FACE TO FACE INTERVIEW

NAME: John Cappo

COMPANY: IMG

POSITION: Senior International Vice President, Managing Director - China

EDUCATION: McBurney School, New York City; National Taiwan University, Taipei

IN HIS POCKET: Blackberry; Nokia mobile phone; Blistex Lipbalm; namecards

Founded in 1960 on a handshake between Mark McCormack and golfer Arnold Palmer, IMG has become the most powerful sports marketing agency in the world. Asia has been a huge part of IMG’s international expansion, with IMG China founded as early as 1979. Since then, IMG China has been responsible for founding and shaping many of the professional leagues in China, including badminton, soccer, and basketball.

Asia has also been central to John Cappo’s life ever since he first visited Taiwan with his grandfather in 1985. He attended university in Taipei and has lived and worked in the region ever since. CIB sat down with Cappo to discuss what it means to be running IMG in China as the country charges ahead to the biggest sporting event in its modern history – the Beijing Olympics.

You’ve been in Asia since 1985 and went to college in Taiwan. How did that come about?

I went out to Taiwan with my grandfather who was a physics professor advising universities [there]. I become fascinated with Taiwan and the Chinese language and ended up staying. It was very difficult to study at National Taiwan University (Tai Da). The local students were so far ahead of me in math that . . . it took me five years to graduate. Studying and graduating from a Chinese university was a great experience though, and I would choose the same path if I had to do it over again. Currently I am still the only native English speaking American student to graduate from the Business Administration department at Tai Da. Many of my classmates are very successful and it is a great network of people to be a part of.

How did you end up working for IMG?

I quit my previous job [with Sports International in Taiwan] about 10 years ago. At the time I was 31 years old and thought it was a good time to take a break and have zero responsibility for a while, because this would be the only time in my life when I could. But after a few months off . . . I felt pretty bored and was thinking, ‘what next?’ Then Breck McCormack [the son of IMG founder Mark, and an acquaintance of mine] sent me a ticket to Hong Kong to meet Richard Avery [who essentially founded IMG China in 1979]. We hit it off really well and I decided to move to Hong Kong and work for IMG. This was in 1998.

What was your first role with IMG?

I was assigned to the sales pit, which is the lowest and toughest place to start out. You have to prove yourself quickly in front of the team or you are out. Three weeks into the job, Avery took me over to Chongqing, where we were staging a leg of the World Volleyball Grand Prix Tour and told me, “get on with it, Cappo.” Then he left. I lived in the Renmin Hotel for a month. I negotiated with the local federations, confirmed ticket and broadcast partners, hotel and travel logistics, sold the event out, and returned to Hong Kong a hero.

How difficult was it to organize a sporting event in Chongqing in 1998?

It was a very interesting time to be in Chongqing. The business center in the hotel had a printer that didn’t work so I had to buy a new one and hook it up [myself]. Then I had to go back and buy some white printer paper to print proposals on, as the business center could not sort that out either. Many of the local companies didn’t understand sports sponsorship, so it was an educational process. [Despite this], I managed to get a number of local companies as supporting sponsors, and a steel door company, Mexin, as the major sponsor.

Can you tell us about IMG’s history in China?

We have organized more than 2,500 events in China since 1979. IMG founded most of the professional sports leagues in China, [starting with] badminton. In 1994 we set up the Chinese National Football League (CNFL) and in 1995 established the Chinese National Basketball League (CNBL). We structured the home and away system, designed the mascots, logos, and licensing program, and secured timeslots with both local and international television broadcasters. At that time IMG also owned two basketball teams: one in Chengdu and one in Shenyang.

Are you still involved with these leagues?

No, in 2004 we did not renew our contracts with the [sports] federations. Their expectations surpassed market valuations. They wanted unrealistic guarantees, the market had evolved and the “old” model didn’t work anymore. . . . It had to be a win-win relationship and we are not a non-profit organization.

What do you mean by this?

Tobacco companies used to be the major sponsors behind Chinese basketball and soccer. . . . They paid a premium for high-profile sports sponsorships [because they were not allowed to] advertise on television. When restrictions tightened and they could no longer sponsor sporting events, we had to find other industries to sponsor these events, but they weren’t prepared to pay the same level of fees. The sporting federations believed the value of the leagues to be worth more than sponsors were willing to pay and thought they could do better without IMG.

IMG spent 10-15 years building up the basketball, football and badminton leagues in China, and now they are really faltering. There is no title sponsor for the Super League [the restructured version of the CNFL] and the federations have been hit by a lot of scandals and charges, including match-fixing and corruption. It’s very easy for people to say, ‘hey, we can do [promotion] ourselves, we can keep the additional 20-30% the agencies make,’ but it’s not necessarily the case. There is a lot — experience, client relationships, expertise — that select agencies can bring to the table. What took us 15 years to build has taken just a few years to destroy, in some cases irreparably.

What impact has the upcoming Beijing Olympics had on the sector?

The Olympics is great for sports, because it means massive investment in infrastructure, a lot of nationalist fervor, and a lot of investment in athletes. The stadiums for the Beijing Olympics are state-of-the-art and the infrastructure change in Beijing alone is amazing. . . . The fees Beijing 2008 have generated are unprecedented. The rights for a partnership package are in excess of USD 100 million, and this is only for the right to promote your association with the Games within China.

Is Olympics sponsorship worth it?

It really depends on what your objectives are and the benchmarks you set for evaluation. For many of the sponsors, it must be beneficial as they continue to renew their contacts with the IOC [International Olympics Committee]. Many of the benefits are intangible: it is [about] branding, image-driving, and [building up] credibility in your target market. The Beijing Olympics is seen as one of the biggest marketing opportunities of the decade because China is the biggest potential growth market. Just in terms of sponsorship revenues, the Beijing games have raised more than a billion dollars. . . I do not think [London 2012] will generate nearly the level of investment Beijing has.

Nowadays your main focus is golf. How popular can the sport become in China?

The growth potential for golf in China is limitless. If you go by the Korean model — the number of golfers in Korea has increased from 1.3 million five years ago to five million now — even just half of this growth in China would mean phenomenal growth. There are more than a million golfers in China now, as opposed to 300,000 five years ago . . . and the number continues to grow.

Unfortunately, there’s been a moratorium on the development of golf courses in China due to some land-usage and irrigation issues. But, in the long run, the development of golf courses will increase rapidly. I was in Beijing recently and there were no tee times available during a weekday at several courses close to the city. And I saw a lot of twosomes out there. Mostly, in golf, you play in foursomes (groups of four). Twosomes mean that golf has become a venue for business transactions. All these guys are out there doing deals on the golf course. Golf is a healthy outdoor venue for discussing business. It is much better than going to KTV.

Does it matter that there are no leading Chinese golfers at present?

Local athletes are the main pillars for television revenues, sponsorship, and ticket sales. If you look at a sport like tennis, its popularity has declined dramatically in the US and Germany because there are almost no prominent American or German players [right now].

In the next few years, we will see the emergence of a local champion. A 19-year-old girl, Tseng Yani from Taiwan, just won a major event on the LPGA Tour, the McDonald’s Championship. She is now ranked sixth in the world and this is just a glimpse of the talent pool that is emerging.

How is sports marketing in China different from other parts of the world?

First of all, many of the officials for the federations are appointed officials, so they are not as sophisticated or knowledgeable about the sport as their counterparts in the West.

[Secondly], China is not a level playing field because it’s a closed media market. There’s only one national broadcaster, CCTV, so television rights are not really negotiable owing to the lack of competition . . . and are small to none compared to the USA or Europe . . . However, the landscape is changing very quickly with satellite television, regional television stations, and the internet. Although satellites has nowhere near the same level of penetration as CCTV 5 [the national sports channel], it can penetrate many of the major urban cities, which is where the sponsors want to target. [In addition] the Chinese market is very fragmented. There are in fact 32 different regional markets, which are in some respects very different. As CCTV 5 can only broadcast a finite number of sporting events, promoters and events have begun collaborating with regional channels.

What are the other challenges for the industry in China?

In China, so much of the relationship is person-to-person, rather than company-to-company, so if that person in charge leaves, the sponsorship program gets challenged. This is especially true with local companies. Another challenge will be how to make use of the fragmented market through devices such as mobile phones and the internet to deliver the message. Approval processes for select events from the government or federations can also be challenging at times.Nevertheless, amid the chaos is tremendous opportunity if managed properly. China is still a very exciting place to be for business. However, as with almost all industries, businesses, or events in China, if you want to be successful it is a marathon, not a sprint. Those without the patience, persistence, and determination to see it through might as well start packing now.