China’s sports industry is on the cusp of a boom unlike anything previously seen. But even with trillions of yuan on the line, will cycling be a beneficiary or just a second-tier sport ailing behind basketball and football?
Gong Xi Fa Cai and prosperous beginnings to all in this Year of the Fire Monkey.
If you’re at all puzzled by the gentle fluidity of the Chinese Lunar Calendar, be assured that it’s a lot easier to understand than the UCI’s ever-shifting racing calendars which were silently overhauled again last year.
The Tour of Qatar also starts today. The ASO-managed Asia Tour 2.HC event has so far not acknowledged this important cultural occasion, and there’s really no reason for it to. Anyway, the hundreds of millions of people celebrating the Chinese New Year are likely doing something other than frantically searching on their smartphones for a live feed of the race.
Cycle sport is a growing but niche sector in China; a thesis discussed by sports industry panelists at the Hainan International Cycling Industry Investment Forum, held one day before the 2015 Tour of Hainan.
CYCLING PARTICIPATION IN CHINA
The panel of stakeholders, which included IMG Events’ Head of Media Sponsorship (Asia Pacific) Ivan Sien, discussed several data points such as the low rate of national participation in cycling (0.4% of China’s population, according to one report) and insignificant sales of sport bikes as a share (6%) of the overall market when compared to developed countries such as France or the US.
While China’s GDP per capita remains significantly lower than either of those two countries, the absolute number of Chinese with similar levels of discretionary income to the average French or US citizen still numbers in the millions. That this base will only grow is seen as a huge upside for the bicycle industry and sports sector in general.
Participation in sports is a direct driver of consumer investment in sporting equipment and, for its part, key players in the mainland bicycle industry have created their own events and leagues (such as Trek’s series in Shanghai) to build brand image and drive consumer demand. Though effective in isolation, the disparate structure hardly resembles an optimal base for national growth.
At a professional level, China’s Hors Categorie Asia Tour events continue to grow with the organiser of Tour of Hainan reporting it delivered an economic impact of CNY3.7Bn (USD56Mn) to its region in 2014. Additionally, more than 3’000 people rode in amateur cycling events within the Tour of Hainan program – a 30% YoY increase from the previous year.
GAME-CHANGING POLICY FOR SPORTING GROWTH
Ahead of President Xi Jinping’s announcement of his government’s 13th five year plan, China’s State Council presented guidelines which sought to transform the nation’s sports industry. Announced on 20 October 2014 the key document – titled ‘Opinions on Accelerating the Development of Sports Industry and Promoting Sports Consumption’ – laid out a vision for growing the value of China’s sports industry to five trillion yuan (USD760Bn) by 2025 – equivalent to roughly 1% of expected GDP in the same year. Furthermore, the guidelines called for 500 million people to be regularly participating in sport within the next decade.
To achieve this almost five-fold increase in value, the Government planned to relax regulation on the sports market, facilitate the flow of more private sector capital into the sector whilst sustaining its own investment envelope, offer preferential treatments normally accorded to nascent industry and require new neighbourhood developments to include sports facilities in their plans.
According to a China Institute of Sports Science national exercise survey of 2014, 33.9% of Chinese exercised with medium intensity at least three times weekly – a 5.7% increase from its survey of 2007. The survey also found that almost half of the respondents aged 20 and older received no external guidance in their recreation of choice – a potentially huge opportunity for event organisers.
CHINA’S SPORTS INDUSTRY TITANS
Chinese-owned Wanda Sports’ acquisitions of Infront Sports & Media and World Triathlon Corporation (WTC) in 2015 received eager coverage in the sports media. Though seemingly endless rumours of Wanda’s interest in RCS Sports were proven to be unfounded (at least for now), the group’s acquisition of Lagardère Sports’ endurance division came from left-field. The move was seen to be a harbinger of Wanda’s likely exposure to professional, and particularly mass-particpation, cycling events.
The most recent name in sports to come out of China is Alibaba. The e-commerce and cloud computing enterprise founded by Jack Ma in 1999 company recorded less than one-third the revenue of Wang Jianlin’s empire last year, but its growth has been meteoric.
In September 2015, Alibaba Group announced it had formed Alibaba Sports Group in partnership with Sina Corporation and Yunfeng Capital. Majority-owned by Alibaba Group, the new entity would be led by CEO Zhang Dazhong, a former vice-president of Shanghai Media Group who helped bring the NBA to television screens in China.
“Sports has the enduring ability to create shared happiness and encourage healthy lifestyles,” said Alibaba Group CEO Daniel Zhang in a press release. “Alibaba Sports Group aims to transform the China sports industry through the use of Internet-based technologies to bring greater and better products and services to consumers, sports participants and sports fans alike.”
One of the first ‘products’ Alisports hopes to bring to China is the FIFA World Cup. In an interview last week with Hong Kong’s South China Morning Post (which Alibaba also purchased in December 2015) Zhang Dazhong stated his company’s interests were in entire leagues, not necessarily clubs or teams, saying “it’s not our direction to buy a club or team, but to create a platform for clubs and teams. Just to buy a club would be an exception or special case, an individual case.”
WHAT IT MEANS FOR CYCLING
The Chinese Goverment’s vision for sport in China may be local, with companies like Alisports targeting already-popular sports like football and basketball, but the impact of value accretion will be felt globally and across many sporting disciplines. One of the preferential treatments offered by the Government to qualified sports companies is a reduction in the corporate income tax rate from 25% to 15% – surely an incentive in itself to start investing in sport.
Professional cycling events may not yet be a prime target for Wanda or Alibaba, but neither are those two companies the only ones in China capable of entering the sports market and making a move. The ASO/UCI stoush and overall lack of consensus about a plan for professional cycling’s monetisation may be an embarrassment to people inside the sport, but the uncertainty created by this also makes cycling events and teams a ‘cheap buy’ for a cash-rich company with commercial acuity.
Of course, the directive from the Government to get more Chinese into sport will not be solved solely by the acquisition of existing assets alone. Mass-participation events will be vital to achieving the growth targets in participatory and consumption terms. In the past, organisers of Asia Tour races flew in experts from larger event organisers to assist with technical and sporting management. It’s not hard to imagine a future where an existing ‘brand’ is bought and its name leveraged to present a Gran Fondo somewhere in the mainland. It will be a very interesting ten years.