The economics of sports

PHIL Knight, the founder of Nike not only built a global sporting brand that dominated the world market share (as of 2020, Nike has 62% of world market share), he too was a marketing genius who revolutionised the sporting industry’s endorsement business model.

Together with their main rival Adidas, these two giants have consistently gone neck and neck when it comes to sponsorship of athletes and sporting events. Where they differentiate is apparent when we drill into the details.

Taking the most watched sporting event in the world, The FIFA World Cup, Adidas has been the main event sponsor since the 1970s. Adidas sponsors the football itself, referee’s gear and placement around the stadium.

Nike’s marketing strategy is on another level altogether. They focus on individual athletes or rising stars and make the effort to identify teams that most likely will go the furthest. It goes beyond just advertisement placements but actual involvement towards the sporting achievement of the athletes.

This is why Nike always associates itself with the greatest of all time in whichever sports. Think Michael Jordan, Tiger Woods, Cristiano Ronaldo, amongst many others. The focus on individuality and sporting heroism is exemplified by Nike through and through.

Brands and their value

Of course, through the years, rivals such as Adidas, Puma as well as new brands like Under Armour has join the new wave of endorsement model to keep up and wrestle market share from Nike. The fact is, when it comes to marketing, no one does it better than Nike.

The game changer they say was when Nike adopted the “swoosh” logo which is one of the world’s most valuable logo today estimated to be worth close to US$30bil (RM125bil).

Bear in mind that Nike Inc originally started out as the Blue Ribbon Sports company who was the importer and distributor of Japanese Onitsuka Tiger sneakers. In a more concise explanation, what Nike did essentially was to embrace simplicity. Ditch the word Nike, stick with the “swoosh” logo itself and add an unforgettable slogan that represents the spirit of champion athletes, “Just Do It”.

Why are top brands like Nike, Adidas, Under Armour and many others important to the sporting ecosystem? Well, the presence of sporting brands inject economics into sports itself. Some would say the commercialisation of sports as a whole.

Our traditional understanding of sports would be healthy physical activities that promotes good values such as team spirit, unity, perseverance, empowerment and others.

Through the passing of time, professional competition took shape when rules were more clearly defined and leagues were form within and between countries.

Today, sports is no longer just between individuals or teams but it often involves a nation and help promote a sense of patriotism. It is more than just entertainment, if anything, it brings people closer together.

The Olympics is one of those occasions where the world’s population would be involved one way or another either as a participant, volunteer or spectator.

The 2020 Olympics in Tokyo which was in the midsts of the Covid-19 pandemic and suffered postponement, reached a global broadcast audience exceeding three billion people. Based on independent research by the International Olympic Committee (IOC), a total of 3.05 billion unique viewers tuned in across linear TV and digital platforms. This makes the Olympics still the most watched event in the world.

On the local front

For Malaysia, our national sport is none other than badminton. We did have our glory days of football and in recent times squash as well as diving.

However, I am fairly certain if one were to throw two racquets and a shuttlecock to random Malaysians walking on the street, they could easily get a game going and bond over it.

Yet, things unravelled when Badminton Association Malaysia (BAM) conflict with Lee Zii Jia and Goh Jin Wei took the country by storm. It was a case of our new national badminton ace deciding to leave BAM to turn professional that brought the saga to light.

This effectively led to BAM’s leadership council imposing a two-year ban on both of them for international tournaments. There was uproar in social media locally and overseas, with a large wave of dissatisfaction shown towards the national body.

Ordinary citizens, former players, industry legends and even politicians weighed in on the matter. The good news is, the matter appears to have been resolved amicably between the national body and the players.

Thus, I would not dwell on which party is right or wrong, but seek to open up a discourse on the potential model for sports which our country and those in power should explore. While Lee Zii Jia insisted he was not leaving because of money and BAM highlighting that allowing him to leave has nothing to do with money rather it is a matter of national interest, the fact remains that money is involved albeit not being a primary consideration.

Having money involved in sports may appear to provide some negative connotation hence no party is willing to speak about it openly. It is my humble view that there is in fact nothing ethically, morally and professionally wrong to have a proper discussion about the economics of sports altogether.

Commercialisation of sports is not something bad. It can be good for a country’s effort to shape the sporting landscape and develop new talents.

Time for change?

We have seen many negative headlines of late pertaining to our country’s athletes being sidelined and living in poverty despite serving our country all their life. A total of 144 national athletes were axed due to budget cuts including our squash and diving heroine Low Wee Wern and Cheong Jun Hoong, among others. Is this not enough to show that the sporting industry in Malaysia requires a a second look?

So what if there were rumours of Taiwanese sporting brand, Victor, providing a lucrative RM8mil five-year contract to Lee Zii Jia to turn professional? If one were in his position, at this young age, he can secure a large sum which would be a safety net for his old age, isn’t it wise for him to take up the offer? A potentially nasty injury may be all it takes to destroy his career. Goh Jin Wei, who was the most promising Malaysian female badminton singles player in recent times and incidentally also defeated Akane Yamaguchi, the reigning World Champion before suffered a dip in performance because of a colectomy surgery. This is a clear example of the career risk that athletes face throughout their life?

If BAM’s concern lies with their commercial obligation towards existing sponsors, then opening up the doors to new corporate sponsors or charity foundations would be a viable option. Potentially, include an open tender and spell out new terms of the sponsorship to include it being about sporting talent development and not merely visibility and ad placements.

In the United States, sports is a big market. However, no matter how good an athlete is, unless they turn professional, they are not allowed to have any sponsorship deals or contracts. Once they turn professional, they are free to take any that come their way. The choice lies entirely with them. This is one of the reasons why sporting careers are desirable for many abroad.

Although Nike sponsors potential budding athletes and rising stars, what Nike does very well is building the following from ground up. Their sponsorship strategies for university and high schools are to sponsor specific programmes in these institutions instead of individuals. Who does this extremely well in Malaysia? Nestle’s Milo.

I believe this BAM saga should serve as a wake up call to all national sporting bodies and the ministry to consider reforms. To improve the sporting landscape of our country, we cannot depend solely on handouts from the national budget allocations.

Public-private sector partnership is a more sustainable model and if the ecosystem is built up, such that the economics within sports itself exist, we will see our country eventually producing more Olympians and the elusive gold medal will no longer be a mere aspiration.

Ng Zhu Hann is the author of “Once Upon A Time In Bursa”. He is a lawyer and former chief strategist of a Fortune 500 Corp. The views expressed here are his own.

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