The announcement in March that iPhox would be the new sponsor of the troubled China Super League (CSL) came as a big surprise to many familiar with Chinese football. In just its third season since a 2004 revamp, the football league had been running without a sponsor after Siemens pulled out at the start of 2005. Then, just as teams prepared to kick off the new season, the Chinese Football Association declared that the little-known iPhox had won the CSL naming rights in a five-year deal worth a reported US$9 million in the first year and set to increase gradually over the next four years.
To say that iPhox had come out of nowhere to strike this deal would be somewhat of an understatement. The UK-based Voice-over Internet Protocol (VoIP) company specializing in peer-to-peer (p2p) online phone services was only formed in January of this year, and yet two months later had made the bold and confident move into its first international sports sponsorship deal. However, given the dire straits that Chinese football has found itself in over recent years – periodically afflicted by match-fixing, falling crowds, corruption and even all out strikes - there are serious question marks regarding the timing and overall wisdom of the move. In the last year alone, several senior CSL clubs have folded as a result of dropping revenues.
Apparently, this is not something that is troubling iPhox. Trevor Robinson, the company's vice-president of marketing argues that there is more than enough value in the CSL to justify the five-year investment.
"We believe the CSL will grow in popularity and become one of the most exciting football leagues in the world," says Robinson, pointing out that the CFA has worked hard to clean up the league. "iPhox is a new company and we selected the CSL as our first major sponsorship because it offers exposure to many people."
Robinson's enthusiasm for the future is somewhat askew with the present reality. Figures put forward by Nan Yong, chairman of the CSL, suggest an altogether more pessimistic picture. Nan said recently that the league's cumulative TV audience for the 2005 season was 120 million, with average match day crowds of 12,000. These compare with an average attendance of 24,700 and combined TV ratings of up to 500 million when the professional game in China was at its peak eight years ago.
Despite this, the CSL remains China's premier professional sporting league. All games are shown live on TV, via either national or local broadcasters, giving iPhox instant access to a potentially huge marketing tool. According to Robinson, in addition to having the iPhox logo on all CSL printed materials such as tickets and programs, the company name appears on banners inside the stadium and around the field, while the CSL/iPhox combined logo appears in the graphics on TV broadcasts and commercials for the CSL. The company has also now begun showing iPhox.com commercials on the TV broadcasts and on giant screens inside the stadium.
Market exposure
The media exposure that comes with owning the naming rights to the CSL will be crucial to iPhox as it competes in the online phone market. In the last several years, a number of overseas companies have landed in China offering their VoIP technologies to the country's growing band of Internet users. Allowing users to make low cost phone calls via the Internet (either to other computers or to landlines), the services have been extremely popular. Firms such as Skype and Vonage have been quick to recognize China's unique market potential, based on a large pool of long distance callers combined with a rapid growth in Internet users.
However, according to Dave Carini at Maverick China Research, these companies offer few differences in terms of technology. "There are not too many innovative services around right now. Technology is not too advanced and lots of companies have what iPhox has. The major area of contention is getting users onboard." For a start-up company such as iPhox, with little or no brand recognition, the sponsorship strategy within this context appears to make more sense.
Martin Roll, CEO of VentureRepublic, a leading strategic advisory firm on branding and author of the recently published Asian Brand Strategy, believes that the sponsorship deal may go some way to cutting the ice in such a highly competitive market. "If iPhox is not a very well known brand in China, then this sponsorship will surely give the brand enough brand awareness to make a big entry into the market," he says. "Further, as Siemens and Pepsi were the previous sponsors of the leaguet, it will also send a message in the market that iPhox is aiming to climb up to the level of the other brands by associating with a similar event."
This is a certainly a view shared by iPhox's Robinson who points out that no international company can afford to ignore such a vibrant opportunity to enter the China market. "We feel that football allows us to reach a large audience to let everyone know about iPhox."
Industry Setbacks
Although the jury is out on whether iPhox's CSL partnership will be a marketing masterstroke or a dangerous miscalculation, the company may well find its short-term strategy affected by matters out of its control. In late March, it was reported that China would put a hold on issuing licenses for free Internet phone services until 2008, a move intended to protect the country's fixed line phone business.
Although the two-year ban has yet to be officially confirmed, industry insiders see it as a warning shot to overseas VoIP operators looking to launch computer to phone services. "This kind of action is a way for regulators to say to foreign companies: slow down, it is up to us to make the decisions about how this technology will be allowed to happen," suggests Carini. According to sources, computer to computer serviced would be unaffected.
Unsurprisingly, given the levels of its investment in China, iPhox is undeterred by the latest potential setback and appears to be willing to sit and wait for the right opportunity. The company stresses that it has a commitment to work closely with China and its people to negotiate and solve any barriers that arise regarding VoiP and Peer-to-Peer. "Solutions will come, because it is now understood by all that P2P and VoIP are cost effective solutions with exciting potential for new applications and revenue streams," says Robinson.
As with its CSL sponsorship, this wait-and-see approach is not without risk and iPhox could see itself squeezed out of any eventual industry reshuffling. At the same time, it is a strategy that if successful could pay enormous dividends. "iPhox appears to be taking a gamble on China," suggests Carini. "If it pays off and the company becomes one of the leading VoIP companies, then this will be very lucrative.
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