China’s soccer frenzy shows early signs of fatigue amid high prices, weak finances

Source:Global Times Published: 2017/3/2 21:48:39

Fatigue may be setting in for some Chinese soccer investors. LeEco has just lost the rights to screen top Asian matches. The cash-strapped group, led by hyperactive entrepreneur Jia Yueting, has unique problems. Still, some others have probably overstretched too.

On Tuesday, the Asian Football Confederation (AFC) scrapped a 2015 contract with LeEco. The AFC didn't say why, but Reuters says LeEco's subsidiary LeSports missed a payment on a $100 million-plus contract giving it exclusive rights to show big tournaments like the Asian Champions League in China.

It is the latest setback for Jia's beleaguered conglomerate, which sprawls from televisions to electric cars. In December, LeSports salvaged an English Premier League contract after reaching a last-minute compromise over $30 million of unpaid fees. Last month, Jia sold off various stakes to secure a $2.2 billion capital injection from a property developer.

Jia, though, is just one of many Chinese tycoons pouring record sums of money into clubs, players, broadcast rights and sponsorship deals. President Xi Jinping's enthusiasm for the game has helped spark a frenzy. Clubs like Inter Milan in Italy and England's West Bromwich Albion are Chinese-owned, while sides in the People's Republic have signed stars such as Argentine striker Carlos Tevez. Reuters says Chinese buyers spent more than $3 billion abroad on soccer over the past year.

But many deals are likely to be disappointing, at least financially. Wang Jianlin, China's richest man, last year warned that buying sports teams was unlikely to make money. Rights to broadcast in China have soared to record highs, thanks to video-streaming platforms, but paying viewers are still scarce.

Meanwhile, mainland clubs have splashed out huge sums but are unlikely to make a good return: match-day receipts and broadcasting and advertising sales are slowly climbing, but not fast enough to offset the huge costs of poaching high-profile coaches and players.

The combination of trophy assets, high prices, inexperienced buyers, and weak finances is dangerous. And signs of strain are already appearing elsewhere. An $800 million-plus takeover of Italy's AC Milan by a little-known Chinese consortium is dragging on. More Chinese players are likely to get stretchered off the field.

The authors are Robyn Mak and Lisa Jucca, Reuters Breakingviews columnists. The article was first published on Reuters Breakingviews.

Posted in: INSIDER'S EYE

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