[JD Says] After NBA All-Star Weekend, Let’s Talk About Games Business
2017-02-22
The annual All-Star Game, as the grandest show in the huge industrial chain of NBA, is a show of legends. In this year’s NBA All-Star Game, the Western Conference edged the East 192-182 and they made 12 records altogether.
While the Game went on, Forbes America released two latest NBA-related lists –one of team values and the other player salaries. According to the latest statistics, the average business value of NBA teams has reached USD 1.36 billion, 3.5 times that over the past five years. As for the most valuable teams, the top two are New York Knicks and Los Angeles Lakers, valuing USD 3.3 billion and USD 3 billion respectively. Stephen Curry-led Golden State Warriors has climbed up the list from the sixth last year to the third this year with a value of USD 2.6 billion.
An interesting phenomenon found in this list is that there is not much correlation between the profitability and the performance of a team. “Business is business” is a well-known pet phrase when it comes to NBA. Those three words have summarized as the world’s most influential sports league – NBA means business.
Sporting events have great profitability
NBA games is full of profitable opportunities. The business model and stories of moneymaking have been repetitively told. The business logic of quite a few sporting events, NBA included, is closely related to IP effects. For example, fans buy tickets, watch games or buy branded jerseys and sneakers out of their affection and even infatuation for some team or player.
Since long ago, the commercial operation of sporting events goes hand in hand with the exploration of celebrities’ IP effects, with the conventional way being celebrity endorsement and game sponsorship. Business entities tend to evaluate stars and games from multiple perspectives. For instance, when Peak, a famous domestic sports brand and JD Capital’s partner, selects a celebrity endorser, it mainly takes three aspects into consideration, namely whether being in tune with Peak’s style, whether having international influence, and in what possibility can his team win. The reason why Peak signed Dwight Howard and Shane Battier is for the fact that their enterprising spirit highly accords with what the brand calls for; and that for Tony Parker is his international visibility.
However, as the price of celebrity endorsements keeps increasing, the cost effectiveness of stars and game sponsorship is on the decline, which determines the necessity of finding a new way to publicize. Furthermore, the ways of celebrities to present personal values and the behaviors of fans are also changing. At the 2016 Olympic Games, the most eye-catching swimmer was Fu Yuanhui, the “walking emoji package”, rather than a world champion.
How to choose and use IP in the best way? This is a question for sports business entities posed by the times. And also the way JD Capital perceives IP operation in the sports industry. Besides IP operation, more opportunities are generated from model evolution of sporting events and the industry itself.
Mobile Internet re-livens games
The sports service industry in China with games at its core is in the ascendant. During times of PC, the first round of sporting events-related Internet dividend was shared by ticket-booking websites. At present, technological breakthroughs such as mobile Internet, live streaming and VR bring more channels for game watching and brand building.
At the end of 2016, NBA China and Tencent announced to launch the first NBA League Pass in China, which enabled Chinese fans to watch live NBA games throughout the whole season via mobile terminals and PCs. A year before that, NBA China and Tencent signed a five-year partnership agreement, the biggest international digital media cooperation agreement ever concluded in the League’s history. Shortly thereafter, the percentage of premium users of Tencent Sports rose to around 15%.
One of the dividends generated by Internet development is that people are getting used to paying for online services. The percentage of premium users is on the rise, which means that in such sectors as sports, the paying-for-content business mode is now feasible. Instead of subjecting themselves to media marketing and passive distraction, people choose to pay more to anchor interesting things efficiently. In the future, the business mode and market potential of sporting events, with many possibilities, may go beyond live video payment. Any of the possibility is expected to become realistic growth point.
In the meantime, currently many domestic enterprises have set up quite a few well-known sports brands, the majority of which are jointly designed and deployed by media companies and TV stations. In sole terms of fight games, brands including Kunlun Fight and Wu Lin Feng have gained huge visibility. IRENA Group, a renowned sporting events operator founded in 2001, is plotting along the whole industrial chain via Internet. As far as JD Capital is concerned, as the organization and presentation of sporting events witness constant innovation, branded events are expected to enjoy enormous growth potential.
Sporting events usher in consumption upgrade
The IP effects of sporting events are guiding the public towards a healthy lifestyle, and mobile Internet is making the process smoother. Nowadays, sporting events are not only a consumption carnival, but means of lifestyle transformation. As their income increases and consumption pattern changes, people are participating in diversified forms of sports in various means and with higher standards, bringing a broader market for the sports industry.
The most typical example is professional marathon. In 2016, over 30,000 people signed up for Beijing Marathon. Some senior runners would go to every city in China or even foreign countries for marathons. The booming of this sports implies a higher level of public attention, and also a higher commercial value.
For PE firms, waves of mass sports and professionalization of sports indicate market expansion and consumption upgrade. The branding, professionalization and segmentation become themes of the future development of mass sports consumption. Products that can satisfy consumers’ professional demands from all segmented sectors enjoy a promising market potential.
The new layout of the sports market is taking effect, and the size of the potential incremental market is considerable. Yet, for domestic sports brands, the brand images, which are not at the high end at present, have become the bottleneck hampering the brands to compete in the market. Capital is an important driving force of business transformation and updating. For example, leading companies that have operated in the third and fourth tiered cities for a long time and accumulated abundant assets are capable of acquiring some higher-end brands with limited operation capacities, so as to enhance its own brand image. Besides, industrial bellwethers boasting comprehensive businesses can acquire companies dedicated in sneakers and workout clothes, in a way to professionalize its own product line.
At present, as young people are adopting a different lifestyle, sports activities once favored by only a small group of people such as road races, cycling, some ball games and winter sports are gaining popularity. Attractive and entertaining, these sports enjoy some user base and have low standards for mass participation. So to speak, there is huge potential for their rapid growth in the upcoming three to five years.
The niche-to-mass transformation of these sports will bring new opportunities to many sportswear and equipment suppliers. The market has increasingly higher requirements for the professional degree of sports goods. As a result, the products are becoming deeply segmented. Take running as an example. 500-meter running and 1,000-meter running require different kinds of shoes. People having such special feet as flat or toe-out feet also need special shoes. Different from physical exercises in the past, participants of sporting events now have stronger demands for professional sports goods. The lasting popularity of games business will noticeably drive the consumption of sportswear, bicycles, fitness equipment and smart wearable devices.