The sponsorship programme for the 2018 World Cup in Russia saw Fifa go to the well of multinational brands, but Fifa soon found the well had dried up.
Although the evidence is now strong that Fifa has changed for the better, past reputational issues impacted on US and European brands and, to a lesser extent, those from Japan and Korea. But brands in the Middle East and the rest of Asia have a different perspective: the World Cup remains the World Cup and is still the greatest show on earth.
Above all, the sales focus has switched to China, where there is a tremendous economic vibrancy and where brands are chasing international credibility and reach through events like the World Cup.
The capital markets in China are driving everything and are the key to the country’s interest in World Cup sponsorships.
Based on the wealth generated through dramatically growing exports, growth in GDP and an economy that has now outgrown the US, there is a huge amount of cash in China trying to find a home, with sports – particularly football – identified as a potent investment vehicle.
President Xi is personally involved in the evolution of a policy which specifically seeks to transition China into a sporting economy, and to drive that forward socially, economically and in schools. Football now sits at the heart of a national strategy that is supported both politically and economically in a country where the state is the prime mover.
The sports economy is now a yardstick by which the country measures its development. In a planned economy clear targets have been set, and a World Cup hosted in China in 2030 is a heart’s desire for the Party Leader.
China’s entrepreneurs can clearly benefit by furthering the state and Communist Party’s objectives, but there is also a pure business opportunity and rationale. Sport and sports investments is big business in China and continues to attract capital.
The momentum is generated from five different areas:
1.The creation of sports agencies and the acquisition of specialist businesses by the entities that represent Chinese capital wealth
This capital is constituted either in a fund that invests in an established sports marketing agency or invests to create a sports marketing agency. A good example of the former is the acquisition of Desport by Wuhan-based investment vehicle DDMC. Desport, an advertising agency established by Lizhang Jiang, quickly built a specialism in linking brands to sport and has wide-ranging relationships including commercial rights deals with Fifa and PSG.
Further examples of Chinese capital acquiring established western sports expertise are Orient Hontai buying Mediapro and Baofeng buying MP & Silva.Football has been the major beneficiary of this investment, especially elite rights-holders. Both Uefa and Fifa have placed and sold rights via third party agency intermediaries in China. The commercial arrangement is usually commission-based or built on an arbitrage arrangement where the agencies provide a non-refundable minimum guarantee.
2. Diversified investment by established companies and major conglomerates
These are normally well-established Chinese business entities such as Wanda or Suning, which have realised the commercial and strategic opportunity of entering the sports-marketing sector.Nanjing-based Suning is a particularly good example: developed by Zhang Jindong from a market stall selling electrical appliances to China’s growing middle class, his vision was to own the entire supply chain, from retail and real estate to content. This has led to the ownership of cinemas and the creation of a broadcast content business – PPTV – that has bought rights to arguably the biggest shows in town, the Premier League and LaLiga. For good measure, Suning bought Inter Milan and owns a Chinese Super League club too.
3. Chinese brands and businesses seeking to build global businesses
The likes of Vivo, Hisense, Xiamao and Huawei all have international ambitions and have used sport as a platform to build brand credibility. Sponsoring major global sports events is a particularly efficient way of building both reach and credibility to global consumers. This is especially true within categories such as electrical products where price and reliability are key.
4. The perception of sponsorship as a media buy
In China, unlike Japan and Korea, sponsorship is not well understood or established in the marketing mix. When sponsorship is mentioned in China, it is understood to mean air-time or media sponsorship. This model is a barter model where exposure or content is provided in exchange for media air-time, and it’s a business that is growing exponentially.Big media companies such as the Charm Group are buying content from providers like LaLiga and saying, ‘We’ll take your content and monetize it via all the air-time on the platform’. If the content is premium it can become a highly-targeted and efficient media buy. These companies know very little about leveraging sponsorship in the traditional sense, but in a market where traditional audiences reached via linear media are still highly valued, this area of the market remains important for rights-holders, even the elite.
Until recently, state broadcaster CCTV was the dominant player in the Chinese media market, but in the last three years that has completely changed. There are now multiple competitive platforms on digital platforms, and rights that were worth in the millions of dollars are now worth hundreds of millions due to competition. This content distribution market is primarily built around media advertising revenues, not the subscriptions model common in most other markets.
It is also vital to understand that in China an overwhelming proportion of the economically-significant population are young and live in the cities. Their average commuting time is three to four hours per day and they are heavy users of mobile devices. The communication infrastructure of China makes the West seem antiquated: the connectivity is phenomenal, and they are watching content that suits their lifestyle. If you have content, like sport, that sits on the mobile devices, you have a ready audience and a strong business model.
5. The Chinese wall around the country’s digital economy
In excluding Facebook, Twitter, Google and Amazon, the Chinese state has facilitated the creation of an indigenous ecosystem, allowing the growth of Chinese equivalents to each of the major Western brands. Sport, and football in particular, is likely to play a key role in providing these businesses with the means to internationalise their brands and services. Alibaba’s relationship with the IOC is likely to provide the first evidence of this trend.All eyes have been on Google, Facebook and Amazon to make cross-territory bids for big-ticket sports rights but Alibaba, Tencent or Weibo are now just as credible. Each has a consumer base of 400-500 million economically-significant people who are likely to grow richer as the century progresses.
In light of these trends, it should come as no surprise that China now accounts for no fewer than six of Fifa’s World Cup sponsors for Russia 2018. Wanda – plus its Sunseeker subsidiary – Hisense, Vivo, Mengniu and Yadea represent what should be seen as a vanguard for a new world order in elite sports sponsorship.