect over the last few years by a multitude of different factors
The first thing to note is the same folk are still running the country. Maybe this is stating the obvious but it is extremely important to understand the fundamental mechanics of Chinese government. This is important as even though there has been some liberalization in the sports industry in recent years, it is still in the whole owned and managed by the State. Therefore every factor and indeed decision around sport in China must give consideration to the influence of government. It is well documented throughout history and particularly in societies governed as authoritarian states that sport has the ability to occupy the attention of the people as a so called 'safe' pastime and therefore is good for social stability. As seen by promotion of major events and national sports teams and icons sport can also be a tool to fuel nationalism which again will also tend to help the incumbent government entrench its support base. As such sport is generally viewed as good thing by the Chinese government and therefore has allowed the industry to flourish by taking active steps to support this.
The awarding of the Summer Games to China in 2003 and the Winter Games last year should be viewed as a part to that political power play that will also result in stimulating infrastructure and further the commercialism of sport whilst supporting social stability.
Interestingly though China's current President, Xi Jinping has led the country through a series of reforms that will undoubtedly have a more profound effect on the sports industry.
Firstly, his anti-corruption purge has effected every layer of government including the higher echelons of sporting administration. The hope here is that fear of criminal proceedings to those corrupt custodians of sport may bring a new era of transparency, compliance and governance. However, this must be tempered with the realism of human nature and the fact that increased commercial activity will bring temptation some may find difficult to avoid.
In October 2015, the State Council announced plans to grow the sports industry to 5 trillion yuan (RMB) by 2025 and eliminated certain barriers that hinder the industry’s rapid development and encourage private capital to invest in building facilities and providing related products and services.
Last year, China's General Administration of Sport announced a series of measures aimed at relaxing rules for holding sporting events. Also in accordance to Xi's desire to turn China into a tier one footballing nation, the government announced a reform plan which included an aggressive grass roots development plan as well as opening up competition for TV broadcast rights for domestic China Super League and National team games (which after bid process was won by China Media Capital owned Ti'Ao Sports for a cool RMB8billion in a 4-year deal).
It is ironic but in many ways the latest surge in the Chinese sports business can also be attributed to the current downturn in its own economy. Much of the vast amount of Chinese corporate and individual wealth over the previous decade was made on the back of property investment. So when after oversupply and governmental policy started stagnating this market investors had to start looking elsewhere for growth. This has resulted in a growing trend for Chinese acquiring overseas assets. There is no greater example of this than China's richest man Wang Jianlin's Dalian Wanda Group who have not only moved some of their property portfolio overseas but they are in the midst of diversifying their assets into other industries most notably in sports and entertainment. They are already making their mark with high profile acquisitions such as US cinema group AMC and Legendary Entertainment. In sport they have already completed deals to snap up one of the worlds highest profile sports marketing agencies Infront as well as taking a sizable stake in Atletico Madrid and ownership of World Triathlon Corp. After consolidating its sporting assets under the umbrella of Wanda Sport, Wang certainly will not stop there and plans to build the worlds first sports company with annual income of in excess of US$10 million.
The loosening of media restrictions in China especially in the non-traditional digital streaming and social media coupled with the flexible way young Chinese consume sports is also stimulating great opportunity within this space. None more dramatic is the rise to prominence of Le Sports which fueled by a treasure chest of investment has been acquiring sports streaming rights at a frightening pace. It is little wonder that major players such as Wanda's Wang Jianlin's and alibaba's Jack Ma have joined the ride and invested in other platforms such as Sina, PPTV Youku, Hupu, etc. are desperately trying to keep up in the chase to secure and deliver quality sports content.
In this day and age no self-respecting global sports property or brand can properly come to terms with market development in China without adopting an effective strategy that integrates and activates relevant platforms.
So it seems we could be standing at the start of another great period of growth for sports in China. For sure there will be downturns and cycles along the way but barring major catastrophe there is no doubt it will become one of the biggest, if not the biggest, sports market in the world at some future date.
Mark Thomas is Founder and Managing Director of S2M Group and has over 20-years experience in the sports industry having worked on a wide variety of projects & properties from being involved in ownership and promoting propriety sports events to delivering strategy, sponsorship, events and activation activities on behalf of clients. Mark speaks fluent Chinese and has excellent relationships with sports rights holders, governmental partners, brands and media. Email email@example.com for more information.