SPORTS AND THE ECONOMY

Holding international sports events can bring more than just tourists and forex to the country's insatiable lust for foreign exchange

By TAJAMMUL HUSSAIN
July 04 - 10, 2005

Social and economic development has been primarily triggered and sustained by industrial and commercial progress since the industrial revolution that started off in the early days of the twentieth century. These indicators of development rely on the evolution and regular upgrading of industries such as textile, technology, consumer goods, electronics, food items, furniture, sports goods, etc.

However, we cannot overlook the other darker side of the picture that involves crippling and sometimes fatal sports injuries, violence on and off the pitch, destruction of public and private property, and gambling or betting that has in recent times been a much publicised and somewhat unmemorable incident for fallen national icons in every sporting arena across the world.

However, an interesting point is that sporting nations are the ones that stand out in every walk of life, including economic and political stability. Developed nations have a strong sports base with players contributing and excelling in most local and international sports events. Sports emboss a deep-rooted sportsman's spirit and a sense of determination to fight and win in the people and nations that are active in sports.

Successful sports stars bring glory and repute to their homelands in addition to valuable foreign exchange that is amplified by visiting tourists and stalking fans and paparazzi photographers. Active sports persons are also known to keep away from drugs and other harmful practices that destroy the moral and social fibre of a society. Hence, it may be said that sporting nations are successful nations.

In this report, we review and comment on the pros and cons of sports as an industry and source of livelihood, an inspiration and money-minting machine for hundreds of nations, thousands of iconic sports stars, the corporate world, and billions of sports fans. The Pakistani perspective comes ahead of international issues and analysis.

SPURRING ECONOMIC DEVELOPMENT

Fortunately, Pakistan has always had a place in the international sporting arena in more ways than one. Apart from creating Squash legends, championship material Hockey and Cricket teams that touched the pinnacle of success, and a Snooker World Champion, Pakistan is home to Sialkot, the city of Allama Iqbal, also renowned for being one of the leading manufacturers and exporters of surgical goods, internationally recognized sports merchandise, and leather goods and garments, to name a few.

Soccer balls manufactured in Sialkot were used in the 1998 Soccer World Cup played in France. These products need no introduction at home or away. Evidence of the popularity of products from Sialkot can be derived from the fact that they are showcased separately, and can actually be purchased on e-bay. Local exporters, producers and agencies also take orders through their websites.

The historic city sadly remains predominantly under-developed in infrastructure terms in spite of being the export capital and one of the highest-flying industrial cities of Pakistan, in the presence of Faisalabad's textile prowess, and the express industrial, technological and commercial progress in Karachi and Lahore.

The city has a little over 1000 production units in addition to 3,229 cottage level and small/medium/large scale industrial units annually producing goods and equipment worth over Rs.2 billion.

The Sialkot Chamber of Commerce and Industry (SCCI) is the governing body that oversees the interests of the business community in this tightly-knit community. SCCI comprises some 4700 members who are mostly industrialists, exporters and importers with individual and collective interests in sports, surgical, gloves, leather garments and accessories, badges, musical instruments, martial arts uniforms and accessories, domestic items and cutlery.

Sialkot also has the highest per capita export in Pakistan with over 2000 different surgical instruments making their way into the international market each year. Its economy and class of entrepreneurs is different from any other city in the country, and its contribution to the national economy substantial.

What makes the city attractive to investors and professionals is its robust export and entrepreneur culture with lots of subcontracting arrangements available for those interested in making it their home. This has facilitated the proliferation of small and medium sized industries in abundance.

Hundreds of smaller enterprises ensure that the stakeholders remain limited in their ambitions and therefore in their specialised value chains unlike vertically integrated organisations across the land that are infinite in their information, wealth and skills capacity. Sialkot is just one of the many examples of "pockets of efficiency" located in Pakistan.

According to the Economic Survey Report 2004-05, cotton, leather, rice, synthetic textiles and sports goods constitute 79.3 percent of our total annual exports. However, according to the same official bulletin, exports are reportedly down for the first three quarters of the current fiscal with footwear alone losing export grounds worth $17.3 million owing to fierce international competition.

ADVERTISING IN SPORTS

Advertising is the most frequently used marketing tool to lure consumers since it speaks directly to the end-users. It generally announces the availability and advantages of a product/service along with its characteristics, prices and performance while creating a user-friendly peripheral image for the brand. Since business is business, not everyone's interests are a source of concern for those conducting the business.

Although the world is well aware of the hazards of smoking, the tobacco industry pumps billions of dollars each year into sports via advertising. According to sources, the industry propels £200 to 300 million each year into Formula One racing alone. It's an open secret that thousands of superstars make billions of dollars wearing a branded shirt or pull-over, driving a long-range stroke with a branded iron, or simply sporting a little sticker on their sporting gear. Tennis sensation Serena Williams reportedly signed a sponsorship deal worth $55 million with Nike recently. This means everything she sports on the tennis circuit will bear a Nike logo.

Sponsorships are advertising agreements that can be made in a number of ways including signing a formal sponsorship contract for the equipment employed in a particular sport (bats, cars, team uniforms) or sponsoring the sports arena, a series, a prominent player, etc.

It is sometimes said that television and sponsorship were made for each other. Since TV is the most popular and most effective source of advertising around the world, it is also the most exploited of all media. While smaller advertisers fight for scraps around the ground or sports arena, corporate giants generally reserve the most strategic advertising sites in most sports and get constant advertising for a fraction of the actual cost.

For instance, part of the bowlers' run-up leading to the wicket carries some corporate logo or the other (AT& T in the West Indies, VB in Australia, Cornhill in England) for a fixed price, usually the sponsorship of the event. Every time the camera focuses on a bowler, the logo is instantly displayed as part of the grass in the backdrop. It has been reported that public awareness about Cornhill Insurance rose from 2% to almost 17% in four years after the company became the official sponsors of the England cricket team.

This is also the loophole corporate advertisers find irresistible. Since cigarette advertising is banned on British TV but acceptable at sporting events, the sponsors get away with advertising campaigns under a legal cover that TV cameras cannot prevent. Advertising in neighbouring India is a vivid example of the overwhelming strength of advertising with all sports icons finding their way into the TV screens thanks to millions of enthusiastic consumer goods and services providers.

Another phenomenon rapidly engulfing the global consumer society has been replica kits with die-hard fans of all ages pouring millions into club stores and on-line stores selling replica shirts, equipment, and a world of collectibles. Although soccer shirts have been the more popular choice through the ages, manufacturers are waging their own hidden war of the footwear front, with Adidas, Nike, Puma and Reebok taking the lion's share.

The industry has been thriving so much so that the worldís richest and most popular soccer club, England's Manchester United, whose recent phenomenal success and traditional popularity implies that they are the runaway leaders in replica kit sales. They also recently signed a six-year shirt sponsorship deal worth sixty million pounds.

The popularity of sports around the world can also be gauged from the fact that almost all newspapers have an exclusive sports section that is followed by millions of readers every day. Newspapers have had to be proactive in their approach to their readership since TV started providing live coverage round the clock.

The media has played its due role in sensationalising sports over the last few decades, and is being fittingly rewarded for its efforts even today. Nonetheless, some say that the media has also been directly responsible for promoting violence in sports by using sensational headlines and encouraging fans to take a ëmoral stanceí pertaining to their beliefs and views. On the contrary, some journalists argue that it is the media is also the one that de-escalates such emotions and tensions. The argument continues.

Although the media has had its negative impact on sports and society, the revenues it generates are a source of economic prosperity for corporate giants, sports persons, clubs and national and international economies.

CORPORATE INTERESTS

The stakes are high in the corporate advertising race to take hold of the helplessly addicted, modern-day consumer, and the number of target is growing by the minute. The main stakeholders are the products and services businesses, advertising agencies, governments (at every level), sports clubs and the sportsman; the target- fans and fanatics, and consumers in general.

Product image is generally associated with the faces that endorse them. Hence, producers are out to get the signatures of the most popular faces in the sports world. Fans of Ronaldo, the supreme Brazilian goal machine, would therefore be obliged to endorse Nike shoes as if it were their divine obligation. Since it is the promotion of mutual interests that brings the company and player together, both are equally responsible for manipulating the consumer.

Although most sponsorship deals imply payment in cash, in-kind sponsorships are also common as well as effective. Instead of money, the company may provide equipment and/or travelling expenses, management expertise, and other services.

Companies are also on record to have provided cash to sporting organisations on various pretexts such as charitable donations demanding no return despite the fact that the company is making the donation to improve its public image, corporate patronage which is a point between donation and sponsorship commonly used in arts, corporate hospitality where customers may be invited in an informal setting with business on the plate, and community relations where sponsorship is primarily meant to project the company as a good corporate citizen, employer and contributor to the national economy.

Companies invest millions of dollars in advertising campaigns year in and year out because association with sports adds value to the brand name and plan. This is why there is immense competition in every market on every product and service being provided today despite the fact that consumers derive little difference in price, quality or content. Sports sponsorships give the brand that little edge over its competition at the end of the day.

However, the real corporate difference lies in the fact that only global mega-brands (such as Coca-Cola) have what it takes to appeal to and sponsor mega international events such as the soccer world cup or the Olympic Games. Plus, there is the opportunity to display the company logo on memorabilia including promotional material, posters, events, letterheads, etc. This is in addition to grass-root level investment the company has to make in national sports to enhance its personalised and localised image. Smaller companies have no option but to concentrate on the regional scale and take their share of the leftover proceeds.

The company's brand objectives are essential to the sponsorships it undertakes. The aim could simply be to promote brand name so that consumers may relate to it and prefer it if and when they had the choice. It could be for creating a corporate image that justifies premium pricing. It could serve as a global customer relations exercise to prove that the company has a global vision and is renowned in the business world. Sponsorship may also provide employees that hidden incentive to work for a major sports sponsoring employer, while giving the community that Good Samaritan image saying, "We care".

In turn, companies seek sports icons that can make valuable and quantifiable contributions to the brandís sales, image and ambitions in addition to having a direct link to the product/service. Sports persons look for good bargains and reputed companies with deep pockets, and a product or service that is clear in the minds of the consumers.

Companies prefer to invest in events that are entertaining and memorable since such occasions provide ample room to build brand value and enhance sales. For instance, a beverage manufacturer may sponsor an event and give away free drinks in a positive environment hoping that the crowd will make return purchases after the show.

The foremost concern for sponsors has to be media coverage. Major sports events are a chance for millions of images to be transmitted across the globe with the sponsors' logos and names flashing across to the international audience. This has a profound impact on the consumer's psyche and he/she instantly recognises and identifies with these brand names and logos when shopping. This leads to another tug-of-war for naming rights with events and sports venues being named after products.

A person's tendency to be more focused and biased at sports events is an important reason why some companies readily sponsor sports events and personalities regardless of the sponsorís reach and consumer base.

THE SPORT'S CONCERNS

Before a certain sport goes hunting for a sponsorship deal, it must evaluate its offer, aim and reach. The sports' governing bodies will also have to determine what the brand targets are. As a rule of thumb, the sponsor's product or service classifies its target audience in different age groups, social income groups, etc.

This is no mean task since one has to evaluate facts along with probabilities that may both be in momentary or continuous transformation. One has to quantify the number of events, participants, spectators and secondary audiences- newspaper readers, and news listeners on TV and radio, the popularity of the sport in the region, gender and age-wise division of the audiences, and the socio-economic position of players and their followers.

The organisers must also consider other products and services that may be associated with the sport or its following since the options on hand are as limitless as the number of sponsors desperately seeking quality sponsorship deals.

The history of the event and the organiser are vital to such deals as it establishes the creditability of the hosts. No company would doubt the power to deliver at major soccer clubs such as Real Madrid, Manchester United or Bayern Munich. These clubs have a proven track record and a fan following that is scattered across the globe. Sponsorship deals with such super clubs are sure to generate enough revenues to meet targets and go further.

A SPORTS-BASED PAKISTANI ECONOMY

It is a widely accepted fact that a tourism-based economy is the real success story of our times. However, according to Professor Victor Matheson, not all tourism is positive. This holds truer in the Pakistani context more than it does in most other places around the world with our perforated borders on the east and west. Moreover, Pakistani tourists are an unusual sight since they rarely are warmly welcomed in most countries.

In Pakistan's case, the country needs to diversify its economic and production sources rapidly and move ahead from the one-crop and two-product economy that we have traditionally nurtured. Therefore, turning our cotton-based economy into a sports-based economy is not the recommended solution; but the option does have its advantages.

Holding international sports events can bring more than just tourists and forex to the country's insatiable lust for foreign exchange. Such events generally trigger an advertising boom that works for all sections of society, especially the public sector. With a little effort, the image of the city hosting the event and the country in general can also take a U-turn- for the better or the worse; this is an attached risk.

However, some experts insist that spending the taxpayers' money on a venue that is designed to host one event only is less sensible than creating a cultural amenity that would bring people back ensuring the utility of the facility beyond one event. In such circumstances, it makes good business and social sense to invest in the latter option.

One case study could be that of our dearest foreign friend, China. The Chinese people are avid sports enthusiasts and lovers, and the country's sports goods industry has recently posted a 10 percent growth. Experts also predict that China will become the worldís top sports goods consumer in less than ten years. This will bring real estate investment (outlets) and a boom in the construction industry in addition to healthy competition among local and international manufacturers that will guarantee that quality prevails over quantity in every department.

The opportunity has been instantly identified by Japanese entrepreneurs who have started focusing on the Chinese market with growing interest. This is why leading Japanese sports goods manufacturers are hastily entering the market before the 2008 Olympic Games to be hosted by Beijing.

BETTING AND GAMBLING IN SPORTS

Although gambling at games is as old as the game itself, the practice is frowned upon by most schools of thought and is not legally permitted by some societies. Although the West has legalised gambling to a large extent, stringent measures are taken to ensure that players and organisers do not cross the legal lines.

Betting is now legally practiced in most parts of the developed world, excluding the isolated spots that are part of the Muslim world. You can bet by using your telephone or even place bet on-line using plastic money. However, a few years ago, some cricketers admitted to giving away secrets and throwing away matches for money.

The news shocked the limited world that knows and loves cricket since cricket was referred to as the gentlemanís game. However, the uncontrolled commercialisation of the game in the last two decades is probably the biggest reason for the events that claimed or maimed many cricketing careers and jeopardised national integrity in the sub-continent and beyond. Some critics are optimistic that the incident was a once-in-a-lifetime affair that would not be repeated and the lessons have been learnt, but only time will tell whether or not it does.