July 22nd, 2010

Why China Presents Fantasy Sports Growth Potential

Thursday, July 22nd, 2010

One doesn’t have to dig too deeply into American economic news these days to find ties to China, and that presence continues to grow on the sports business front.

China has been a significant frontier and viewed as a potential boom market for sports marketers at least since Yao Ming went first overall to the Houston Rockets in the 2002 NBA draft (and probably before that to the keen observers). Fantasy sports have yet really penetrate the market, but it doesn’t take a business whiz to see the potential.

John Tang was recently featured by Forbes for his vision on this front. The China native picked up fantasy sports while studying at UCLA in the 1990s. In 2008, he and a partner launched their own fantasy company in China, Fan Te Xi, with the vision of matching the perfect gaming style with a hungry audience.

“It’s about numbers, and Chinese people love numbers,” Tang told Forbes. “It’s also about sports. And Chinese are fanatics when it comes to sports. And it’s on the Internet.”

That last phrase refers to the bulging population of Web users within the world’s most populous nation. Even with as little as 30 percent of its residents online, China presents as many as 130,000,000 more Internet users than any other country. That total represents as much as a fifth of the globe’s surfers.

Of course, selling your concept is nowhere near as easy as approaching the largest market and simply saying, “Here it is, a game you’ll love.” For one thing, football dominates the American fantasy landscape, but the game remains an oddity in most other countries. Basketball grabs the hearts of Chinese sports fans, while baseball registers somewhere far behind.

Another aspect is that the Chinese player probably doesn’t have as much patience for a full-season game as his American counterpart.

“Chinese are very demanding when it comes to instant gratification,” Tang told Forbes. “They don’t like to wait.”

One can see some direct impact of that instant-gratification pursuit in the unique willingness of Chinese gamers to load up on small, frequent purchases of virtual goods (quintupling American expenditures on similar items). The lack of patience might also mesh well with the emerging market of short-term fantasy games among American operators, with competitions playing out in a day rather than over several months. (FSB.com has been told, though, that even that model might not be immediate enough for the average Chinese’s gamer’s appetite.)

Whatever the format or formats that take hold in the country, the growth potential is what has to excite anyone in position to reach for it. Beyond the sheer population numbers, the ever-changing economics of China is resulting in growth of particularly pertinent classes.

One can first look at the “nouveau riche,” a group of mostly first-generation entrepreneurs who have made a lot of money in an economy now more willing to help them get started. According to Hurun Report CEO Rupert Hoogewerf (in the interview linked above), the inhabitant of his publication’s “Rich List” is 49. The average person who has made 10 million British pounds (a little more than $15 million) is 43 years old, while the average Chinese millionaire is just 39.

Obviously, if you operate fantasy games and your target market is Chinese millionaires, you should probably alter your business plan a bit, but those facts are at least promising. That kind of economic growth is also helping to give rise to a burgeoning Chinese middle class.

According to one report from London’s Euromonitor International, China’s middle class is projected to grow from 80 million people in 2007 to 700 million by 2020. (They define the middle class as those with a household income between 60,000 yuan and 500,000 yuan, a range of about $9,000 to nearly $74,000.)

“The expanding middle class in China is indicative of the country’s economic success and is extremely important to both local and international companies due to their significant purchasing power,” the report stated.

Tang obviously sees the potential and told Forbes that Bloomberg is among the companies that have approached him in pursuit of the Chinese market. Expect many more to target the Chinese audience going forward. If this line from Pabst Brewing — yeah, that Pabst — is any indication, Americans could find a willing consumer.

(From our earliest days here at FSB.com: China’s Sports Scene on the Rise.)