June 3 (Bloomberg) -- North Korea is returning to the World Cup after 44 years, and venturing into the sports marketing industry that evolved in its absence.
Ahead of the June 11 start of the tournament, the soccer team of Kim Jong Il’s regime has snared a 4 million-euro ($4.9 million) jersey contract over four years, according to Daniele Nastro, marketing director of Pompeii, Italy-based sports apparel maker Legea s.r.l. North Korean soccer association assistant general secretary Ri Kang Hong confirmed the deal with Legea, without giving financial details.
“Perhaps it’s a sign of incipient capitalism,” Jim Hoare, a retired British diplomat who served in Pyongyang, said from London. Although western sports leagues aren’t covered by the media in North Korea, officials “would be aware of the value of sports sponsorship,” Hoare said.
The deal is timely as North Korea faces trade restrictions. South Korea halted business last month after blaming the communist nation for a torpedo attack on a warship that killed 46 sailors in March. Japan has tightened controls on sending money to the North, which was already under United Nations sanctions for nuclear testing.
Kim’s regime is “hungry” for foreign cash, according to Scott Snyder, director of the Center for U.S.-Korea Policy at The Asia Foundation in Washington. “The economy is in a very difficult situation,” he added.
Ranked No. 105 in the world, North Korea takes on the Nike Inc.-clad Brazil, the record five-time world champion, in its opening game on June 15 in Johannesburg. Ladbrokes Plc, a U.K. oddsmaker, rates North Korea a 16-to-1 chance to defeat Brazil, meaning a $1 bet would yield $16 in profit.
The communist state is given a 1,000-to-1 chance of winning the tournament, according to Ladbrokes.
At the 1966 World Cup in England, when brand names were absent from even European team uniforms, North Korea wore plain red shirts when it upset Italy 1-0 to reach the quarterfinals and won the affection of the English, who “probably felt sorry for them,” Hoare said. England now commands about 34 million euros a year from Nike Inc.’s Umbro brand, making it the top earner of the 32 teams that will play at the World Cup in South Africa, according to Sport + Markt AG.
No Apparel Market
North Korea’s team is getting an amount similar to what might be paid to a low-ranking team in the English Premier League, the world’s richest soccer league, according to Simon Chadwick, a sports business professor at the U.K.’s Coventry University. Ri, in an interview in Tokyo last week, said it was hard to find a jersey sponsor as there’s “no market” for sports apparel in North Korea.
“If it doesn’t result in sales, there’s no point” for some sporting-goods companies, Ri said.
Legea will provide North Korea with branded World Cup jerseys and training gear, Nastro said. That will help raise the Italian brand’s international profile, although the marketing bet could backfire, Chadwick said.
Legea “will be working overtime to put clear blue water between the team and the regime,” Chadwick said. “It could get to the stage when people stop buying the brand if they’re being seen as propping up a dictatorship.”
While not breaking trade sanctions, Legea is “swimming against the tide” with its sponsorship because of the perception of North Korea, Snyder said. “It’s a bit like sponsoring Tiger Woods at the moment,” he said.
Nastro said he isn’t worried. “In the World Cup, politics will be out,” he said by telephone from Pompeii.
Rival Chinese Bid
North Korea received other bids. It declined an offer by China Hongxing Sports Ltd., the Singapore-listed company that provided its jerseys for qualifying games, according to Kelvin Yeung, chief financial officer of the Chinese company.
European brands might have bid more, Yeung said, without saying how much China Hongxing offered. Ri said the agreement with the Quanzhou, China-based company had expired and declined to comment on why it wasn’t renewed.
North Korea rejected Legea’s first design for its shirts as too modern, frowning upon a white line across a red shirt, Nastro said.
“As a people, we don’t like flashy designs,” Ri said. “For home games, the jerseys are white, which we regard as noble, and it reflects our spirit. For away games, we go with red, which is used in our national flag. It also symbolizes our passion and heart. A simple design expresses that more purely.”
As part of the shirt deal agreed in March, there is a kicker for North Korea: it will get a 10 million euro bonus if it wins the World Cup, Nastro said.
“That’s probably not going to happen,” he added.
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