Asia is no stranger to the franchise model, having imported it, predominantly from Europe, and having implemented it in various sports in the region. With an every-growing fanbase and popularity, organizations have identified huge potential for profits and have established franchise leagues of their own, along with building athletic competition within Asia. Franchise-based leagues like ONE, IPL, CSL etc. are attracting huge viewership from around the world, which is why it is an area of great interest for all the top media agencies.
The sale of broadcasting and media rights is the most important source of income as well as an important component in the business of sport. The sector has benefitted in multiple ways because of the sale of these rights. It has created a lot of opportunities to nurture the upcoming pool of athletes and to boost the long-term financial possibilities and performance of teams that are then better placed to attract the best athletes to their ranks. Such is the importance of broadcast revenue, that some sports push forward to attract broadcasters and viewers by reshaping their model according to their rules. For example, volleyball has adopted a new scoring system that makes it easier to predict the duration of matches. Similarly, the tie-break was introduced in tennis matches, along with yellow tennis balls to make it easier for viewers to follow matches on television.
In most sports broadcasting and media rights have already started surpassing ticket sales as the primary source of income for the sports leagues. The importance of broadcasting and media rights is very important as a source of income for the top-tier global sporting events. The sale of broadcasting rights for the Brazil 2014 FIFA World Cup generated some US$537 million. From 2009 to 2012, Olympic broadcasting revenue amounted to a staggering US$3.914 billion.
Broadcasting rights also help uplift other revenue streams, such as in stadia advertising, corporate sponsorship deals and naming rights, all of which obtain added value because of the visibility that broadcasting produces. And this has changed the entire dynamic of the sporting industry in terms of marketing, acquiring talent and merchandise sale, concentrating money in the hands of certain big clubs/franchises or the more popular leagues. With significantly greater financial resources, these franchises can easily out-muscle others with smaller budgets.
One should look no further than the Chinese Super League (CSL), if one wants to understand the financial muscle of these leagues/clubs. It has been attracting talents from all around the world, with transfer fees in excess of $50 million. In the January transfer window of 2016, Chinese sides spent nearly 250 million euros, which was more than the 220 million euros that the Premier League (the top-flight competition of England) spent on acquiring talents. This was possible only because of the money earned through sale of broadcasting rights.
The major part of the league’s 2015 revenue of $230 million— a modest figure which is tripling year-on-year — was from domestic broadcasting rights worth $155 million. But that number is set to explode on the strength of a new partnership with China Sports Media (Tiao Dongli), which agreed to pay the CSL $1.25 billion for exclusive domestic rights from 2016-2020. “The eight billion for five years deal was a dynamic estimation, and we want to enter a positive cycle,” said Li Yidong, chairman of CSM. “Every investor needs to profit from the growing soccer market. If there’s no business interest, there will be no sustainable development.”
The ONE Championship, considered as Asia’s top sports media property, is a Singapore based mixed martial arts(MMA) league. Its’ MMA fights are streamed on free-to-air TV or pay TV in 128 countries with 1.7 billion potential viewers. ONE’S revenue is in eight digits, which comes from media rights, sponsorship and in-product placements. In an interview, ONE’s chairman and CEO, Chatri Sityodtong says, “On an event basis, we are very close to profitability. I believe we will cross the billion-dollar valuation mark within next 12 months. But the numbers I care about the most is audience reach and audience engagement because that will eventually drive all future revenues. From 300,000 video views on social media three years ago, this year we will see a billion video views; and as a media property, that is very significant.” For his investors, Chatri is of the view that an exit opportunity would come in the form of a listing, adding the company is being built with an initial public offering in mind as Asia’s first multi-billion-dollar sports media property.
In our generation of media, views are very important and TV ratings are very important. It is because these are the standard scales to measure the popularity of their channel. It allows them to charge for advertisement slots during high-rated sports leagues. So getting the TV rights of these global leagues is important to them as they are a huge source of income for them. Also seeing this huge amount of market in these sports leagues has made the bidding wars more strategic.