Coronavirus and baseball collide in Japan, Taiwan and South Korea

Linda J. Dodson

TOKYO/SEOUL — It was April Fool’s Day, but the organizer of the Taiwanese professional baseball league was in no mood for jokes. With the novel coronavirus sweeping across the region, John Wu, commissioner of Chinese Professional Baseball League, made the difficult decision to hold all games without spectators until further notice.

“We are going to hold a season opening match on April 11,” Wu announced on April 1. The league postponed the date twice, pushing the start date back roughly a month from the original schedule of March 14.

The move follows similar postponements in Japan and South Korea, East Asia’s two other baseball strongholds. In a year that has already seen major sporting events delayed or canceled — most notably the 2020 Tokyo Olympics and Paralympics — these moves are not only a disappointment for baseball fans, but a blow to business for everyone from team owners and high-paid stars, to stadium operators and beer vendors.

Baseball is arguably the most popular local professional sport in Taiwan, Japan and South Korea. The three leagues attracted about 36 million people to their stadiums in over 2,400 games — both regular and post-season — in 2019. On top of the unsurpassed ability to attract crowds, teams in all three leagues are allowed to carry company or brand names in their own names, unlike their North American peers in Major League Baseball. This provides unique opportunities and incentives for big companies to own baseball clubs for promotional purposes, even if standalone baseball business itself is not profitable.

CPBL’s Wu, in making his announcement, appealed to fans “to stay away from the stadium periphery as well, in order to prevent creating breaks in the anti-epidemic efforts.” The Taiwanese government has taken an aggressive, tech-supported approach to fighting the virus, which has infected nearly 1.5 million globally and killed more than 88,000.

Beyond stadiums, CPBL has implemented policies to avoid contacts between players and fans at hotels and training grounds.

For Rakuten, the Japanese e-commerce platform operator, Wu’s announcement is a mixed blessing.

The company is a newcomer to the Taiwan league. Last fall, it acquired the 2019 CPBL champions, the Lamigo Monkeys, from local shoe maker La New International, making it the first company to own a pro team in both Taiwan and Japan.

The newly christened Rakuten Monkeys were given the privilege of hosting the opening match against the Chinatrust Brothers, owned by CTBC Financial Holding, at Taoyuan Stadium.

Yoshinori Kawada, co-general manager of Rakuten Monkeys, told the Nikkei Asian Review on Sunday it was “regrettable” that the new team will not be able to play live in front of their home fans. This, of course, has repercussions for business.

“Spectator-less games mean sales of tickets and fan goods, as well as food and beverage revenue at the stadium, will be impacted,” he said.

Investing in baseball is strategic move for Rakuten. Hiroshi Mikitani, the company’s founding chairman and CEO, said when the acquisition of the Monkeys was completed in December that the team will set “the stage to connect with more customers in Taiwan through our expanding Rakuten services, including e-commerce, travel, card, digital content and soon-to-launch online banking.”

It is a strategy that has paid off at home. Mikitani drastically raised Rakuten’s profile in Japan when the company became the owner of the Tohoku Rakuten Golden Eagles and joined the professional league from 2005. The company had hopes for a repeat performance in Taiwan, but it has already lost a number of prized promotional opportunities due to the postponement.

While Taiwan is braving the pandemic and starting its 2020 season on Saturday, however, both Japan and South Korea remain hesitant.

The Nippon Professional Baseball league of Japan, the oldest and the largest of the three leagues, has the biggest business interests at stake, but it is also facing the greatest uncertainty over the contagion. Prime Minister Shinzo Abe on Tuesday announced a state of emergency for the first time under the country’s pacifist postwar constitution.

The NPB, with 12 teams divided up into two leagues, hosted 858 regular season games last year, attracting over 26 million spectators. Though the total size is dwarfed by MLB’s 68.49 million yearly total, Japan comes out on top in terms of per-game average: nearly 31,000 vs. 28,000.

And while the Los Angeles Dodgers topped the ranking of professional baseball clubs in the world by attendance in 2019, three Japanese teams were in the top 10: the Hanshin Tigers, Yomiuri Giants and Fukuoka SoftBank Hawks.

The commercial value of the league is difficult to grasp, as all 12 teams are privately-held with very limited financial disclosure. A rare exception came when Rakuten’s Mikitani estimated in 2016 the market size to be 140 billion yen ($1.3 billion in today’s value) in his presentation to Prime Minister Abe’s advisory council.

The Fukuoka SoftBank Hawks are a key marketing tool for SoftBank. (Photo by Masaru Shioyama)

Only the Hawks disclosed both the club’s top and bottom lines via government gazette. For the year ended February 2019, revenue was 31.77 billion yen and net profit was 544 million yen. Yoshimitsu Goto, president of the team who doubles as chief financial officer of SoftBank Group, told Nikkei, “We are not looking to maximize the team’s net profit.” As a fully owned subsidiary of the group, “What we seek from the Hawks is to maximize our brand value.”

An AI-powered analysis of big data gives an idea of how much impact the virus is already having on NPB. Tokyo-based startup X-Locations compiled and evaluated anonymous mobile phone GPS data for the first two weeks of March this year and last. The findings showed an estimated 13-31% drop in human movement in the vicinities of the 12 home stadiums of the Japanese teams, a result of all 2020 pre-season games being held without spectators.

The only exception was Rakuten’s home at Sendai in northern Japan, where X-Locations’ analysis showed that events to commemorate the March 11, 2011, earthquake and tsunami brought more people to the area around the ball park.

The drop in human movements was even more acute when comparing the season-opening weekend last year and a comparable weekend this year. The data of the six ball parks that hosted the opening three matches last year — from Sapporo to Fukuoka — indicates that the number of people was roughly cut in half this year, pointing to a significant shrinkage of economic activity.

Tokyo Dome, the home of the Yomiuri Giants and the only publicly-traded ballpark operator in Japan, is feeling the pinch. In a rare move, the company on March 12 refrained from disclosing its full-year earnings forecast for the financial year ending next January, saying it is “difficult to make reasonable assumptions at this point given the influence of the novel coronavirus.”

Tokyo Dome President Tsutomu Nagaoka acknowledged to investors on March 24 that “it will be extremely challenging” to hit its consolidated operating profit target of 13 billion yen for the year through January. On top of the bleak outlook for baseball, at least 12 concerts in April have been either cancelled or postponed so far. Nagaoka hinted at possibly slashing executive payrolls, along with various other spending cuts to weather the storm.

That storm could be unprecedentedly serious. NPB, which originally scheduled the season to start on March 20, has now given up on setting a specific date to play ball, after postponing it twice.

“Since the opening date is not determined, we are in a very painful position of not being able to conduct any promotional activities,” Noriaki Kajiwara, public relations manager of Chiba Lotte Marines told Nikkei. He admits that there is something Japanese to it as well, “a mounting social mood of self-restraints,” or a social peer pressure, which is hindering its promotional activities.

Atsushi Saito, the NPB commissioner, has even hinted that a shorter season may be on the cards. “We may need to consider reducing the number of games, although we have strongly hoped to stick to 143 games per team,” Saito said after the meeting with representatives from the 12 teams last Friday. If this is to become a reality, it may open up various questions, including regarding certain player contracts, such as on their performance-based bonuses.

The NPB season was postponed for two-and-half weeks in 2011 due to the earthquake and tsunami. And the only cancellation of the whole season since its inception in 1936 was in 1945 due to WWII.

The South Korean league is on a similar footing. The Korea Baseball Organization originally planned to kick off the season on March 28, but the operation committee on Tuesday decided to start exhibition games on April 21 with no fixed date for the season opening.

Like NPB, KBO is considering cutting back on its regular season from 144 games per team to 108 in its worst-case scenario, according to Yonhap news agency. “Of course, we expect our revenue from ticket sales will drop as we consider cutting the number of games,” a KBO spokesman said.

Unlike their Japanese peers, South Koreans are relatively transparent in terms of their financials. The combined revenue of the 10 clubs was 507.7 billion won ($418 million) in 2018, and this could be at risk. The LG Twins, the only baseball club in South Korea to attract over a million regular-season spectators last year, said its revenue has dropped sharply from a year ago due to the suspension of the league. Ticket sales account for one-fifth of its revenue, according to KBO data.

“We can sell more items when star players come out or we host marketing events. But as the league has not started yet, we don’t have those chances,” the spokesman said of the impact on sales of jerseys and other team items.

The club will likely suffer even more if KBO slashes the number of games. As the haziness drags on, some fans are requesting refunds of season tickets, worth up to 3.3 million won for Doosan Bears, the 2019 champion team.

KBO, however, insists there will be no adjustment or negotiation over the broadcasting fee contract it signed with major broadcasters as well as a consortium of internet and telecom companies. The consortium — consisting of Naver, Kakao, KT, LG Uplus and SK Broadband — is paying 110 billion won for five years until 2023 for broadcasting rights. The baseball organizer also extended its title sponsor partnership contract with Shinhan Bank, main banking arm of Shinhan Financial Group, until 2021 in March.

Kawada at Taiwan’s Rakuten pins his hopes on increased value from broadcasting rights, as fans now have no choice but to cheer for their teams via television. “We are in negotiations to create new forms of sponsorship programs,” he said.

Samsung Lions players hold a training session at the Daegu Samsung Lions Park in coronavirus-hit Daegu, 300 km southeast of Seoul, on March 11. 

  © EPA/ Jiji

Notwithstanding sporadic bullish comments such as this, the financial impact seems to be unavoidable for all three leagues. SoftBank’s Goto admitted that the Hawks, though a valuable asset for branding purposes, face unavoidable financial damage as a club.

TV rights will remain intact, but just about everything else from season tickets to food and beverage sales to the pricing of advertisements on its home stadium will suffer. The team’s dome in Fukuoka, which it owns, has had to cancel or postpone virtually all concerts and exhibitions lately, much like Tokyo Dome.

“Our staff is now dealing with various stakeholders individually and there’s a lot to do,” Goto said. He added, however, that “as the operator of the team, our top priority is to diminish the possibility of infection as much as possible.”

It is not all about money, either. Given their substantial social influence, baseball clubs in the region are being called on to step up to the plate in the trying times. Lee Yong-kyun, a columnist for the Kyunghyang Shinmun, is urging the Samsung Lions to act like the New York Yankees did after the 9/11 attack in 2001 and the Boston Red Sox after the 2013 terrorist incident.

As Daegu is both the home of the Lions and the epicenter of the coronavirus outbreak in the country, “Samsung can comfort people with their play. If they do better, I am sure it will give more comfort to Daegu residents,” Lee argued. “I was told that Samsung plans to let a medic who served in Daegu throw a ceremonial first pitch. Such an event will also encourage people to overcome the epidemic.”

The team’s representatives did not responded to Nikkei’s request for comment.

With the start of the season still undecided, however, just when that morale-boosting first pitch will come remains anyone’s guess.

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