The economics of sport | The star
PHIL Knight, the founder of Nike, not only built a global sports brand that dominated the global market share (in 2020, Nike holds 62% global market share), he was also a marketing genius who revolutionized the model sports industry endorsement commercial.
With their main rival Adidas, these two giants have always been neck and neck when it comes to sponsoring athletes and sporting events. Where they differ is obvious when we drill down into the details.
Taking the world’s most watched sporting event, the FIFA World Cup, Adidas has been the main sponsor of the event since the 1970s. Adidas sponsors the football itself, the referee’s kit and the placement around the stadium.
Nike’s marketing strategy is on a whole different level. They focus on individual athletes or rising stars and strive to identify the teams that are likely to go the furthest. This goes beyond simple advertising placements, but a real involvement in the sporting success of athletes.
That’s why Nike always partners with the all-time greats in any sport. Think of Michael Jordan, Tiger Woods, Cristiano Ronaldo, among many others. The emphasis on individuality and sporting heroism is exemplified by Nike through and through.
Trademarks and their value
Of course, over the years, rivals such as Adidas, Puma as well as newer brands like Under Armor have joined the new wave of endorsement models to follow and fight Nike’s market share. The fact is, when it comes to marketing, nobody does it better than Nike.
According to them, the game changer was when Nike adopted the “swoosh” logo, which is one of the most valuable logos in the world today, estimated to be worth nearly US$30 billion (125 billion RM).
Keep in mind that Nike Inc originally started as Blue Ribbon Sports company which was the importer and distributor of Japanese Onitsuka Tiger sneakers. In a more concise explanation, what Nike basically did was to embrace simplicity. Ditch the word Nike, keep the “swoosh” logo itself and add an unforgettable slogan that represents the spirit of champion athletes, “Just Do It”.
Why are big brands like Nike, Adidas, Under Armour, and more important to the sports ecosystem? Well, the presence of sports brands injects economy into the sport itself. Some would say the commercialization of sport as a whole.
Our traditional understanding of sport would be healthy physical activities that promote good values such as team spirit, unity, perseverance, empowerment and others.
Over time, professional competition took shape as rules were more clearly defined and leagues formed within and between countries.
Today, sport is no longer just between individuals or teams, but often involves a nation and helps promote a sense of patriotism. It’s more than just entertainment, on the contrary, it brings people together.
The Olympic Games are one of those occasions where the world population would be involved in one way or another as a participant, volunteer or spectator.
The 2020 Olympics in Tokyo, which were in the midst of the Covid-19 pandemic and suffered a postponement, reached a global broadcast audience of over three billion people. According to independent research by the International Olympic Committee (IOC), a total of 3.05 billion unique viewers tuned in to linear TV and digital platforms. This makes the Olympics the most watched event in the world.
On the local front
For Malaysia, our national sport is none other than badminton. We had our glory days in football and lately in squash as well as diving.
However, I’m pretty sure that if two rackets and a shuttlecock were thrown at random Malaysians walking down the street, they could easily throw a game and bond.
However, things went downhill when the Badminton Association Malaysia (BAM) dispute with Lee Zii Jia and Goh Jin Wei took the country by storm. This is the case of our new national badminton ace who decided to leave BAM to become a professional and who shed light on the saga.
This effectively led to BAM’s board of directors imposing a two-year ban on them from playing international tournaments. There was an uproar on local and overseas social media, with a large wave of dissatisfaction with the national body.
Everyday citizens, former gamers, industry legends and even politicians have weighed in on the issue. The good news is that the case seems to have been resolved amicably between the national body and the players.
Thus, I will not dwell on which party is right or wrong, but will seek to open a discourse on the potential model for sport that our country and the rulers should explore. Although Lee Zii Jia insisted that he was not leaving because of the money and BAM pointed out that allowing him to leave had nothing to do with the money but rather a matter of national interest, the fact remains that money is involved although it is not a primary consideration.
Having money involved in sports can seem to have a negative connotation, so neither party is willing to talk about it openly. In my humble opinion, there is actually nothing wrong ethically, morally, and professionally with having a proper discussion about the economics of sport.
The commercialization of sport is not a bad thing. It can be good for a country’s efforts to shape the sporting landscape and develop new talent.
Time for change?
We have seen a lot of negative headlines lately regarding our country’s athletes who are ostracized and living in poverty despite having served our country all their lives. A total of 144 national athletes have been laid off due to budget cuts, including our squash and diving heroine Low Wee Wern and Cheong Jun Hoong, among others. Isn’t that enough to show that the sports industry in Malaysia needs a second look?
What if there are rumors that Taiwanese sports brand Victor is offering a lucrative five-year RM8mil deal to Lee Zii Jia to turn professional? If someone was in his situation, at this young age, he can secure a large sum that would be a safety net for his old age, isn’t it wise for him to accept the offer? One potentially nasty injury can be enough to destroy his career. Goh Jin Wei, who was the most promising Malaysian badminton player in recent times and incidentally also beat reigning world champion Akane Yamaguchi, suffered a drop in performance due to a colectomy. This is a clear example of the occupational risk that athletes face throughout their lives?
If BAM’s concern is with its commercial obligation to existing sponsors, then opening the doors to new corporate sponsors or charitable foundations would be a viable option. Optionally, include an open RFP and outline new sponsorship terms to include that it is about developing athletic talent and not just exposure and ad placements.
In the United States, sport is a big market. However, no matter how good an athlete is, unless they turn professional, they are not allowed to enter into sponsorship deals or contracts. Once they turn professional, they are free to take whatever comes their way. The choice is entirely theirs. This is one of the reasons why sports careers are desirable for many people abroad.
Although Nike sponsors potential budding athletes and rising stars, what Nike does very well is build the following from the ground up. Their sponsorship strategies for universities and high schools are to sponsor specific programs at those institutions rather than individuals. Who does that extremely well in Malaysia? Milo from Nestle.
I think this BAM saga should serve as a reminder to all national sports bodies and the ministry to consider reforms. To improve the sports landscape of our country, we cannot depend solely on donations from national budget allocations.
Public-private partnership is a more sustainable model and if the ecosystem is built so that the economy of sport itself exists we will see our country eventually produce more Olympians and the elusive gold medal will not be more than a simple 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 company. The opinions expressed here are his own.