International sports organizations face a transformed landscape in China

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Is there a sports market in the world that has seen more seismic changes in the past two years than that of China? Let’s recap some of the highlights and weaknesses.

July 2019 – The NBA accepts a record-breaking digital media rights deal with Tencent for the period 2020-21 to 2024-25.

October 2019 – NBA business in China rocked by Daryl Morey’s tweet incident. The league continues to suffer a reported loss of $ 200 million In income.

Kevin mccullagh

january 2020 – A strong government response to the Covid pandemic puts an end to all international sporting events and most domestic events in China. These restrictions are essentially still in place and are expected to apply for most of 2022.

September 2020 – English Premier League terminates digital media rights deal with streaming platform PP Sports. A series of other agreements are subsequently renegotiated or terminated prematurely as the previous leader in the sports streaming market, it almost collapses.

February 2021 – Chinese Super League champion Jiangsu Suning collapses after owner Suning withdraws financial support. Despite the efforts of the Chinese football authorities, the country’s club football remains in serious financial difficulty.

Mid-2021 – Rights holders formerly at PP Sports, including CSL, Premier League, UEFA, German Bundesliga and Italian Serie A suffer deep cuts in the values ​​of their media rights in China, in new agreements concluded this year.

October 2021 – NBA announces rights deal with Migu, the result of which is that the league’s digital media rights revenue from China between this season and 2024-25 will, remarkably, be more than planned at the time of the record-breaking July 2019 deal.

November 2021 – WTA announces end of all tournaments in China following Peng Shuai affair

december 2021 – The United States announces a “diplomatic boycott” of Beijing 2022. Allies including Australia, Canada and the United Kingdom follow suit.

For international sports organizations, especially those based in the West, the result of these developments is that China has moved from a land of opportunity to one of the most difficult markets in the world.

The challenges fall into two broad categories:

(i) Economical – In the field of sports media in particular, the paid audiences that it was hoped to develop for sport have not materialized. More generally, international sports brands in China are faced with an amplified version of the challenges observed in other markets: a young audience less in love with their product than previous generations and dizzying competition from games and other kinds of entertainment. digital.

(ii) Policy – The growing political divide between China and the West presents a distinct category of challenges, especially for West-oriented organizations. Even more difficult, sports organizations are asked if they can align their “values” with their activities in China. In some cases, they clearly cannot answer these questions honestly or directly without harming their business, whether in China or at home, and therefore are the target of criticism. In a world where rights holders place their values ​​at the heart of the construction of their brand, trumpeting them from the rooftops, realpolitik approaches may not be acceptable to fans and customers.

What does 2022 have in store for us?

The next most likely candidate for a shocking Chinese history is of course Beijing 2022. At the time of writing, the US diplomatic boycott had just been announced. Such a move arguably sounds more dramatic than it is – the absence of a few B-List politicians from the opening and closing ceremonies of the Winter Olympics is not a big deal. A boycott of the athletes would have many more consequences, although it does not appear to be planned at the moment.

Even in the last boom years, China was a difficult market for foreign sports organizations to navigate. Now, this requires an even more careful approach. Expert local knowledge, a clear strategy and contingency planning all need to be in place.

Few companies and few sports organizations with global ambitions can afford to ignore the world’s second largest market. Organizations like the NBA and UFC show that strong business results are still possible. But the costs of doing business in China are rising. The WTA is the first major sports organization that appears to have reached a tipping point where that cost has outweighed the benefits. Will others follow?

For the sake of political harmony and the continued growth of the sports industry, we can hope for more economic stability on the Chinese market and an easing of East-West tensions in 2022. But it is clear that it is is a market undergoing profound change. two years ago.

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