Global Growth in

International Sport:

A Niche Portfolio

Strategy

Joe Cobbs, Jonathan A. Jensen, & Mark Groza

Organizational ecology niche perspective

INTRODUCTION

Niche: multi-dimensional resource space (Hutchinson 1957)

• Not exclusive to small market segments

Resource perspective in organizational ecology

• Niche broad or narrow, based on the variance of the resources (Milne et

al., 1996)

Niche portfolio strategy diversifies market risk

• Success relies heavily on amount and quality of resources within

targeted niches (Milne et al., 1996)

Niche marketing strategy

INTRODUCTION

Particular market niche (Porter, 1980)

• geographic boundaries

• type of customer

• segment of product line

• combination of these three elements

Niche marketing (Kotler 2003)

• collection of customers of sufficient size

• willing to pay a premium

• unlikely to attract similar competitors

• represent profit and growth potential

Where niches defined geographically, building diversified portfolio

involves international market expansion

Application of Niche Strategy to Formula One

INTRODUCTION

• Very high spectator consumption (588m), yet drastic variation by region

(Sylt and Reid 2011)

• Model the importance of native resources to success of international

expansion strategy

• Build on theoretical foundation of Milne et al. (1996), who applied niche

marketing strategy to sport industry

Examination of Niche-based Resources

HYPOTHESES

• Resource categorization: participants, spectators, sponsors,

media

• H1. Participant-based resources: number of (a) events, (b) teams, and

(c) championships

• H2. Spectator-based resources: (a) population size and (b) gross

national income [GNI]

• H3. Sponsorship-based resources: (a) current corporate sponsor

support and (b) corporate support potential (In-country market cap)

• H4. Media-based resources: (a) traditional and (b) new media

Demand DV: TV advertising rates

METHOD

Standard commercial time—rate card—for broadcast of every F1 grand prix

over 4-year period in 19 countries, across five continents

• sourced from UK-based media agency

• Call for utilization of broadcast-related metrics to measure demand (Fort

2006; Tainsky 2010)

• Broadcast rights fees dominant revenue source in sport industry

(McCarthy 2013; Ourand 2013)

• Actual attendance figures closely guarded• media reports often gross estimates or wholly inaccurate

METHOD

Table 1 F1 Broadcast Network by Sample Country

Country Network Country (cont.) Network (cont.)

Australia Ten Greece Alpha

Austria ORF-1 ANT1

ORF-2 Hungary RTL Klub

RTL Italy Rai Due

Bahrain Bahrain TV Rai Uno

Belgium Canvas (North) Japan Fuji

Eén (North) Malaysia ESPN Asia

La Deux (South) NTV7

La Une (South) Star Sports

RTBF ASTRO

Brazil Rede Globo Netherlands RTL7

Canada RDS Spain Canal 9

TSN IB3

TSN2 La Sexta

China CCTV-5 TPA Television Principado de Asturias

Guangdong TV Sports TV3

Guangzhou TV Competition Telecinco

Shanghai Documentary U.K. BBC One

Shanghai Great Sports BBC Two

Denmark TV3 Puls U.S. FOX

TV2/TV2 Zulu FOX Deportes

France TF1 Speed

Germany RTL

Premiere

METHOD

Table 2 Means, Standard Deviations and Correlations Among Study Variables

Variables Mean S.D. 1 2 3 4 5 6 7 8 9 1. AdRate (Thousands USD) 424.60 500.30

2. Events .74 .53 .40**

3. Teams .56 .87 .55** .14

4. Championships 2.64 3.60 .59** .19 .52**

5. Population (Millions) 132.00 301.40 .17 .12 -.14 -.11

6. GNI (Thousands USD) 33.50 15.90 -.04 -.14** .23 .11 -.45**

7. SponsorSpend (Millions USD) 132.00 212.20 .41** -.04 .49** .14 .02 .27*

8. MarketCap (Trillions USD) 2.06 3.72 .01 -.08 -.02 .04 .37** .13 .39**

9. News 211.38 111.83 .10 -.32** .46** .00 -.33** .58** .65** -.01

10. Internet 63.74 17.80 -.04 .30* .20 .12 -.52** .85** .35** .07 .64**

* p < .05; ** p < .01

RESULTSTable 3 Regression Results for Participant, Spectator, Sponsor and Media Resources effect on Ad Rates Independent Variables Model 1 Model 2 Model 3 Model 4 Model 5

2008 -.04 (0.27) -.03 (0.25) -.03 (0.26) -.07 (0.81) -.08 (0.90)

2009 -.05 (0.37) -.01 (0.08) -.01 (0.08) -.05 (0.49) -.04 (0.42)

2010 .05 (0.37) .06 (0.59) .05 (0.54) .06 (0.71) .08 (0.86)

Participant Resources Events (H1a) .30** (3.36) .29** (3.04) .30** (3.50) .29** (3.17)

Teams (H1b) .32** (3.14) .33** (3.27) .08 (0.78) .08 (0.68)

Championships (H1c) .37** (3.63) .38** (3.90) .47** (5.24) .46** (4.80)

Spectator Resources Population (H2a) .25** (2.67) .32** (3.38) .28** (2.78)

GNI (H2b) .07 (0.71) .09 (0.85) .27 (1.71)

Sponsor Resources SponsorSpend (H3a) .40** (4.08) .52** (4.04) MarketCap (H3b) -.28** (2.93) -.32** (3.16)

Media Resources News (H4a) -.13 (0.81) Internet (H4b) -.19 (1.09) F-statistics .21 11.71 10.43 12.34 11.50

R2 .01 .52 0.57 .67 .69

ΔR2 .51** .05* .10** .02

Note: Standardized coefficents reported β; (t-value in Parentheses) * p < .05; ** p < .01

H1, H2, & H3 supported

RESULTS

Participant-based resource variables are significant

• (H1a) Events (β = .30, p < .01), (H1b) Teams (β = .32, p < .01) and (H1c)

Championships (β = .37, p < .01) each yield significant coefficients

Spectator-based resource supported by change in R2 (p < .05)

• (H2a) Population (β = .25, p < .01), but (H2b) Income not supported (β

= .07, p > .05)

Sponsor-based resource supported by change in R2 (p < .05)

• (H3a) Sponsor Spend (β = .40, p < .01), but (H3b) Market Cap negative

effect (β = -.28, p < .01), based on low demand for F1 in US and China

Media-based resource (H4) not supported

Application Example: Failure of F1 in Turkey

DISCUSSION

First race in 2005; abandoned by 2012 (Cary, 2012)

Media blamed poor attendance (BBC Sport, 2011)• Symptom of lack of demand for the sport in geographic niche

Turkey as geographic niche • No participant resources (driver, team or event)

• Marginal spectator resources (only 73 million consumers)

• Minimal sponsor resources: 1 current corporate sponsor (Ofisi, who had spent

$350,000 with Honda)

Russia niche shows promise

DISCUSSION

• First race in Russian Federation in 2014 (BBC Sport, 2010)

• Participant resource: Russia has boasted drivers (Vitaly Petrov, Daniil Kvyat) and

team (Marussia Virgin Racing team)

• Spectator resource: Population of 141 million above mean of study

• Strong sponsor involvement

• Race slated for Sochi, site of 2014 Winter Olympics and 2018 FIFA World Cup

Questions? Joe Cobbs (cobbsj1@nku.edu)

Jonathan A. Jensen (jensen.205@osu.edu)

Mark Groza (mgroza@niu.edu)