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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (4433)	2/21/2005 12:39:33 AM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

China's sport fans open their hearts - but not their wallets By David Owen Published: February 21 2005 02:00 \| Last updated: February 21 2005 02:00 When Stockport County went to China just under four years ago, they were the 39th best football team in England and Wales - hardly the most promising position for building a global brand. But when they turned up in Guang'an City, birthplace of the late Chinese leader Deng Xiaoping, they drew a crowd of 25,000. Some spectators travelled for four days to get there. Things have not improved for Stockport, now the 68th best team, but the club's reception is symptomatic of a much wider trend in Chinese society: from basketball to auto racing, American and European sports have become hugely popular, prompting teams and leagues to make significant investments in the hope of new revenue streams. But despite the fervent support, these foreign investors are finding that passion for their products in the world's most populous market is not leading to the commodity they most need to sustain their marketing efforts - hard cash. An insider at Real Madrid - Europe's most successful football club and employer of David Beckham, England captain and global sports icon - estimates that just 4-5 per cent of its €303m (£209m) of ordinary revenue is derived directly from Asia, with China providing perhaps 40-50 per cent of this. At Manchester United - the English club with the highest international profile - China is thought to account directly for about £1m of its £160m annual turnover, despite the fact that the club estimates it has 20m committed fans in China's main urban centres - twice the UK total. "If you measure success by how many people are watching, that's no problem," says Guangyu Li, a Shanghai-based associate principal with McKinsey, the management consultant. "But deriving financial returns is much more difficult." One problem for foreign leagues is the lack of competition in the TV rights market. This has kept rights fees, which have escalated sharply elsewhere, very low. The English Premier League puts the value of its three-year deals in China and Hong Kong at something over $100m, or about $5m per club. But a good three-quarters of this is generated by Hong Kong. "If the television market opened to competition, China could become for sports such as basketball and volleyball what India is for cricket," says Emmanuel Hembert, London-based manager at AT Kearney, the management consultant. But it would be surprising to see significant loosening before 2008's Beijing Olympics. Merchandising sales are also limited because the price of official team kits and other branded items puts them in the luxury bracket, making sales volumes disappointingly low. The US's National Basketball Association has a five-year partnership covering Asia with Reebok, the sports goods company that in turn has a multi-year agreement with Yao Ming, the 7ft 5in tall NBA star who is China's biggest sports celebrity. A Reebok spokesman was quoted last year as saying that the group had $30m in annual sales of athletic shoes and apparel in China. Considering that the NBA generates an estimated $3bn in annual revenues, those numbers are a mere drop in the merchandising bucket, even with Yao's help. The one area where foreign sports continue to see financial support is in ticket sales, even with high prices for some premier events. The inaugural Formula One Grand Prix in Shanghai last year saw 150,000 tickets snapped up at more than £200 each. But even there, experts are cautious. McKinsey's Mr Li believes demand for elite sporting events is driven in part by status rather than love of sport, making it vulnerable to shifting fashions. More encouraging is the impact China has had in luring sponsorships from multinational companies, which are equally eager to get their brands known in Asia. Michael Payne, the former Olympic marketing chief now with Formula One, argues that for some global events "corporate interest in China would account for 30-40 per cent of the total return on investment for many sponsors". Germany's Siemens, in deciding to end its sponsorship of China's football Super League, said it would "use our sponsorship of other teams, for example Real Madrid, to keep our profile high in China". Even with the difficulties of generating revenues, there is no sign of Big Sport abandoning its efforts to crack China. Andy Anson, Manchester United's commercial director, says: "I would like to think of us generating between £5m and £10m a year in China within 10 years." An executive at another top European club adds: "If you want to compete in the football business in 10 years' time, you are either in China or you are dead." news.ft.com