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By Xie Jun Source:Global Times Published: 2015-9-27 18:18:01

Sport marketing crossover by Chinese industry giants

Sports, a long-neglected industry in China, is suddenly bustling with competition - not just among players and teams, but between businessmen and executives. Chinese industry giants LeTV, Tencent, Alibaba and Dalian Wanda, among others, have recently stepped up their efforts to accelerate the commercialization and development of the domestic sports market. Purchasing domestic and international sports clubs, buying the broadcasting rights to local and global matches and developing derivative products are just some of the strategies these companies are undertaking in an attempt to turn China into the world's largest commercial sporting market. The Global Times interviewed several Chinese sports experts on their views about how successful those strategies will be, and whether they will generate economic value for those companies as well as the entire sports industry.

Photo: CFP

One of China's leading online video content providers Leshi Internet Information & Technology Corp, also known as LeTV, announced on its Weibo account on September 22 that the company had procured the exclusive broadcasting rights of the English Premier League football matches in Hong Kong from 2016 to 2019.

Lei Zhenjian, CEO of LeTV Sports, the company's sports affiliate, said that they had spent more than $200 million on purchasing the broadcasting rights, Shanghai-based news website reported on Wednesday.

LeTV is not the only company in China to have made a crossover into sport marketing following the government's new guidelines on the domestic sports industry.

According to the guidelines, which were announced in 2014, investment in China's sports industry will exceed 5 trillion yuan ($784 billion) by 2025.

E-commerce giant Alibaba Group set up a subsidiary on September 9 that specializes in sport marketing.

Real estate giant Dalian Wanda Group Corp, which has a relatively long history of football marketing, also announced on September 4 that they had purchased two sports firms in Italy.

On January 30, another Chinese Internet giant company, Tencent Inc, snatched up the exclusive broadcasting rights of NBA contests for the next five years.

"China's sports industry was immature in the past, and its limited resources were monopolized by a few companies with government background," Lin Deren, a sports industry analyst, told the Global Times on Thursday.

"Companies like Tencent and Alibaba have started to tap the free market, but they have different strategies, and the effects of those strategies have yet to be tested by time," he said.

Investing in sports clubs

Of these four companies, both Alibaba and Dalian Wanda took the strategy of investing in local and foreign football clubs.

Dalian Wanda started its sport marketing business back in 1994, when it purchased its first football club in Northeast China's Liaoning Province. Renamed after the firm, the team was transformed into one of the strongest in China. During this transformation process, Dalian Wanda greatly increased its company profile in China.

In 2015, Dalian Wanda hastened its steps to purchase overseas sports clubs and companies.

On March 31, Atletico Madrid, a famed football club in Spain, published a statement on its website that Dalian Wanda had acquired a 20 percent stake in the company for the sum of 45 million euros ($50.34 million).

On February 10, Dalian Wanda announced a takeover of the world's second-largest sport marketing firm, the Swiss-based Infront Sports & Media AG.

Infront would invest more than 250 million euros in the next 10 years in a German football club.

Wang Yujia, a project planner at the sport marketing firm Beijing Shibo International Sports Co, told the Global Times on Thursday that he has "confidence" in Dalian Wanda's business model.

"As a real estate company, they have the land and money to back up their investment in football clubs. They've also gained a lot of experience over the years in football club management," Wang said.

Lin also noted that despite the fact that a large number of European football clubs have actually been losing money in recent years due to reasons such as the rising status of certain "celebrity" football players, buying a competitive overseas football club can still generate great economic values for the buyers.

On June 5, 2014, Alibaba Group announced it would take a 50 percent stake in Guangzhou Evergrande Football Club, one of China's most successful football clubs. However, this move was not considered favorably by analysts.

"Running a domestic football club is more difficult than running an overseas one. First, overseas sports clubs usually already have a mature management team, which can save a lot of time and effort for the Chinese investors. Second, the consumer market for domestic football clubs is still immature and needs time to cultivate," Wang noted, adding that Alibaba, as an e-commerce company, has neither the talent, experience nor mature ideas about football club management.

"They just like taking chances," Wang noted.

Online competition

LeTV and Tencent's strategy, on the other hand, is the procurement of broadcasting rights to local and international sports matches.

According to a news report by domestic technology website, as of August LeTV had bought the exclusive broadcasting rights to more than 200 sports contests, including Euroleague, a professional basketball competition in Europe.

Buying the rights to the Premier League in Hong Kong was a particularly wise option for LeTV, said Tommy Lee, a Hong Kong resident who has been a fan of Premier League matches for many years.

"There are a large number of Premier League fans in Hong Kong. Such a large audience base would not only attract many advertisers for LeTV, but would largely increase the latter's publicity, an advantage LeTV can't get by purchasing the broadcasting rights of many other sports contests," Lee told the Global Times on Friday.

Tencent also procured the exclusive broadcasting rights to five seasons of NBA games for $500 million in January, the Beijing Times reported on January 31.

"It has become a widely adopted strategy for industry giants to seize market share with a large-sum investment. And considering the fact that contests like NBA have a large audience base, it's understandable that Tencent and LeTV, both with abundant capital, would choose to spend money on their broadcasting rights," Lin said.

Lin nevertheless noted that some online sports match videos offered by Tencent and LeTV charge a fee, which is a hindrance to the popularity of those matches among mainland audience.

"Mainland consumers are still not accustomed to being charged for online video content, and this mind-set is unlikely to change anytime soon. If Tencent and LeTV use the pay-to-play model for their sports videos, I am not sure how many mainland viewers those videos can attract," he noted.

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