Richard Welbirg reports on his five takeaways from two days at the All That Matters conference in Singapore from September 14-15.
1. LOCALISE, PART I
The Chinese sports market was a strong theme throughout Sports Matters, but particularly so on the afternoon of day one, which saw a keynote speech from Ma Guoli (LeSports vice-chairman and maybe the most respected man in Chinese sports television), a conversation with NBA China’s David Shoemaker and a panel on the future of sports content in the country asking ‘will the bubble burst?’
Both Ma and, on the latter panel, Bin Li of Kaixing Capital were keen to play down the pervasive notion that it’s gold-rush time in China.
The government-backed investment drive in almost all aspects of Chinese sport, and the commensurate growth in the markets for sports media rights and sponsorship, have fostered the idea that all a rights-holder needs to do is arrive in the country and watch the money roll in.
Not so, said the panellists. Instead, patience is required and localisation – not only in content, but also in how one does business. Big winners in China’s ‘explosion’ are those who have put in the work.
For example, the NBA, whose commissioner, David Stern, turned up at CCTV headquarters nearly 30 years ago to push taped games in person. Today basketball rivals football as China’s most popular sport and the NBA reaped the rewards with a $500m TV deal last year.
Or English Premier League football club Liverpool, whose approach to China was highlighted by Bin. He said football clubs and others “can’t just come to China a few times a year and expect to succeed”. He stressed the importance of local partnerships.
As a deal gets bigger in China, it quickly involves a lot of stakeholders: the national government; public companies with an eye on what that government wants; and local government with its own set of incentives.
Bin said local partnerships were vital to understand the market and find shortcuts. It is a mistake to apply western thinking or to appoint the wrong person. China only works with those it trusts.
2. PPV IN CHINA
The ‘Chinese bubble’ and the likelihood of it bursting is a topic of much debate – it was among the questions to Ma Guoli and others at July’s World Football Forum in Paris, and the focus of the last Sportel.
It is to some extent the wrong question, though. All bubbles burst – what ought to be asked is, is the Chinese sports market a bubble? Is the TV rights market, which has shown such growth among digital players, a bubble?
Most attendees to whom I spoke think it isn’t. One argued cogently that the period of rapid growth was already over, that the curtain would be drawn by the expected sale of Chinese Basketball Association rights later this year and that is likely to inspire the same furious competition that drove the tender of Chinese Football Association rights to record dollar values.
He said this was the new normal and the next few years were likely to see Chinese media companies trying to prove the business models in which they had invested so much.
On the panel, there was discussion of whether pay-per-view (PPV) models, relatively new to the country, could earn returns on big rights-fee expenditure.
Bin pointed out that PPV for entertainment content was a relatively new development, but it would be a bigger challenge for sport. The government has put so much into pushing sporting events to the public that they are unused to paying to watch them.
The number of PPV subscribers is rising quickly, though, from about 9m in 2014 to 30m last year, and there are expectations that the audience will have grown 200 per cent this year. However, Bin contended that pure sports propositions were unlikely to make money.
The best place for investment, he said, was in ventures that could tie together sport and another sector: sport and education, sport and entertainment, and sport with virtual reality.
3. LOCALISE, PART II
The morning of day two saw a lively debate on the do’s and don’ts of sports investment in India, Asia’s other giant market (albeit a sleepier one than China of late).
Emphasis was again on the importance of localisation, which might be more difficult in India than any other country on Earth. A recurrent idea was of India being more of a continent than a country in terms of language, culture and religion.
“Clients in Delhi and Chennai negotiate differently,” said Ravishankar Pathanjali, chief strategy officer of Global Sports Commerce. “You have to have the right people in place, who know local ways of doing things.”
Arvind Iyengar, CEO of Sportz Interactive, added that external investors had to fit their business model to the local one. He noted that in India about 80 per cent of TV revenue comes from advertising, not from consumer subscriptions – which means businesses getting into that ecosystem might have to be “a bit more b2b than b2c”.
Also under discussion was the proliferation of Indian domestic leagues attempting to emulate the success of cricket’s Indian Premier League. The breadth of new competitions and constituent franchises has created a supermarket for sponsors, who can for the first time pick and choose between clients and different levels of entry. Among the leagues it was agreed that football’s Indian Super League and the kabaddi league have proved their sustainability, and with big investor backing, have room to grow. Domestic hockey and badminton are both seen as having the potential to carve out successful niches.
4. NOT SO OTT?
A similarly frank debate covered the role of over-the-top platforms in the future of sports broadcasting. Media coverage of this new age is often hyperbolic; I’ve often chuckled when in the run-up to a major media-rights tender an article claims Amazon, Facebook and/or Google are debating whether to take the plunge and bid against the pay-TV broadcasters.
So I enjoyed a sober and realistic discussion that pointed out from the beginning that pay-television operators have the same access to the internet as anyone else.
The broadcaster weakness, according to Craig Dobbs, head of programming & acquisitions at FOX Networks Group, is that they need to make money.
Dobbs said it is “great fun to be a start-up because you can lose money” and it’s hard to compete with that. But in the long term the existing broadcasters can promote their OTT packages using their powerful linear channels – and they can steadfastly refuse to share content.
Few people know more about running an upstart OTT platform than Tim Martin, whose Coliseum stunned everyone with the acquisition of Premier League rights in New Zealand in 2013 and who this year left NZ behind to set up the specialist Rugby Pass platform across Asia.
Martin said the reason OTT platforms so closely guarded their subscribers is because they have nothing else. Not only are there few current subscribers in the OTT space, but the big broadcasters have already caught up. “When we started four years ago, the big broadcasters weren’t in that space. Those days are over…and it’s very expensive today,” he added.
One of the biggest claims about OTT delivery is that it could allow rights-holders to cut out the middle-man and deal with the consumer directly. Yes, said Martin, and they could probably “get close to what they earned from TV companies” – but with no upfront payments and assuming all the risk.
Mike Kerr, managing director of beIN Sports in Asia, forecast there would be those who got it wrong and disrupted the market – drawing on memories of telco’s misbegotten early ventures into rights acquisitions in the early 2000s.
5. CONVERGENCE FORMULA
As soon as John Malone’s Liberty Global acquired Formula One earlier this month, there were questions about whether the venerable racing series might eventually converge with its upstart cousin, Formula E.
Formula E made annual losses of £43.8m to the year ending July 2015 and Liberty have, alongside Discovery Communications, an undisclosed stake in the electric car-racing venture.
However, the idea was shut down pretty quickly in Singapore by Richard Paugh, SVP (commercial relationships) at Formula E team DS Virgin Racing.
Paugh argued that the two reach different demographics: 60 per cent of Formula E fans are between 26 and 45; F1 fans are older and, on the whole, wealthier. Also, the fact that Formula E has an exclusive 25-year FIA licence to race under the renewable driving banner means any merger would be a generation away.
Formula E has courted that younger audience with features like FanBoost, which gives the three most popular drivers – by fan vote – a five-second power boost.
FanBoost was first used successfully in 2014 in a delightful echo of Formula One duels past, as Bruno Senna (nephew of the late Ayrton Senna) used it to pass Nico Prost (son of Alain).