Annual operating expenses 40 billion ~ 50 billion … Absolute dependence on parent company support such as advertising expenses
The acquisition of Shinsegae is 135.2 billion… Aiming for’distribution + sports’ synergy
Recurring’sale, ups and downs’ due to poor performance and management difficulties of the parent company
Samsung·Hyundai Motors, four sports teams… SK is for soccer, basketball, and e-sports
Alibaba Vice Chairman Has NBA Team in Tr. 2.6… World’s highest price
Surprise news was released for the new year. It is news that Shinsegae Group, a large distribution company, has decided to take over SK Wyverns, a professional baseball team operated by SK Group. There was a back statement that the SK Wyverns team was also surprised by the unexpected news. Professional sports clubs and companies are inseparable. Professional teams are created or sold depending on voluntary factors such as marketing, social and economic conditions, and the will of entrepreneurs.
In particular, the history of domestic professional baseball, which has been through many twists and turns, and has become one of the most popular professional sports in Korea, has been in line with the ups and downs of numerous companies. Let’s take a closer look at the sale of SK Wyverns.
1. Background of Shinsegae Group’s acquisition of SK Wyverns
Shinsegae Group Vice Chairman Jeong Yong-jin decided to take over SK Wyverns, which is a rapidly changing distribution industry trend. Vice-Chairman Jeong has predicted changes in the distribution industry since long ago. He mentioned Starfield Hanam, which was being built in Hanam, Gyeonggi-do in March 2016, and predicted that “the future competitors in the retail industry will be theme parks and baseball fields.” It is predicted that the competitors in the distribution industry will not be hypermarkets or department stores, but will be entertainment cultures such as baseball fields and theme parks. It can be interpreted that the usual opinion of the vice chairman that the distribution business should not only sell products but become a space that occupies the customer’s time has been carried out.
Shinsegae Group also announced that it has been considering acquiring a professional baseball team for several years to integrate online and offline and expand the online market. It is said that both the 20s and 30s, which form the core of the professional baseball audience, and the increasing number of women in recent years, all overlap with the core customer group of the retail industry. For this reason, the distribution industry expects that Shinsegae will not only enter a ballpark with affiliates’ stores, but will actively engage in distribution marketing that can penetrate the lives of spectators.
2. Background of SK Group’s sale of SK Wyverns
While selling SK Wyverns, SK Telecom said, “I will contribute to fostering and supporting Korean sports by expanding the base of amateur sports and strengthening the global competitiveness of Korean sports.” It did not provide detailed explanations on the background or reason for the sale. The industry sees SK Telecom’s sale of professional baseball teams as an extension of environmental, social, and governance (ESG) management. It is an analysis that it will focus on sports support activities that are more consistent with the’social values’ that SK Group Chairman Choi Tae-won places emphasis on, such as supporting unpopular sports events. Some observers say that SK Telecom has proceeded with this sale as part of the transition to an intermediate holding company. It is analyzed that if the baseball team business continues after the transition to an intermediate holding company, one of the subsidiaries will have to take over the baseball team, and no subsidiary will be willing to take over a business that is difficult to make a profit. SK Wyverns recorded an operating loss of 600 million won in 2019. Bank loans also increased from 950 million won in 2018 to 3.5 billion won in 2019. Last year, the deficit is expected to increase even more than the previous year due to an unattended game due to the novel coronavirus infection (Corona 19).
3. Terms of sale
E-Mart, an affiliate of Shinsegae Group, decided to acquire 100% of SK Wyverns’ shares held by SK Telecom for 133.58 billion won. Among the acquisition prices, stocks were estimated at 100 billion won, and land and buildings such as baseball practice ranges were estimated at 32.8 billion won. The condition of the acquisition is to hire and succeed all the players and the front, including the coaching staff, and the hometown of the baseball team will remain in Incheon. This contract is expected to be concluded on the 23rd. E-Mart and SK Telecom plan to close working-level discussions related to the launch of the club as soon as possible through consultations with the Korea Baseball Commission (KBO) and Incheon City. On the other hand, it is evaluated that this acquisition was set lower than the rumor of the Doosan Baseball Team’s sale of 200 billion won. The reason was analyzed that the financial environment deteriorated due to the spread of Corona 19.
4. Current status of professional teams of large domestic companies
Major domestic groups are engaged in various sports marketing activities by running multiple clubs centering on so-called’four professional sports’ such as baseball, soccer, basketball and volleyball.
Representatively, the Samsung Group currently operates Samsung Lions (baseball), Suwon Samsung Bluewings (football), Seoul Samsung Thunders (basketball), and Samsung Fire Insurance Bluefangs (volleyball). In addition, Hyundai Motor Group also has professional clubs in all four sports, including Jeonbuk Hyundai Motors (football), Kia Tigers (baseball), Ulsan Hyundai Mobis Peaverse (basketball), and Hyundai Capital Skywalkers (volleyball). SK Group sold the professional baseball team SK Wyverns, but still operates Jeju United FC (football), Seoul SK Knights (basketball), and SK Telecom T1 (e-sports). In addition, LG Group operates LG Twins (baseball) and Changwon LG Sakers (basketball), POSCO operates Pohang Steelers (football) and Jeonnam Dragons (football), and Hanwha Group operates Hanwha Eagles (baseball).
5. What kind of club is SK Wyverns?
SK, which took over Ssangbangwool in 2000 and entered the KBO League, gained a reputation as an’emerging prestigious club’. In particular, it has won 3 times in the regular season (2007, 2008, 2010) and won the Korean Series 4 times (2007, 2008, 2010, 2018), and a total of 8 times (2003, 2007-2012, 2018). He entered the Korean series. In the late 2000s, he earned the title of’Absolute Dynasty’, and played a total of 2821 games in 21 seasons until last year, leaving 1437-1328 losses and 56 draws (0.5197 odds).
SK won 22 consecutive victories from Doosan in Incheon on August 25, 2009 to LG in Jamsil on March 30, 2010. This is the record for the most consecutive wins in the KBO League team. In addition, SK, with’Home Run’ as the team color, made 21 consecutive home runs from Daegu Samsung Games on June 14, 2016 to Incheon KT on July 9, achieving a new record for consecutive home runs in all-time professional baseball teams. This record is unbroken. .
6. The atmosphere of the SK Wyverns team
SK players, who had been building their bodies through personal training ahead of the start of the spring camp, couldn’t hide their embarrassment when the news of Shinsegae Group’s acquisition of the club became known. Immediately, however, the signing of a memorandum of understanding (MOU) between Shinsegae Group and SK Group was officially announced, and the players sighed of relief as E-Mart, the acquirer, promised ‘100% hiring succession to players and front desks’.
Captain Lee Jae-won said, “I had a lot of conversations with fellow players through social media. We will be more united, and we will prepare for the new season without shaking.” Director Kim Won-hyung also said, “We have already announced the list of camps, and all the training schedules have come out. Now you just have to go and focus on training.”
7. From Sammi Superstars to SK Wyverns
In 1982, the first year of the KBO League, the team related to Incheon was Sammi. Sammi made a surprise sensation with 3rd place in 1983 (52 wins 1 draws 47 losses), but remained at the bottom in 1982 and 1984. Sammi, who suffered from sluggish performance and management difficulties at the parent company, sold the club to Cheongbo Foods for 7 billion won in May 1985. Cheongbo participated in the league in the second half of June 1985, but remained at the bottom of the year, and continued to play at the bottom. Cheongbo sold the club to Pacific Chemical (now Amorepacific) in October 1987 when its parent company, Poonghan Textile, went bankrupt.
Pacific, which bought Cheongbo for 5 billion won, stayed at the bottom in 1988, the first season, but reached third in the regular league in 1989, making it the first postseason for the Incheon baseball team. Pacific achieved second place in the Korean Series in 1994, but was acquired by Hyundai Group for 47 billion won in May 1995. Hyundai won the Korean Series for the first time in Incheon Baseball in 1998. However, Hyundai, aiming to enter Seoul, suddenly left Incheon and headed for Suwon on condition of moving to Seoul in 2000. At this time, SK acquired Ssangbangul from Jeonju, and established SK, and chose Incheon as the city associated with it. SK led the revival of Incheon Baseball, but in January this year, it handed over the baseball team to the Shinsegae Group.
8. How does a professional baseball team operate?
The annual operating expenses of the professional baseball team amount to 40 billion to 50 billion won. Team operating expenses are based on the players’ annual salary and incentives. In addition, the’running cost’ of 100 athletes to eat, sleep, move, and train for a year also accounts for a significant portion. It is known that the operating cost of SK’s squad in 2019 amounted to about 35 billion won. When the annual operating cost was set at a maximum of 50 billion won, a whopping 70% went into operation of the squad. Professional baseball teams cover operating expenses with advertising expenses and admission income. However, most of the advertising costs are supported by the parent company. SK raised 33.5 billion won in advertising revenue in 2019, of which SK Group affiliates, such as SK Telecom, earned 23.5 billion won. After all, it is the reality of the domestic professional baseball team that it is impossible to operate the club itself without the support of the parent company.
9. Examples of the sale of major world sports clubs
To date, the largest acquisition of sports clubs in the world is $2.35 billion (approximately KRW 2.625.4 billion), which was paid by vice chairman of Alibaba Group, Chai Chung-shin, who acquired the Brooklyn Nets of the NBA. )All. However, considering the inflation rate, Malcolm Glaser, the head of the Glaser family in the United States, acquired Manchester United of the English Premier League for $1.47 billion in 2005, but George Steinbrenner, the boss, in 1973, defeated the Major League New York Yankees by 10 million. Buying in dollars is considered a bigger deal. As of 2019, these transactions amounted to $2.8 billion and $2.5 billion, respectively, according to the Bleacher Report, a US website dealing with sports information.
Former President George W. Bush was famous for buying the Texas Rangers for $66,000 in 1989, when his father George HW Bush was president, and selling them for $149,000, 254 times the purchase price five years later. AC Milan, a famous Italian professional football team owned by former Italian Prime Minister Silvio Berlusconi, was sold to a Chinese consortium for 220 million euros in 2016, which is also a famous trading case.
10. The world’s richest club & owner
Former Microsoft chairman Stephen Ballmer, owner of the NBA Los Angeles Clippers, and Mansour bin Zayed Al Nayan, deputy prime minister of Abu Dhabi, United Arab Emirates (UAE) who owns Manchester City in the English Premier League, are among the wealthy owners. But now, the world’s richest owner is Mukesh Ambani, Chairman of Reliance Industries, who owns the Indian cricket team Mumbai Indians. As of the end of 2020, he has a total of 77.8 billion dollars (92 trillion won), ranking 13th in the world’s richest people. Former Chairman Ballmer is ranked second in wealthy owners with $72.5 billion.
The Dallas Cowboys of American Professional Football (NFL) have not missed the top spot for five years from 2016 to last year in the asset values of sports clubs around the world, which are evaluated annually by economic magazine Forbes. Dallas’ value last year was about $5.5 billion, an increase of 10% over the previous year. Major League Baseball’s New York Yankees ($5 billion) followed by the NBA New York Knicks ($4.6 billion).
Reporters Lee Hwan Lee, Joonwoo Park, Seyoung Jeong