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29Nov/1111

NFL IN LA: DETOUR THROUGH CHINA WITH AEG

aeg in china mercedes benz arena china nba in china footballphdsBy Jaboner Jackson 8 a.m. | Even though AEG is focused locally on returning the NFL to Los Angeles through its planned downtown Los Angeles stadium, Farmers Field, globally AEG has continued to push for a bigger piece of the burgeoning sports and entertainment pie in China, a move that started in earnest in the years preceding the Beijing Olympics of 2008.  But all has not been rosy for AEG.  Like many of its Western brethren, AEG has struggled to penetrate the live entertainment business in China.  AEG currently stands at a crossroads in the world's most populous country, and the outlook is far from optimistic.

AEG and the Beijing Olympics

The Beijing Olympics of 2008 presented opportunities for the three prominent American live entertainment companies, AEG, Ticketmaster, and Live Nation, to develop infrastructure in China.  (Ticketmaster and Live Nation subsequently merged to form Live Nation Entertainment in 2010, with Ticketmaster becoming a subsidiary of Live Nation Entertainment.)  AEG, through its AEG Ogden and AEG China divisions, began on this process during the Olympics.  AEG provided operational consulting services on Beijing National Stadium, Beijing National Swimming Centre (The "Water Cube"), and China National Convention Center. 

But AEG did not provide facilities management during the Olympics.  Rather its role was advisory only and not operational.  AEG did not participate in design, construction, financing, or ownership.  And even in its advisory role, its involvement was limited.  Per China's business model, government owned corporate entities solicited consulting services from Western companies and Western companies were happy to oblige in the hopes that they would be able to secure future business.  AEG provided intellectual expertise and Chinese companies listened and learned.

Table: AEG's Consulting and Management Roles in Beijing

FACILITY

DESCRIPTION

AEG'S INVOLVEMENT

Beijing National Stadium ("Bird's Nest")

Open air stadium with 80,000 capacity

AEG provided consulting services related to operational design, such as operational cost analysis.

Beijing National Swimming Centre (Beijing National Aquatics Center or the "Water Cube")

Indoor swimming Olympic swimming complex with training facilities

AEG provided post-Olympics consulting services on future uses.

China National Convention Center

Meeting space, exhibition space, and hotel space in Beijing, adjacent to the National Stadium

AEG provided opinions on tender processes.

MasterCard Arena in Beijing (formerly called Olympic Basketball Arena or Wukesong Arena)

10,000 basketball arena that was named MasterCard Arena in 2011 under AEG's management estimated at $4 million annually

AEG secured a post-Olympics facilities management contract.

 

AEG Global Partnerships secured naming rights in 2011 a few weeks before securing naming rights for Farmers Field in Los Angeles.

 

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It was not until after the Olympics that AEG began to secure facilities management contracts with China.  Its major coup was securing the facilities management contract in 2008 for Wukesong Arena (Olympic Basketball Arena) in Beijing. 

Wukesong Arena was poorly equipped to hold the types of concerts that AEG hoped to bring to the facility and in 2008 AEG set about renovating the new facility from a basketball-only facility to a multiuse arena in the vein of Staples Center.  AEG reopened the arena in 2009 and ushered in what it hoped would be a new era in Chinese live entertainment.  AEG even brought in Beyonce for its first concert.

But AEG failed to gain traction.  It had difficulty providing a multitude of events.  Even though AEG brought aboard John Cappo, a veteran of sports marketing in China, as President and CEO of AEG China in 2009, not much improved.  AEG's Asian concert division could not secure talent.

Nonetheless, AEG, through its AEG Global Partnerships division, was able to secure naming rights in January 2011 that are believed to be $4 million annually from MasterCard to rebrand the arena.

AEG and Mercedes-Benz Arena in Shanghai

In 2010, China hosted the World Expo in Shanghai with the just built Shanghai Expo Cultural Centre by Oriental Pearl Tower Group (OPTG), a Chinese government owned corporation.  With an eye towards life after the World Expo, OPTG signed a facilities management contract in 2008 with AEG and the NBA to create and book events for the arena after the World Expo.  AEG Global Partnerships quickly secured naming rights from Mercedes-Benz in 2009 and set about prepping the arena for a reopening, which it had in January 2011.  AEG will likely have to book at least 80 events a year to maintain its contracts with both OPTG and Mercedes-Benz.

Ticketmaster Also Falters In China

AEG has not been the only company to have had difficulty in China.  Ticketmaster, who had run the ticketing system for the Beijing Olympics in 2008 through its Emma Ticketmaster division, bowed out of China in full in 2010 after failing to book a roster of Western musicians in China to any significant degree. 

And even when Ticketmaster had Western musicians booked, cancellations were common, such as those with Linkin Park and Oasis in 2008 and 2009.  Furthermore, Ticketmaster had some very public mistakes, such as the Bjork fiasco in March 2008, when Bjork shouted "Tibet! Tibet!" at the end of her Shanghai concert, a huge mistake in a socialist country.

AEG's Outlook In China

We believe that AEG will continue to have difficulty in China and has a high likelihood of bowing out of the market completely if it fails to deliver on its contracts to provide live events in the number specified.  AEG is now finding out what Ticketmaster already did almost two years ago--the live concert business in China is an immature one.  Chinese have not shown the willingness to spend big yuan on seeing Western musicians and Western musicians have not been able to endear themselves to the Chinese with any consistent basis.  And when AEG bows out of China, another Western company will have bit the dust in the People's Republic after lofty aspirations.

***

Acknowledgements:  A special thanks goes to our good friend, Laura from Live Nation, for her help in understanding the timelines in this article and for the background information on Live Nation and Ticketmaster.  We'll see you at the Guns N' Roses concert at the Forum in Inglewood later this month.  Like always, Sunday brunch at Pete's Cafe is on me.

 

References:

AEG Brain Trust (09/2011)

LA Times: AEG, NBA in Shanghai (10/2008)

Sports Business Journal: Naming Rights (01/2011)

Guardian UK: Bjork (03/2008)

Chinamusicradar.com

Photo: Mercedes-Benz Arena in Shanghai

jaboner@footballphds.com

Comments (11) Trackbacks (0)
  1. Every US company thinks they know China. China always proves them wrong. But the NBA is a strong partner and will salvage AEG in Asia.

  2. Japan uses the Yen. China uses the Yuan Renminbi

  3. it’s taken some time but some american mega-corps are finally figuring out that china will only come out ahead with these so called partnerships…their main motivation is to steal as much intellectual property from the west that they can so eventually they own their domestic markets outright and undercut the global marketplace…the one thing that they have against them is their own arrogance and the fact that more and more of their economic growth is being done with smoke and mirrors either through over-development where demand does not exist aka ghost cities or they are flat out manipulating currency exchanges and reporting ginned up economic data.

    the olympic venues are such a great example of this excess and economic mis-allocation…not a single of the major olympic venues have seen any post olympic events of any significance and serve to be no more than grand white elephants in china’s growing collection

  4. Seriously absolutely hilarious about how everyone thinks China is the best place to be just because they have 1.3 billion people. What about the lack of transparency? The stealing of intellectual property? The bribery? The nationalization of resources?

  5. What does this mean that the Jaguars are being sold to Shahid Khan the man who tried to buy the Rams since he lives right near St. Louis? Do we eventually see in the near Pat Bowlen selling the Broncos to Stan Kronke, the Rams sold to Shahid Khan to stay in St. Louis and the Jaguars sold to AEG or Majestic Realty?

  6. Jacksonville staying put. Rams to Los Angeles after no renovations get done there. You heard it from me first.

  7. China? WTF? How did AEG get into China?

  8. So let me understand this: China built a bunch of $hit crappy, AEG made it better, China took over again? Sounds right to me, homies.

  9. AEG should go to the team instead of waiting for the team to go to it. Meaning, look at San Diego as a L.A. Live complex situation, develop it. There is plenty of land, it’s ocean front, it’ll go up over time. Why go to China when San Diego is right next door? Be partners with the Chargers instead of trying to swindle the Bolts.

  10. Is that a space ship?


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