The making of a sports industry


  • Business News,Business
  • Saturday, 03 Sep 2011

IT was certainly a treat for Malaysians to play host to three top football teams from England in July. Football fans reciprocated by flooding the Bukit Jalil stadium for all three matches. The showing was proof of the scale and extent of interest among Malaysians towards English football, thanks also to the era of satellite television which has brought the top league games right into living rooms of Malaysians.

Caught up in the fever, sales of replica jersey have soared; it is commonplace to see the jerseys of the top football teams on the backs of many fans in the country. Cementing Malaysians love for the sport further was when fans packed the stadium for the return leg of a World Cup qualifier between Malaysia and Singapore, which some have described as the rebirth of Malaysian football in the country.

Such is the power of sports.

Stamping its mark

For long, Malaysians have been involved in Formula 1 by having a leg in the circuit run at the Sepang racetrack as well as through teams sponsoring or participating in the race.

Petroliam Nasional Bhd (Petronas) was the first to get involved in a big way and is today the title sponsor for the Mercedes GP Petronas Formula One team. Its entry into the high octane world of Formula 1 was followed by Team Lotus, whose principal owner is Tan Sri Tony Fernandes. Proton followed suit by taking a 25% stake in Lotus Renault GP.

Entry into Formula 1 is viewed as a tremendous branding opportunity for sponsors and team owners; ultimately turning in a profit would be the aim for the Malaysian-backed Formula 1 teams too.

Malaysian wings in overseas sports have also branched out into the world's largest top football league the Barclay's English Premier League.

Tony recently created waves when he bought a controlling stake in premiership side Queens Park Rangers (QPR) after first striking a sponsorship deal with the league's referees. Commenting shortly after taking over QPR, he said football clubs in England, apart from offering a fantastic branding opportunity, can be a profitable business for owners.

GENTING BHD has become the main sponsor for Aston Villa, another premiership team. TELEKOM MALAYSIA BHD struck a 5-year sponsorship deal with Manchester United last year.

Getting everyone's buy-in

For many Malaysians, watching football, playing sports and even buying sporting goods and playing futsal might be the extent of their involvement in sports but official statistics show that the influence of sports on the economy is much deeper than that. Youth and Sports Minister Datuk Seri Ahmad Shabery Cheek says that in terms of gross national income (GNI), Malaysia's sports industry is worth RM30.2bil about 5% of total gross domestic product (GDP).

“However, Malaysia's sports industry has yet to be accepted as one of the nation's 12 National Key Economic Areas,” he says at a sports business conference in Kuala Lumpur in July.

“The Youth and Sports Ministry believes in the importance or potential of sports as an industry. The ministry has embarked on a number of initiatives to make this a reality and to turn Malaysia's sports industry into a major contributor to GNI.”

The understanding of just how valuable sports is is appreciated overseas more so than in Malaysia at the moment. One suggestion put forth to grow sports as an industry was to transform the Bukit Jalil Sports Complex into a “sports city” a one-stop centre for sports merchandise.

Ahmad says that idea has been presented to the EPU and he believes the Bukit Jalil Sports Complex can be a profitable one-stop sports centre.

If successful, that model of a centralised area for sports and its supporting industries could be replicated in other states.

But growing sports as an industry would also mean getting more people involved and that is not just from the athletes perspective.

News and media play an important role in generating the buzz that go along with what is played out on the pitch and courts.

“The sports industry requires lawyers, cameramen, commentators, psychologists, marketers, designers, researchers, journalists, athlete agents, even organisers, sponsorship consultants, researchers, licensing and merchandising experts, stadium architects, even playing turf experts and many, many more,” says Ahmad.

Great value to be tapped

The nascent roots for sports as an industry requires much nurturing as media normally plays a leading role in energising the sector.

Overseas, broadcast rights for major sports are sold for billions of dollars, and the most lucrative are seen in American sports especially the National Football League (NFL).

American broadcasters are paying in excess of US$20bil (RM60bil) for the 2011-2013 season and that money is utilised right through in generating ancillary activities surrounding the NFL.

Football around the world is the most popular sport and is now seeing vast amounts of money being channelled into the games especially in Europe.

The Football Association in England sold the overseas broadcast rights to the premier league for 1.4bil (RM6.86bil) for the 2010-13 seasons, which was double the rate received the last time.

In Malaysia, the rights to Malaysian football has attracted great interest, with ASTRO having sealed a RM220mil deal with Football Association of Malaysia for 4 years.

Under that deal, local football would be shown on Astro's Arena channel, which is a dedicated channel for sports.

Astro chief operating officer Henry Tan says Astro Arena's sponsorship in cash and kind totals almost RM500mil over the next 4 years. That includes the RM220mil in sponsorship in cash and value added promotion for FAM over the period.

Astro's investment in sports content has increased from RM118mil in financial year 2008 to RM415mil in 2011.

“Astro Arena's coverage of local sports has increased from 508 hours last year to 520 hours in the first six months of this year. This speaks volumes to our dedication and commitment to meet objectives for establishing a local sports channel,” says Tan during the sports business conference.

Astro Arena's deal, however, does not limit itself to football alone.

Astro Arena has signed on 14 sports association to provide live telecast, junior leagues and also local athletes.

“If we want our local sports to prosper, we must be willing to pay more for it. If we do not invest in the economy for sports, it won't grow. If we invest in it, we have all to prosper from it,” says Tan.

Astro's entry into the Malaysian Super League this year for football saw Telekom Malaysia (TM) lose its hold in the league it has sponsored since 2005. TM has, however, found another avenue for sponsoring local football, grabbing the rights for the Malaysian national team and creating a fresh campaign based on that.

TM chief marketing officer Rozalila Abdul Rahman says the abbreviation TM for Telekom Malaysia fits nicely into the brand Team Malaysia and that has helped increase the brand value for TM.

And the telco giant is seeing tangible benefits from its sponsorship of sports as it is spending 13% of its advertising and promotion budget on sports this year.

“It's been growing over the years. Last year it was about 10% and I think if we see the returns, it will grow. If revenue comes, in we can spend more as we can do bigger campaigns,” she says.

On your mark, get set, go

Increasingly, sports sponsorship is being viewed from the return on investment perspective rather than a corporate social responsibility angle. Rozalila says such value from sports sponsorship can be ascertained from an increase in market share or brand share. “It could also be in terms of the media exposure we get and we value that,” she says.

“If you see it from a charity, it can be about spending money without a purpose. If you look at it from a commercial sense, you can see the intent.”

Currently, TM has a 5-year contract with FAM. Will the tie up last over and beyond? “We have to look at it at a holistic manner,” she answers.

Football has long been the largest recipient of sponsor money in Malaysia. Even so, until recently, the absolute amount has been small.

Funds are needed to grow the sport, particularly at the grassroots level. This in turn will ultimately determine how big an economic contributor sports can be to the country. When national football team won the SEA Games Gold medal and recently the AFF Suzuki Cup, the old ways of getting money into the sport was ripped up; by splitting the sponsorship of football in the country into the league and the national team, Football Association of Malaysia (FAM) managed to get in more money than it ever did previously.

Previously the entire package for sponsorship and broadcast package for Malaysian football was worth RM16mil but after the packages were separated into the league and the national team, revenue into FAM grew.

Astro came in for the national league and TM took up the national team.

“Financially if you take the RM30mil from Astro and the RM6mil from Telekom, we are at RM36mil compared with the RM16mil plus of last year. We are more comfortable now than we were previously. Now, we have to ensure the money is spent the right way,” says Malaysian Super League (MSL) CEO Stuart Ramalingam.

As the amount of money into a sport can dictate just how far such an event can grow and contribute as a business, the new deal was a windfall for FAM and the sport.

The MSL is profitable and a healthy balance sheet would mean progression of the sport and the business in the country.

Ramalingam is clearly pleased to see giants like Astro and TM pour money into local football. The change in mindset is already evident. “Almost all the deals done in FAM are based on a business perspective with partners and a focus on return on investments ... It sends a signal that commercially, football can work,” says Ramalingam, adding that Astro would not pick football if it did not think it could make money out of it.

The next step towards building football as a larger industry is to have the states look at the sport from a business angle.

Ramalingam says the various states need to have marketing executives as they are the people that bring money into the club.

“Commercialisation of the club and football is key towards improving finances and the results of which will be seen on the field directly,” he says.

The agenda of the MSL is to improve the commercialisation of the sport in the next couple of years and grow it as an industry.

“It takes over 1,000 people to prepare for 11 people to play on the pitch. If more people are involved outside the white lines, the higher the commercial value, hence the franchise value will also grow,” says Ramalingam.

“Now people use football as a life tool. In Malaysia, it's a weekend supporting sport, but in Europe it is a culture.”

Another sport that has attracted a huge following in the country is badminton.

“This can be evidenced by the number of people who turn up at our tournaments whether it's our national or international tournaments, we get a sizeable crowd,” says Badminton Association of Malaysia general manager Kenny Goh.

The sport has been producing world-class players since the 1950s and internationally, it is the most successful sport Malaysians have been engaged in.

Its next aim is to lift the profile of the Malaysian Open Super Series, which is held every January.

“If you look at certain events in the world, like Wimbledon (tennis), it's an event that every player wants to be a part of. With the Malaysian Open, we want to make it the event everyone wants to participate in,” he says.

Although badminton has found success in Malaysia, Goh feels the level of sponsorship could be better.

“When sponsors come in, we hope to work with them and bring the sport to a higher level,” he says.

He feels badminton events, besides just organising the competition itself, need to be more attractive and have more supporting activities.

“What we can improve on is conduct activities leading up to the competition itself to attract more people. We need to work with the media they can help generate publicity and awareness for the public. We can only be limited by our imagination,” he says.

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