The Beijing Olympics in 2008 helped to redefine the world’s perception of China. The sports extravaganza not only served notice to the world of China’s potential to become the world’s largest economy, but also created a positive spillover to other economic sectors and attracted foreign investment.
The event reportedly generated an operating profit of US$170 million and the run-up to the Games prompted an infrastructure building boom including a massive expansion of the capital’s subway system. The closing of hundreds of factories and power plants to tame Beijing’s notorious pollution was a public-health plus.
Brazil was hoping for a similar lift when it bid for the 2016 Games. The event that concluded yesterday in Rio de Janeiro certainly helped restore national pride in a country beset by severe economic and political malaise, but the jury is still out on the long-term benefits.
The sports industry can help drive an economy forward through activities related to promoting and organising sports-oriented events and businesses. It includes distinctive segments such as sports tourism, fitness, sporting goods manufacturing and sales, management and sponsorship.
Sport today is a multi-billion-dollar industry in terms of generating employment and revenue, propelled by enormous consumer demand. Industry professionals agree the time has come for Asia to tap into the potential, given its burgeoning middle-income population and consumers’ growing interest in living healthier lives.
“What we see is a significant increase in investment in sports coming from Asia and a lot of that is driven by China and the Middle East, so a lot of sponsorship revenue and commercial support are coming out of those two markets into both the domestic market as well as internationally,” says Claude Ringuet, managing director for Southeast Asia and Greater China at Nielsen Sports, which provides analytics and insights within the sports industry.
Global sporting federations and major rights holders no longer need convincing that Asia is a great place to stage events. However, the region’s record for athletic competitiveness is spotty, which tends to reflect lower levels of economic development. Developing world-class athletes takes years and requires well-funded programmes and facilities that a lot of countries still consider a luxury.
“The ability to host major sports events in the region is generally good in Asia. If you look at more mature markets like Japan, Korea, China, and even Singapore, they have significantly improved in their ability to host major events,” said Mr Ringuet.
“But obviously in emerging Asia, it’s not there yet. It’s still a challenge for them. Emerging Southeast Asian countries, for example, still lag quite some way behind western Europe, Australia and the US.”
High quality of sports development for children and youth is something associated with mature markets. In Southeast Asia, a lot still needs to be done at the grassroots level to encourage participation in sports and provide the right development framework to help top performers flourish.
There are some success stories, however. Mr Ringuet points to badminton, saying the “fantastic” development pathway has led to Asian players dominating the sport. Other sports, especially those with an Asian heritage and high participation rates in the region, could benefit from a similar focus.
The sports business in Southeast Asia, meanwhile, is dominated by football and largely driven by the success of regional products such as the Suzuki Cup, though Asian football leagues cannot come close to those in Europe in terms of popularity among the Asian fan base.
Outside of football, though, the industry is still quite immature. “Yes, there is increasing maturity in the region but it’s been rather a slow rise,” said Mr Ringuet. “Sport is important in immature emerging markets, but there are other priorities for their governments in terms of infrastructure and development of the country as opposed to funneling money toward the sports industry.
“In these smaller markets, there is less interest by multinationals in investing in sports as the market is still immature from a product perspective. Vietnam has come on the radar over time, the same with Myanmar. Cambodia and Laos will come, but they are not yet markets that major corporations are looking to invest in.”
The huge influence of Western sporting properties such as the English Premier League, and their ability to attract an enormous viewer base from Asia, can potentially hinder the development of local Asian products. But the former will continue to push even harder into Asia given the huge potential for revenue from marketing, sponsorship and merchandising.
At the same time, a huge amount of money has started to flow from Asian businesses into global sports clubs, marketing and sponsorships. Chinese interests have been leading the way in football, but the biggest success story in recent years has been the improbable rise of Premier League champions Leicester City, owned by the Thai travel retail company King Power International.
“But if you look at global sports such as football, there is still a long way to go for the Chinese Super League or the Thai Premier League to be on par with European leagues,” Mr Ringuet said.
Tanya Heimlich-Ng Yuen, a senior consultant with the sports specialist Tse Consulting, agrees that Asia has high commercial potential, however it’s not quite there yet in terms of sports maturity.
“In terms of sports performance on the world stage, there are relatively fewer medals won by Asia Pacific countries. China, South Korea, Japan, and to some extent North Korea are about the only countries that are sort of breaking onto the medal scene,” she told Asia Focus in a telephone phone interview from Switzerland.
“The US and Europe remain strongholds, still outperforming Asia. Asia is upcoming but not leading as much in terms of commercial and professional leagues. So there is quite an opportunity there, not only in terms of performance but also commercial opportunities.”
The development prospects look promising in light of the 2020 Olympic Games to be held in Japan, which will also stage the Rugby World Cup in 2019. In 2022, Beijing will hold the Winter Olympics and Qatar will stage the World Cup of football.
Ms Yuen suggests three areas that Asia needs to look at: medal contention, commercial opportunities and hosting of major events. Pursuing these aspects can also help countries utilise sporting success as a form of soft power.
“Soft power helps justify and encourage investment in sports, not just at a league level but at the grassroots level. Sport affects health positively and helps promote integration within communities.”
Though not as financially influential as other sectors, the sports industry accounts for a significant portion of gross domestic product (GDP), particularly in China, Japan and Korea. Sports and related activities can contribute anywhere between 1% and 5% of GDP.
In China, football and basketball leagues have attracted considerable sponsorship and advertising. In 2012, sports accounted for 0.5% of the Chinese economy and the figure is forecast to increase to nearly 2.0% in 2025, according to Gemba Group, a sports and media consultancy.
The Thai Premier League, to give one example, over the past decade has grown into a successful business “ecosystem” from players and club owners and executives to sponsors, ticket sellers, event staff and food vendors.
“My guess is the Thai football league, for example, has economic impact across all areas of way over $100 million, generated through everything from television rights to sponsorship to ticket sales,” said Marcus Luer, founder and group CEO of Total Sports Asia, a Malaysia-based global sports marketing agency.
“The salaries of the players are really just one piece of the puzzle. There is a whole supply chain of services from the guy who makes and sells the ball to the guy who kicks it, and whoever has something to do with the league earning a living.”
However, the sports industry also needs to be viewed in a larger social context and not just as a commercial proposition, Mr Ringuet told Asia Focus.
“There is still room for the financial side to grow, but you’re never going to see sports overtaking manufacturing industry. But you can obviously see opportunities, ongoing improvement in terms of revenues that come in through development of football leagues and other sports in local markets,” he said.
In his view, sports should be emphasised not only at the league and national competition levels as a source of revenue, but it should also be prioritised at a participation level as there is a significant push to improve people’s health and well-being.
Athletic achievement on the world stage also has a positive psychological impact on a country and its brand image, and can even create a knock-on effect in other sectors such as tourism. Thai stars such as golfer Ariya Jutanugarn and badminton hero Ratchanok Intanon have become valuable ambassadors for their country.
“For sure, success drives interest and drives money into sports,” Mr Luer said.
He points to Malaysia’s Nicol David, one of the top squash players in the world. “Squash is a well-known and well-accepted sport in the country, but it’s just because of her,” he said. “Malaysia doesn’t have a history in squash, only for recreation. But now it’s a steady product. It’s just how it works, and there is no difference in any other market in the world.”
The better a reputation a country gets from having an athlete winning medals, the more enthusiastic the public becomes about watching and even playing a sport. The delivery of sports content via expanded media platforms from traditional broadcast to online builds interest further. Media exposure enhances sports development and gets people thinking more about health and fitness, stimulating the sporting goods market.
The Asia-Pacific sports equipment market had total revenues of $18.49 billion in 2013 and a compounded annual growth rate of 3.7% between 2009 and 2013, according to a report by Asia Briefing. Through 2020, the region is expected to show rapid growth, owing to rising demand from countries such as Australia, China, Japan and India.
Government commitment in developing sports at the national level too is vital for the growth of industry. Singapore, for example, has a forward-looking plan and vision to create a career path for athletes, which will also foster greater participation by the public.
“When it comes it a country like Thailand, there is a bit of a lack of government commitment,” Mr Luer said. “I have spent a lot of time with individuals in that sector there and they all want to do things, but clearly in the current environment, there is really not a coordinated effort. A lot of it is very ad hoc, and that’s similar in other markets too.
“What always happens is there is large focus when there is a large event coming up. Next year, Malaysia is hosting the Southeast Asian Games. Naturally as the host, there is a lot of emphasis now that they want to do well, so the money is being poured into it for a period of time. Then when the event moves on to somewhere else in a year or two, it drops off.”
While governments that focus on sports get to bask in the glory achieved by high-performance athletes, they can also help encourage their citizens to lead healthier lives, potentially reducing the burden on the healthcare system.
“Goodwill is generated when your country wins something, or even having a chance to participate can be a huge achievement,” Mr Luer said.
“There are really few things that can scale up national pride and a sense of national unity like a victory in sports because it’s one of the few times when you don’t look at which political party you are associated with. You don’t look at religion, race or colour.”
The recent smiley selfie between North and South Korean gymnasts at the Rio Olympics was a powerful illustration.
“That’s also what China has obviously worked out,” said Mr Luer. “They can create massive unity within a very large market. To create that, they use sports in a very effective way.”
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