The 20 billion sports marketing market is about to boom, but where are the opportunities?

The sports industry showed a new look in 2016. After the previous Internet model boom subsided, capital turned its attention to offline, cash flow and profitability. Among these, sports marketing is one of the core focus tracks.

Compared with the emerging Internet + sports entrepreneurial projects, sports marketing companies are relatively traditional, lack popular concepts, and are not so sexy in terms of growth, storytelling and imagination. However, they have the advantages of clear monetization path, light asset operation , small investment, quick results, and easy to generate stable cash flow. At the same time, they can better integrate and activate sports resources and realize service upgrades.

More importantly, sports events, whether top-level or mass-market, are increasingly becoming the object and carrier of promotion for various consumer brands; it is a consensus among most businesses to enhance brand concepts and influence through sports events, thereby increasing product sales conversion rates . This has accelerated the growth of the role and demand for sports marketing.

According to what we have learned from Lanba Sports, both VC and PE, early and back-end investors in the market have recently begun to pay more attention to the field of sports marketing.

How big is the sports marketing market?

As the intermediate link between the B-end and the C-end of the sports industry, sports marketing can be divided into two categories:

First, the marketing business of business development, agency and advertising of sports events, activities, leagues, athletes and teams themselves;

The second category is composed of various companies, such as brand owners of equipment, footwear and apparel, automobiles , fast-moving consumer goods, IT, etc. They carry out various marketing activities such as advertising in sports events, leagues, and players, product placement, and commercial cooperation.

In mature regions of Europe and the United States, sports marketing has long become a big cake of the sports industry. According to data from IEG, a statistical agency under the WPP Group, the global sponsorship scale is expected to reach US$57.5 billion in 2015, and the scale of all types of sponsorship in North America is US$21.4 billion, of which sports sponsorship is approximately US$14.88 billion, accounting for 70%. And this is not the whole of the sports marketing industry chain.

In the North American sponsorship market, sports sponsorship accounts for 70%. Data source: IEG.

According to a report released on September 19 by Sports Sponsorship Insider, the 25 Champions League teams from 12 top European football leagues earned 2.85 billion euros from sponsorship alone in the 2016-17 season.

Specifically for a single brand, the sporting goods brand Under Armour's marketing expenses increased from US$205 million in 2012 to US$417.8 million in 2015. In the mature commercial sports world of Europe and the United States, sports marketing has always played a relatively important role and market size.

Sports marketing is not new in the Chinese market.

Starting with the “Oriental Magic Water” Jianlibao, which became an instant hit at the 1984 Los Angeles Olympics, cases of sports marketing began to appear in the domestic sports circle. Li Ning around 2000 and Lenovo, which went global as a top sponsor of the 2008 Olympic Games, are both companies that have left a mark in sports marketing cases . Until this year, Wanda has formed a strategic partnership with FIFA, Alibaba has sponsored the Club World Cup, and Hisense has sponsored the European Cup. Local companies that have created typical sports marketing cases are constantly emerging.

But on the other hand, because the domestic sports industry has not exploded in the past few years, the role and concept of sports marketing have been underestimated.

If classified by business model, traditional companies and institutions involved in sports marketing business in mainland China can be roughly divided into two categories: one is the type that connects resources around sports IP; the other is the type that plans sports marketing programs.

The former is at the upstream of the sports marketing link, and its main business is to connect sports IP resource providers and brand owners and provide a marketing platform for the latter, which requires a high level of resource integration capabilities. Representative companies include global sports marketing giants such as IMG, Infront, Bafang Global, Lagardère, and Dentsu, as well as domestic vertical sports companies such as Ford Sports, Sports Window, Shengkai Sports, Shenglishijia, Hualu Sports, and Ouxun Sports.

The latter is relatively close to the 2C end of the sports marketing process, connecting brand owners with target consumer groups, and testing the ability to plan specific plans and implement creative ideas. Among them are vertical sports marketing companies such as Keysight and BroadSky, as well as advertising, public relations and communication groups such as BlueFocus that have set up sports marketing departments.

In addition, various new media platforms also use media platforms to provide IP for offline self-organized events and help the event to be implemented, becoming the third category of sports marketing companies. For example, there are Hupu and Sina Sports, while new entrants include LeTV Sports and Tencent Sports.

Summary of sports marketing players in the Chinese market

However, starting from 2014, driven by policy support, consumption upgrades, people's awareness of sports and health, competition stimulation, and the need for companies to expand domestic and overseas markets, the demand in this field and its importance in the industrial chain have gradually been magnified. The scale of the sports marketing industry has grown significantly. According to data from Dongxing Securities , the main business income of China's sports marketing industry increased from just over US$2 billion in 2006 to around US$3.5 billion in 2015, and in 2014 it increased by about 40% year-on-year.

Summary of Sports Marketing in China

It is foreseeable that, stimulated by the European Cup, the Olympics, the Chinese Super League, and this year's Asian 12-team tournament, the scale of China's sports marketing industry will have a steep growth curve in 2016.

From Lanba Sports’ survey and visits to the industry, the Chinese sports marketing industry has shown the following three trends:

1. The cost of sports IP commercial sponsorship is rapidly expanding

One direct reflection of the rise of sports marketing is the significant growth in local IP commercial sponsorship over the past year or so. In order to grab sports sponsorship resources, new entrants have resorted to high-profile money-spending policies, resulting in a sharp increase in sponsorship amounts. This is particularly evident in Chinese football.

For example: In the past two years, large sports sponsorship cases in the domestic market include:

• Ping An of China has signed the Chinese Super League title sponsorship with a whopping 600 million yuan for four years, nearly double Wanda’s previous 65 million yuan per year;

• Nike signed a 12-year contract with the Chinese team with an annual payment of no less than 100 million yuan, ending the more than 30-year Adidas era;

• Changan Ford becomes the main sponsor of the Chinese team, with an annual sponsorship of no less than 50 million, a significant premium over Beijing Hyundai;

• Nubia spent 150 million yuan to acquire the rights to the chest advertising of Jiangsu Suning’s Chinese Super League uniforms this season;

• Dongfeng Nissan Venucia was on the chest of Evergrande’s game uniforms for two consecutive seasons in 2014 and 2015, with revenue of 100 million yuan each year.

At the same time, the types and number of sponsors are also increasing. The Chinese Super League added TAG Heuer as a new watch timing supplier in the 2016 season, and the Chinese team welcomed another international formal wear brand, Zegna, before the top 12 matches.

Wang Yiming, CEO of Dentsu Media China, told Lanba Sports that "prices have risen too high in recent years. Sports event sponsorship should be long-term, not just for one or two years. Of course, sports IP is unique, and there is no absolute price rationality."

Last year, China Open achieved the 1+3+8 top sponsor ratio for the first time - 1 chief sponsor, 3 diamond sponsors, and 8 platinum sponsors. This year, more than 10 new sponsors were added (a few original sponsors did not renew their contracts).

"In an age of information overload, it is increasingly difficult to capture and focus attention in a short period of time, but sports have this characteristic. Moreover, the people behind different sports and different sports events can be clearly traced. This is particularly valuable for business owners." Zhang Qing, CEO of Key Sports Consulting Company, told Lanba Sports.

2. Big companies are competing in global sports marketing

The commercial development of sports IP itself has advanced by leaps and bounds, and giant companies have also begun to collectively enter the field of sports marketing, either from a capital or business perspective.

In terms of capital, Wanda holds a controlling stake in Infront, China Media Capital participated in the investment in Shengli Shijia, LeTV Sports acquired a stake in Lagardère Sports Asia (formerly WSG) , Tencent participated in the investment in the Internet sports marketing platform Wesai Sports, and IDG Capital invested in Shengkai Sports earlier.

On the business level, there are many cases of local giants joining hands with top international sports IPs. They are all increasing their sports marketing and promoting globalization.

In the past year alone, the following overseas sports marketing projects have emerged:

• Wanda became FIFA’s top partner, sponsored four World Cups, and became FIFA’s exclusive global commercial partner;

• Alibaba has sponsored the Club World Cup for eight years, and Ali Sports has reached a strategic cooperation with sports marketing giant Dentsu of Japan;

• Hisense becomes the first top sponsor from mainland China in the 56-year history of the European Cup;

• Huawei signed top stars such as Messi and Lewandowski;

• ZTE joins hands with La Liga’s Sevilla, and its sub-brand Nubia sponsors Cristiano Ronaldo;

• Suning acquired nearly 70% of the shares of Serie A Inter Milan (which to some extent includes sports marketing implications) .

"Sports marketing is a shortcut for Chinese companies to go international," Feng Tao, CEO of Shengkai Sports, once told Lanba Sports. He has worked for international sports marketing companies ISL and WSG.

"Globally, sports have long been a marketing tool, but we have just started." Wang Yiming revealed that with the demand for sports marketing in the Chinese market, Dentsu's sports marketing business, in addition to its global sports marketing business, recently also includes strategic cooperation with Alibaba and commercial development of some Chinese events.

Through overseas sports marketing, the giants began to reap rewards in terms of brand and performance. According to technode, the Golden State Warriors won the 2014-15 NBA championship, which nearly doubled ZTE's market share in the United States. Facebook data shows that after two seasons of sponsoring the Rockets, the number of active users of ZTE mobile phones in the Houston area has become the highest among major markets in the United States.

In addition, this year Hisense sponsored the 2016 European Cup, earning an advertising value of 570 million yuan, doubling its brand awareness in the five countries of Britain, Germany, France, Italy and Spain (Ipsos data) , and at the same time driving a significant increase in sales, with sales in the French market alone increasing by 3 times.

Hisense sponsors the European Cup and reaps great rewards

Needless to say, Huawei is still sparing no effort to invest heavily in sports sponsorship around the world, which in itself proves the value and returns of sports marketing.

3. Various consumer brands begin to pay attention to sports marketing

In addition to the increase in sponsorship of core event IPs and the actions of giant companies, emerging consumer brands are also beginning to pay more and more attention to marketing and placement in the field of sports events.

Some companies that previously had little involvement in sports marketing are starting to make efforts. For example, Xibei Youmiancun has sponsored the Beijing Marathon for consecutive years, and Qiaowai Immigration also sponsored the International Champions Cup China and Beijing Marathon this year. After sponsoring the Shanghai Marathon, Ctrip also teamed up with LeTV Sports to market sports tourism products.

Corporate demand for sports marketing has exploded. Also feeling this change are the party A and party B companies in the industry that are vertically engaged in sports marketing.

"Before August last year, Borei Sports had never done any market development. When a customer came, we would judge how big the profit margin was and decide whether to accept the contract. If we accepted the contract, we would just provide good service. Last year, we quickly developed Master Kong as a customer. This market is still very easy to develop," Li Yize, general manager of Borei Skyworth, a sports marketing company listed on the New Third Board, told Lazy Bear Sports.

Prior to this, Li Yize had been in the field of sports marketing for more than ten years. After the establishment of Borui Sports in 2007, their main service targets were the public relations and promotion business for sports brands such as Anta. But after 2015, Li Yize clearly felt that the demand in the field of sports marketing was growing. "There are more and more companies that want to do marketing in the sports field, and in fact, there are also endless categories of events and sports activities that can carry this marketing concept." Li Yize predicted that based on the investment situation of various domestic sports marketing sponsors, the current market size of sports marketing is about 20 billion yuan. As the industry matures, the market size of sports marketing will increase rapidly.

Tai Xiaoming, general manager of Blue Label Sports, has similar feelings. Prior to this, BlueFocus, a listed company mainly engaged in advertising and public relations business, began to set up a special sports department after this year's European Cup, intending to focus on the layout of sports marketing business. Tai Xiaoming revealed to Lanba Sports, "In the past two years, many clients have set aside budgets specifically for sports and planned related projects, which may be given to different marketing agencies in the future."

Where are the opportunities?

After sorting out the concept of sports marketing, market size and recent domestic conditions, the latest changes and opportunities in the short term have become a hot topic of concern for investors and companies that want to participate in the field of sports marketing.

At present, the commercial development rights of core domestic and foreign sports event leagues and players are basically occupied by existing sports marketing companies, and there is little chance of opening up in the short term. With the emerging entertainment event IPs and the general rise of mass sports consumption, there are great opportunities for sports marketing.

From Lazy Bear's perspective: there are two new opportunities emerging. The first category comes from new media platforms with strong appeal. They aggregate existing sports traffic and attract advertising attention through their own high-end sports event IPs. The second category is teams or companies that can understand the needs of sports people during consumption upgrades and help implant brands and content in various events or sports scenes. These teams or companies will become the focus of market demand.

For example, the first type of new media platforms are heavy, and Tencent Sports can be one of the representatives. In the Super Penguin Celebrity Basketball Game that just concluded, the quality of the event, the number of participating stars, as well as the quality of the broadcast and the level of attention it received all reached unprecedented heights in similar commercial competitions. The star lineup includes top domestic entertainment stars who dabble in basketball, such as Kris Wu, and traditional NBA stars such as McGrady and Carter. The competition format is based on the NBA All-Star model, and is supplemented by Tencent NBA's broadcasting platform. As a commercial event, the venue was almost packed.

This type of emerging entertainment event with strong communication capabilities will definitely become an emerging marketing target for advertisers. Emerging media teams such as Tencent will therefore become variant sports marketing platforms.

Another aspect is that in addition to professional and commercial sports events, a large number of emerging folk events and emerging mass sports and fitness fields also contain marketing opportunities. Among them, there are three directions worthy of attention.

One type is urban young and middle-aged groups who participate in sexual sports because they are fashionable and highly popular. By using this type of campaign for marketing, there are more resources to choose from, more channels, and it is easier to reach consumers. Running alone has spawned marathons, 10km runs, fluorescent night runs, color runs, and various theme runs.

The potential of sports marketing in the field of mass sports and fitness is unlimited

The second category is the traditional fitness field. The types of fitness venues are becoming increasingly diverse, with large comprehensive venues as well as small, beautiful and convenient venues appearing one after another. There are also various ways of teaching fitness classes, such as group exercises and private training. Among them, there are many internet celebrities and fitness experts. Through these KOLs, brands can also conduct effective marketing and communication, thereby increasing the conversion rate of products and services.

Another type is fitness activities such as square dancing which are popular among middle-aged and elderly people. The aging trend of the entire society is becoming increasingly obvious, and brand owners may have the opportunity to gain opportunities in sports marketing and market development.

In this process, marketing teams and companies that understand the needs and characteristics of events and sports people, as well as the needs of advertisers and the characteristics of products, have the opportunity to stand out quickly.

"Sports such as square dancing and fishing actually have a very strong demand for equipment and props. In addition, the holding of some folk amateur competitions also gives brands the opportunity to conduct more down-to-earth marketing and match users' actual needs with corporate products and services." Tai Xiaoming from Blue Label Sports said.

Li Yize believes that the difference between mass sports and fitness marketing and professional sports sponsorship lies here, that is, the marketing goals are clear and solve the actual needs of users. "For example, in the gym, anaerobic exercise is not suitable for drinking sports drinks because relatively less electrolytes are excreted. If sports drink brands want to market, they can go to the gym to encourage and educate people about aerobic exercise. If users have demand, product sales will naturally be good."

Li Yize also gave an example of how he received services from runners after finishing the Beijing Marathon. This equipment brand is well aware of runners' pain points and provides professional services, which directly changed Li Yize's view of the brand and he began to buy more of its products.

"If sports marketing is to be upgraded, it is still necessary to encourage the audience to use the company's products and services," said Li Yize.