Editor's Note: Long-distance races are finding their footing in China, among a population that is becoming more health-conscious and finding more time and disposable income to devote to sport. The number of marathons has spiked since 2011. Organizers are not running off with as much money as those in other countries due to a unique business model that finds the majority of profit coming from copyright revenue. The article details the rising popularity of marathon running as well as giving the run down on how copyright issues affect business.   

Going the Distance: The Increasing Popularity of Marathons in China

Marathons are more popular than ever in China. There were 56 marathons held in Mainland China in 2015, according to the Chinese Athletics Association. This is five more races then were held the previous year, and marks a large increase from 2011 when only 22 marathons were held.

Hong Kong listed company Zhimei Group organized five marathons this year in Guangzhou and Hangzhou.

In the first half of 2015, Zhimei Group earned 295 million Yuan in revenue, with net profits of 93.1 million Yuan. The event operations section of the company performed well, up 50% to 107 million Yuan in revenues. Gross margins also increased 42% to 670 million Yuan.”

The Marathon Market

However, the commercial market for marathons still needs to be cultivated domestically in China. “As for the market situation, the bulk of revenue still comes from sponsors and other businesses. As of right now, only a dozen or so marathons have the commercial power for this,” said Zhimei Group president Shen Wei.

Chinese marathon operating company Zhong Ao Lu Pao is one of the most well-known organizers in China. The company was founded in 2009, and organizes the Beijing Marathon and helps organize other marathons throughout the country including the Shenzhen International Marathon.

Zhimei Group was established in 2006 as a private enterprise and was one of the original marathon organizers for races in China. “In 2011, Guangdong had its first open bid to for a marathon, Zhimei won the bid to organize the Guangzhou Marathon. Marathon organizers must have coordination and organization skills in order to deal with 26 different government departments,” said Zhimei Group chairman of the board Ren Wen.

A Growing Industry

Ren Wen said that the marathon industry is a good investment at the moment because China’s per capita GDP is growing. Per capita GDP in China is about $4,900, close to the critical threshold of $5,000. At this point, many Chinese are wealthy enough to spend money in the sports industry. Running marathons have become popular with sporty Chinese, with 44% of the sports population involved in marathons or road races.

Returns are also quite good. Shen Wei said operating profit margins are about 60%. Profit margins are slightly different for different events. Last year, the production costs for the Hangzhou Marathon were 17 million Yuan, and revenues were between 30 million and 40 million Yuan.

International consulting firm Frost & Sullivan reported that China marathon organizers earned direct revenues in 2014 worth over 2 billion Yuan.

Copyright Issues

The revenue model is slightly “abnormal.” Ren Wen said that in the foreign model for marathons, 40% of revenue for the entire copyright comes from copyrights, 30% comes from sponsors, and 30% comes from business-to-consumer revenue from runners. In domestic Chinese events, it is difficult to achieve revenues from copyright, and only 10% of revenue comes from runners.

At the moment, prices for copyrights for popular sporting events are extremely high, but not for marathons. In China, it seems that marathons organizers sometimes even have to pay media to come film the events. Yangzhou International Half Marathon had to pay CCTV about 4.5 million Yuan to come broadcast the race.

“Marathon registration is very popular, but registration fees are a small part of the revenue for organizers. Other business-to-consumer services like training services are still growing, so for now, revenue is mainly dependent on sponsors,” said Shen Wei.

Shen Wei added that sponsors have a limit on how many marathons they can sponsor, so they only choose the largest, more popular core events. Therefore, it is impossible for all marathons to obtain full revenue.

In the second half of 2014, the State Council issued the, “Opinion on Accelerating the Development of the Sports Industry to Promote Sports Consumption.” Soon after, more money began to enter the Chinese sports industry. Many have called this increase in sports-related spending a financial “bubble,” that will not last.

Not many companies have the foundation and the ability to organize marathons professionally. However, a few companies that organize more relaxed road races have popped up in recent years including PPTV’s “Run China,” races, and Li Ning’s 10K races.

“For money to come in, the first thing that needs to happen is getting copyrights. Then projects will have the financial resources to move quickly and on a large-scale. There is also currently no basis for investors, which makes it difficult. These are the challenges organizers currently face,” said Shen Wei.

Zhimei Group sponsors a number of events including the Four Seasons Run, the Happy Footprint City Convention, and other independent road races and competitions. Over the course of the year, the company organizes more than 1300 races and competitions. In the future, the company hopes to work to monetize event and crowd data, and move into sports services, sports training, sports tourism, and derivative products.

However, at the moment, Ren Wen said that idea of a sports marketplace “bubble,” has no foundation. Now, Chinese society has more disposable income than ever before, which has helped the market for sports grow, which means a positive future for the marathon industry.

Source: The Paper

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Keywords: Chinese revenue marathon Marathon increase popularity