China: A huge sporting market with strings attached
October 17, 2019
Professor Jürgen Mittag wasn't at all surprised by China's reaction to a recent tweet from Houston Rockets' general manager Daryl Morey, in which the basketball executive expressed support for protesters in Hong Kong. After all, the head of the Institute for European Sport Development and Leisure Research at the German Sport University in Cologne has been studying sporting and political development in the country for several years.
According to Mittag, the rift between Beijing and the NBA's Houston Rockets is the result of an increasingly repressive policy on the part of Chinese President Xi Jingping.
"Sport has become an instrument of politics," Mittag told DW.
Morey's quickly deleted tweet, which read: "Fight for freedom, stand for Hong Kong," drew the wrath of Chinese leaders, with serious consequences.
Soon after the Chinese basketball association ended its partnership with the NBA team, a Shanghai bank and a sporting goods company canceled their sponsorship deals, and Chinese state broadcaster CCTV said it would not broadcast some of the preseason NBA games being played in the country. In a market that promises plenty of revenue for those who can establish a foothold, this is significant.
Massive potential market
The NBA has been trying to get that foothold in China for some time, and the Bundesliga also wants to open up new revenue streams from this enormous marketplace. After all, there are about 500 million potential football fans there.
As a result, the German Football League (DFL) has had an office in Beijing since March while Borussia Dortmund, Eintracht Frankfurt, Borussia Mönchengladbach, Bayern Munich, Schalke and Wolfsburg all have a presence in the country.
"It's certainly lucrative, but it's also a process that brings many difficulties and isn't always sustainable," Mittag said.
For the Bundesliga clubs, operating in China is anything but easy. While contracts with most partners are considered binding, some say this is not always so clear cut in China. A Bundesliga insider who did not wish to be named told DW that the Chinese tend to forensically examine each point of a deal and try to renegotiate in their own interests.
The fine print
"Since every detail is repeatedly checked, the clear aim, as well as financial, is to improve their existing know-how. Also, the flow of money to Germany is a problem because the Chinese like to keep the money in their own country."
Schalke has worked with Chinese partners for several years and Alexander Jobst from the club's marketing board says that poses its own problems.
"The cooperation is often challenging due to the cultural differences. The Chinese know exactly what they want to get for their money," he told DW, before noting that things had gotten even trickier of late.
"You have to act with the utmost sensitivity. In our contracts, we pay close attention to points on the topic of freedom of expression," Jobst said. The Chinese are really hard-hitting negotiating partners."
Such difficulties became clear in Schalke's link with Chinese club Hebei Fortune. The two clubs had agreed a deal worth €30 million ($33 million) over five years but a few months ago, the Chinese outfit suddenly halted payments because they were unhappy with the coaches Schalke had sent them.
Rapid change at the top
"This was partly because on the other (Chinese) side there were suddenly new people in the management team who were questioning the decisions of their predecessors," Jobst said.
"There, who's in charge often changes much more quickly than in this country."
The bosses at the Bundesliga club were able to resolve the issues, and despite the bumps in the road, Schalke still wish to maintain a presence in the Chinese market because the economic opportunities are simply too big to ignore.
"You have to weigh up every deal very carefully," said Wolfgang Holzhäuser. The former managing director of Bayer Leverkusen once took part in negotiations towards a deal in China on behalf of the club.
Holzhäuser added that moral and ethical issues were among those that always needed to be weighed up, and that there was always the danger of these taking a backseat – if the financial incentive was particularly strong.
In the end, the Bayern Leverkusen deal never came to fruition, in part because, as managing director, Holzhäuser would have personally borne the legal liability and he didn't feel the deal would have been in the club's best interest. Any clubs that enter deals with Chinese partners are bound to find themselves caught in a similar tug-of-war between morality and business.