China is filled with sports fans, from President Xi Jinping on down. Now Chinese companies are betting big that those fans will pony up to watch their favorite teams.
Chinese media and Internet companies have struck big deals in recent months for the rights for everything from the Los Angeles Clippers to Spanish soccer-club matches, often paying many multiples to the prices they paid in the past. The companies are driven by a growing Internet audience and a new government push to promote professional sports.
“China is a huge market for us, and we are always trying to increase our fan base here,” said Ignacio Martinez Trujillo, general director of Spain’s La Liga soccer league, which this year struck a €250 million ($275 million) deal to show the games there. He said the La Liga professional soccer league is scheduling some games with popular teams like Real Madrid and Barcelona earlier for Chinese audiences.
Asked why La Liga struck its deal in China with an online firm rather than a traditional television broadcaster, Mr. Martinez Trujillo said, “they pay more than others.”
Industry figures say the bidding represents an increasingly lucrative revenue stream for global sports leagues and teams. But Chinese companies have yet to prove that sports fans will pay for even the biggest games and marquee names.
“All the money is suddenly rushing in and they are disrupting the rules of the game,” said Ren Wen, chairwoman of Hong Kong-listed sports media company Wisdom Holdings Group. “China’s sports industry is still very underdeveloped, and red-hot money will burn it, not ripen it.”
Tencent Holdings Ltd.earlier beat out Leshi Internet Information & Technology Corp. for the exclusive online five-year rights for the National Basketball Association in mainland China, in a deal that people familiar with the negotiations said was worth at least $500 million. For the 2014-2015 season, a handful of Chinese Internet companies paid $10 million to $20 million for game packages, according to SportCal, a London-based tracker of sponsorship and marketing deals.
Shanghai PPTV Media Tech Co., a Web company backed by electronics retailer Suning Commerce Group Co., in August acquired the five-year exclusive all-media rights for La Liga in mainland China, Macau and Taiwan. Previously a mix of Chinese state and provincial broadcasters paid a total of $12 million for four-year rights, according to SportCal.
“We believe the football industry has huge development potential, and La Liga with its top-flight games provides us with a great strategic opportunity to explore and develop this intellectual property,” said Dong Li, head of PPTV Sports, the sports arm of the video site.
The biggest deal so far has been home-focused. State-backed sports distributor China Sports Media pledged 8 billion yuan ($1.26 billion) in September for the rights to broadcast China’s Super League on television and online for the next five years. By comparison, it paid only about 85 million yuan for the right to broadcast this year’s games, according to SportCal. The deal marks a bet on improved play from a soccer league notorious in past years for corruption and poor play.
“China used to get content for free or at a very low cost, but now there is a serious shift as the broadcasters themselves are competing to get the different rights,” said David Hornby, sports director of Shanghai-based sports digital agency Mailman Group, whose clients include the European football club Liverpool FC. “Prices will keep going up as long as the demand is there.”
China has the world’s largest market of video watchers, totaling 461 million, according to the China Internet Network Information Center. In recent years Chinese companies have bid up the rights for everything from first-run movies to South Korean soap operas to U.S. shows like Fox’s “Empire” and Netflix’s “House of Cards.”
The trick is to get viewers to pay. Despite its size in terms of viewers, China’s online video market in terms of revenue totaled only about 24 billion yuan in 2014, much of that from advertising. Baidu Inc.,the search giant sometimes called the Google of China, says its iQiyi video-streaming service has more than five million paying customers but doesn’t release details on terms or how many get discounts.
“It is too shortsighted now to still think about how you can make money back right away, “ said Yu Hang, vice president of LeTV Sports, an arm of Leshi, which says it has bought over 250 events in everything from cycling to golf. “Now it is more a question of how many users you can attract by spending this amount of money and how much value this group of users can bring to the company later.” Last month, LeTV bought four-year all-media rights of 12 soccer events under the Asian Football Confederation in mainland China for nearly $110 million, according to the company.
The higher prices are in part a response to a new government effort to boost sports. The country offers little competition outside of certain sports like tennis, gymnastics and volleyball. The sports push has a high-profile backer in Mr. Xi, the country’s top leader, who attended a Los Angeles Lakers game during a U.S. trip three years ago and joined in a selfie with British Prime Minister David Cameron taken by Manchester City star Sergio Aguero during Mr. Xi’s trip to the U.K. in October.
The State Council, the country’s cabinet, issued a mandate in October 2014 to promote the development of China’s sports industry and consumption. The central government set a target that China’s sports industry should exceed 5 trillion yuan in value by 2025. The state authority said the total value of sports and related industries reached 1.1 trillion yuan in 2013.
“The government pictured such a profitable future for the industry, which otherwise cannot be imagined,” said Li Jiang, executive director of Beijing-based market research company Yutang Sports. “Even more foreign investors and talents are recently approaching us for cooperation, which I could not imagine before.”
By LILIAN LIN November 13, 2015 in the Wall Street Journal