Korea moves: the 2016 sports industry outlook

Nielsen Sports Korea’s Managing Director John Mou is your guide around Korea’s sports industry, where baseball and football dominate and where the next winter Olympic Games is gradually taking shape.

PyeongChang and the road to Olympic enthusiasm

John Mou, Nielsen Sports Managing Director Korea

John Mou, Nielsen Sports Managing Director Korea

It has been a low-key build-up so far to the next winter Olympic Games, to be staged in PyeongChang, located around 110 miles east of South Korea’s capital. PyeongChang was awarded the Games in 2010, seeing off the challenge from Annecy and Munich and succeeding where it had failed twice previously. With just over two years until the opening ceremony, venue and infrastructure construction projects are now accelerating ahead of a programme of 28 test events due to be staged between this February and April 2017, beginning with an FIS alpine skiing World Cup men’s downhill at the under-construction Jeongseon Alpine Centre on February 6th and 7th.

Despite a tardy start to its domestic marketing programme, the last 12 months have seen four tier one partners – Korean Air, Samsung Group, Hyundai-Kia Motors and the SK Group conglomerate – sign up, along with two ‘tier two’ partners and four smaller ‘tier three’ partners. “A few partners have already joined the winter Olympic committee,” confirms John Mou, Managing Director of Repucom Korea office in Seoul. “The project is very much driven by the government at this stage and with winter sports not currently so huge in Korea, there’s so far been not much news and promotion. But people will love to see the Games.” The launch of a comprehensive volunteer programme and unveiling of the PyeongChang 2018 mascots this year, ahead of the start of the ticket sales process in 2017, may prove to be crucial milestones in engaging the local population.

K-League: looking for foreign investment

The K-League, originally the Korean Super League, is Korea’s top-level competition. It was founded in 1983 and in fact now comprises two divisions, the K-League Classic and second-tier K-League Challenge. Played during the summer, each season usually begins at the end of March and runs to November. Even before it was rebranded to the K-League in 1996, several team franchises had been relocated from major conurbations such as Seoul, Busan and Incheon to smaller towns and cities, a process of decentralisation designed to offer football a point of difference from the established baseball teams in the larger cities.

The K-League Classic features 12 teams, with the clubs split into two sections of six at the end of the season to decide the champions and relegation. Hyundai-owned Jeonbuk Motors won the 2015 title ahead of Suwon Bluewings, owned by a subsidiary of Samsung, and Pohang Steelers, owned by steel-maker POSCO. Fourth-placed Seongnam are city-owned, while fifth place FC Seoul and sixth place Jeju United are owned by the GS Group conglomerate and SK Energy respectively.

“The K-League from a commercial point of view is quite different to many of the leagues around the world,” says Mou. “Going back to when it started, the government asked the companies to run clubs and when they did that, whatever money was spent on that club, there was a tax benefit given to the companies. Now, as companies struggle financially and the government has been shrinking the tax benefits over the years, investments are less and less every year. That pushes players to go abroad rather than stay in Korea, or the clubs struggle to hire good players from overseas.”

With many of the corporates that own K-League clubs already so well-known domestically that brand exposure is not among their priorities, Mou suggests the league should be looking further afield for future growth. “K-League clubs really need foreign investment,” he argues. “I’m not sure there’s too much of an international strategy in place, which I find very strange because it’s a good opportunity to get closer to the Korean consumer.”

Korea’s football challenges in 2016

As with many football leagues around the world, the K-League’s competition for eyeballs and fans comes not only from other domestic sports leagues but, via television, the internet and occasional pre-season tours, from the powerhouse European leagues. “Many Koreans follow the Premier League, La Liga and Bundesliga,” Mou says, “and especially the Premier League as currently there are more Korean players playing there.” Korean players plying their trade abroad stimulates interest – Mou points to Tottenham Hotspur’s Son Heung-min, who on signing from German club Bayer Leverkusen, was responsible for a swing in audiences between cable companies in Korea, one of which broadcasts the Bundesliga and the other the Premier League.

“This year is key for preparation for the FIFA under-20 World Cup, which takes place here in 2017,” Mou continues, summarising the football landscape in Korea.

“Obviously the Korean Football Association need to do a lot of promotion to engage football fans and I think this gives the K-League an opportunity to grow. For the league itself and the clubs they need to work harder to get sponsorship, to be able to survive and be stable financially – to hire good players and move up a level of the game; they definitely need to bring up the level of the sport, in particular because China is investing a lot in its Super League and taking away a lot of players – and even the coaches. That’s the biggest challenge.”

The KBO: hitting it out of the park

While football is popular in Korea, it trails baseball as the country’s number one sport. Each of Korea’s major cities is home to at least one team in the KBO (Korean Baseball Organisation) League, the top professional league, although Seoul boasts three – Doosan Bears, LG Twins and Nexen Heroes. Other teams, largely owned by and named after major companies, are based in Incheon, Daegu, Changwon, Suwon, Busan, Gwangju, Changwon and Daejeon. The league was founded in 1982 and has expanded from six teams at launch to a ten-team competition. “Baseball has games almost every single day for five months during the summer,” reports Mou, “and this is where clearly the K-League is not reaching the same audience ratings. Broadcast companies also prefer to show baseball, because they can obviously make more money via commercials.

“Each club is trying to run their own marketing and develop, even handling player transfers to Major League Baseball – but the league also supports the clubs a lot and they have been very successful from a marketing point of view.”

Aside from football and baseball, Mou points to volleyball, basketball and golf as the three other major professional sports in Korea. Korea’s volleyball league, the V-League, was established in 2005 and features men’s and women’s competitions, while the Korean Basketball League is in the midst of its 20th season.

Korea’s domination of women’s golf, meanwhile, is longstanding and remains remarkable. As of the first week in January nine of the top 20 women’s golfers on the official Rolex ranking were Korean, led by world number two Inbee Park. But Mou notes a shift in Korea is connecting with the game. “Everybody has followed golf for many years, but now there are too many Korean players dominating the LPGA so rather than people watching the tournaments, there is now more participation.” As Repucom’s recent World Golf report noted, of those who actively participate in sport over 12 per cent of Koreans now play the game, a proportion higher than in Australia, the US, Great Britain and Japan.

Brand-building: looking global

With a population of just over 50 million, it is no surprise that many of Korea’s major companies look outwards when it comes to sports sponsorship decisions. Established major multinationals such as Samsung and Hyundai are well-known on the global sporting stage, but Mou suggests a similar approach is also a viable option for other Korean firms. “Everyone knows LG, Samsung and Hyundai, but there are lots more companies that don’t have global awareness,” he points out.

“Doing a sponsorship and owning a club [in Korea] has a lot to do with brand awareness and obviously these companies need some return on investment for that as a compensation,” he adds, “but locally here they aren’t finding it so attractive, or necessary, to achieve yet more brand awareness – the market here is very small, so many are trying to look abroad rather than spending and investing more locally.”

“However, running a sports club in Korea acts as an important stepping stone for reaching global awareness – rather than trying to start directly in other countries. Korean club sponsorship has a lot to offer when companies look a little closer to home.”