2. Foreword Sport in China
An industry awakens
3
CONTENTS
3. Foreword
4. Destination Europe
14. Taking a View
FEAST IN THE EAST
ccording to trusted business
bellwether publishing house
Forbes, there are currently
251 Chinese billionaires.
According to China-based
wealth research firm Hurun, that figure is
actually 568. China, a country of 1.375 billion
people and, by some measures, already
the largest economy in the world, must be
considered a powerhouse in any industry.
China’s sporting ambition is unquestionable.
President Xi Jinpeng’s stated target for
the nation to develop a sports industry
worth CNY 5 trillion ($750 billion) by 2025
is ‘punchy’ to say the least.The Chinese
government has already suggested that
its total sports economy will reach CNY
3 trillion ($450 billion) by 2020. For some
perspective, professional services firm PwC
recently calculated that the North American
sports market would be worth $75 billion
by 2020. Clearly there are fundamental
differences in the metrics employed, and
there may well be a disconnect between
perception and reality. Making sense of
the Chinese sports industry is not nearly
as simple as making sense of the more
established, but smaller markets across
the world. Nevertheless, the growth is real.
China is rising; has already risen. From the
real estate moguls making waves through
acquisitive raids across the global sports,
media and entertainment industries, to the
uniquely regulated environment and specific
government policies that have fuelled tech
innovation and a flourishing digital-first
content consumption culture within the
country itself, the Chinese sports industry
has never been so globally relevant, so
open, and so exciting.
This report will look at the acquisitive
activities of Chinese investors targeting
sport abroad, and examine the shifting
sands of the media landscape inside the
world’s most populous country.
A
Head of Sport Business
Victoria Miall
Editorial Director
James Emmett
Art Director
Sam Richardson
Marketing Manager
Frankie Martin
Sponsorship Director
James Elderton
Contributing Editor
Matt Cutler
Credits
4. Sport in China
An industry awakens
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76
Outside of the UK, a number of top-tier
clubs in France, Spain and Italy are also
being targeted, with Atlético Madrid,
Espanyol, Lyon and Nice – in addition to
those already mentioned - already clubs
that have had significant stakes in them
acquired by Chinese investors over the last
18 months.
Politics, PR and Profitability
A variety of factors are driving this Chinese
investment into European football, and it is
no coincidence that major deals have come
in the wake of Xi Jinping becoming one of
the world’s most powerful men and taking
Chinese presidential office in March 2013.
President Xi Jinping wants China to
become a “world football superpower”
by 2050 - he sees sport, and football more
specifically, as a driver of positive societal
change that will help the country and its 1.4
billion population overcome widespread
pollution, famine and rising debts. He
believes a strong Chinese elite football
presence at home and abroad will inspire
the population - by 2030 he wants the men’s
national team to be one of the best in Asia,
DESTINATION EUROPE
his August, with a simple
squiggle on a piece of paper,
football-obsessed landscaping
entrepreneur Guochuan
Lai marked a new dawn for
English football.
His signature, confirming hisYunyi
Guokai (Shanghai) Sports Development
company’s 88% acquisition stake of English
Premier League club West Bromwich
Albion, took the Baggies under Chinese
ownership alongside neighbours Aston
Villa, Birmingham City and Wolverhampton
Wanderers.
Significant for the West Midlands, of
course, but critically the deal represented
a landmark moment for UK football at a
higher level: the first Premier League club
had finally come under full ownership by
a mainland Chinese person or company. It
had happened on the continent - Chinese
electronics retailer Suning acquiring a
70% ownership of Italian giant Inter Milan
for just over $300m in June - but for it
to happen in the Premier League, the
world’s most popular domestic football
competition, it held greater significance.
Particularly given there’s more to come.
In December 2015, a Chinese consortium
took a 13% stake in City Football Group
- parent group of English football team
Manchester City - for $400m, however full
takeovers or majority acquisition stakes of
Premier League clubs, like the case of West
Brom, are expected to ramp up.
Hull City, Southampton and Sunderland are
likely to come under Chinese ownership
sooner rather than later - following
protracted takeover talks - while a “top
table” Premier League team could be
bought by Chinese investors by the end of
the calendar year, according to insiders.The
same source says a “top six club” could
also come under Chinese ownership by
the end of the season, with Liverpool much
rumoured to be open to offers.
T
Sport business commentator Matt Cutler, former Editor of
SportBusiness International, tracks the frenetic levels of Chinese
investment flowing into European football. Why has it happened,
what will it mean for the football landscape, and where are we on
the journey?
Dalian Wanda
chief Wang Jianlin,
owner of
Atlético Madrid
“Sport is underdeveloped
in China compared to the
West, and it is in the Chinese
DNA to be - and want to
be - the best in the world,
competing with other global
superpowers in any area you
care to mention.”
Italian Serie A giants
AC Milan and Inter,
both now under Chinese
ownership
5. Sport in China
An industry awakens
Destination EuropeLEADERSReport
98
he or she poses to the government. With
the president encouraging investment in
football, said Chinese millionaires and
billionaires can legitimately move money
outside the country whilst supporting the
establishment and becoming high-profile
Chinese figures in the West in the process.
Profitable and Under-Exploited
Major European football clubs - which,
thanks to bumper broadcast revenues,
are slowly-but-surely becoming money-
making machines in addition to iconic
global brands with loyal fanbases - are also
attractive business propositions for Chinese
investors in their own right.
“Profitability is key for Chinese investors
looking to acquire businesses or properties
in any sector,” says Dan Fletcher, Director of
FMMI, the sports consultancy founded in 2001
that specialises in the Chinese market and is
working with a number of Chinese groups on
outward sports investment projects.
“When we see Chinese investors coming
into major football clubs, we’re not seeing
Roman Abramovich-Chelsea situations;
they’re not going to pump in hundreds of
millions and not expect a tangible financial
return.There’s a public misconception
about that.”
“Clubs that have been targeted to date
have been targeted because of their
perceived stability.Take West Brom as
an example - it’s a Premier League team
that has been turning a profit regularly;
that’s why it was attractive, and the new
owners will be looking to grow turnover
incrementally through their links in China.”
Pumping cash into international real estate
has long been a sound strategy for Chinese
investment vehicles, in particular because
it enables them to spread risk. Observers,
however, see European football as ‘the new
real estate’, offering investment options
that can be made over, or in addition to,
say a block of new-build flats in a swanky
part of London or Paris.
Indeed, many of the investors looking at
European football made their money from
real estate in China during the boom from
2005 to 2011; they see clubs - more often
than not in major cities with large amounts
of land surrounding a stadium and training
ground - as development opportunities that
fit into their portfolio of businesses. Even
non-real estate specialists will see huge
opportunities in boosting a club’s revenues
streams by simply applying expertise
and helping with connections to open up
the Chinese markets, with China-specific
sponsorship, sports tourism, club-owned
media channels, pre-season tours and
merchandising all ripe for exploitation in
a country with a huge population and a
rapidly-growing football culture.
Diversification
Large Chinese conglomerates also see
football clubs as investments that can
and the female football team one of the best
in the world - while at a grassroots level he
wants at least 20,000 football training centres
and 70,000 pitches in place.The ambitious
target is to have 50 million children and
adults playing the game by 2020.
“Sport is underdeveloped in China
compared to the West, and it is in the
Chinese DNA to be - and want to be - the
best in the world, competing with other
global superpowers in any area you care to
mention,” says Alexander Jarvis, Chairman
of Blackbridge Cross Borders, a specialist in
brokering outbound investments for high
net-worth Chinese into sport. Blackbridge
have been involved in several high-profile
investments recently and are currently
working on several more that will hit the
headlines in the months and years to come.
“President Xi Jinping’s current drive into
football is similar to the drive into the
Olympic Games a few decades ago. In 20
years China went from 11th best to the
best, when it topped the medal table at the
Beijing Games in 2008,” Jarvis adds.
The presidential vision has, naturally,
encouraged public investment into football
at home and abroad - the minority share
acquisition of City Football Group, for
example, is state-backed - and hugely
wealthy individuals running private
companies have been given an impetus
and the chance to curry favour with the
president by supporting, and helping carry
out, his vision. And as there’s no bigger
global sport than football - and no bigger
domestic leagues than those based in
Europe - why not start there?
Politics also comes into play from a slightly
different perspective.Though in practice
capitalism is rife in China, technically the
country is a communist state, and therefore
the richer an individual becomes through
business, the greater perceived threat
LEADERSReport
“When we see Chinese
investors coming into major
football clubs, we’re not
seeing Roman Abramovich-
Chelsea situations; they’re
not going to pump in
hundreds of millions and not
expect a tangible financial
return.There’s a public
misconception about that.”
6. Sport in China
An industry awakens
Destination EuropeLEADERSReport
1110
diversify and benefit other areas of
their business says Kathya Santos, CEO
of Guanxi Global, the company that
previously specialised in brokering Chinese
acquisitions of Western real estate and has
now moved into sport.
‘Guanxi’ is the Chinese term for building
and maintaining strong business
relationships, and in the spring of 2017 -
in partnership with the UK government’s
Department for InternationalTrade - Guanxi
Global will be looking to do just that by
hosting the Chinese Investment Expo in
London, which will act as a platform to
connect Chinese buyers with UK sellers
across various sectors.
“A football club can both diversify the
business of a large corporation, and open
up its other business interests to a new,
global audience - primarily the club’s
fanbase,” she says. “Profitability will indeed
be key, though that doesn’t necessarily
mean the football club will have to make
large amounts of profit initially; though
Chinese companies won’t want to be losing
money, they’ll be looking to improve the
profitability of the overall pie.”
Geopolitics are also at play.
Chinese central government initiatives
like the ‘One Belt, One Road’ - reviving the
historic Silk Road trade route that runs from
its borders to Europe - are driving a new
approach to building better relations across
Eurasia. In the UK, the English Premier
League and English Football Association
(FA) recently agreed to deliver a large-scale
coach development programme to China
in partnership with the Chinese Ministry of
Education. Investors see owning a football
club as a vehicle to build relationships
with, and leverage influence over, local and
regional governments.
Growing influence in the energy sector,
for instance, will have been a factor in the
Chinese investment into City Football Group;
venture capital firm Citic Capital, part of the
consortium, has huge interests in the energy
sector globally, while CEFC China Energy
Company - which bought Czech football
club Slavia Prague in 2015 - has close ties
with local government in the country. Jarvis
says Blackbridge has a growing number
of minority and takeover requests from
Chinese financiers, energy, telcos and
retailers for clubs inTurkey, Serbia, Russia,
Kyrgyzstan, Kazakhstan and Uzbekistan – in
addition to clubs in countries outside Europe
such as Iran and India.
The PR value, and prestige, of owning a
football club must also not be underplayed.
Many of the listed companies buying, or
looking to buy, famous football teams will
want media coverage to reflect positively
on their businesses, while rich Chinese
businessmen looking to strengthen their
relationships in high-level business
communities will have the perfect vehicle
to do so.
“Do not underestimate the importance
of guanxi,” says Jarvis. “Chinese
businesspeople see bringing associates or
potential clients to major football games
as the perfect way to network and build
relationships. It’s no different to what many
CHINESE INVESTMENT IN EUROPEAN FOOTBALL: A SNAPSHOT
Club League Investor
Inter Milan Italian Serie A Suning Holdings
AC Milan Italian Serie A LiYonghong and Haixia Capital
Atlético Madrid Spanish La Liga Wang Jianlin and Dalian Wanda
Espanyol Spanish La Liga Rastar Group
Manchester City English Premier League China Media Capital
West Brom English Premier League Lai Guochuan
Wolves English Championship Fosun International
Aston Villa English Championship Tony Xia
Nice French Ligue 1 Zheng Nanyan and Chien Lee
Lyon French Ligue 1 IDG Capital Partners
Sochaux French Ligue 2 Ledus
Den Haag Dutch Eredivisie Hui Wang and United Vansen International Sports
Slavia Prague Czech First League CEFC China Energy Company
“A football club can both
diversify the business of
a large corporation, and
open up its other business
interests to a new, global
audience - primarily the
club’s fanbase.”
West Bromwich Albion
owner Lai Guochuan
surveys his new Premier
League surroundings
7. Sport in China
An industry awakens
Destination EuropeLEADERSReport
1312
organisations have done for decades with
corporate hospitality.”
The Chinese Future
Experts have differing opinions on how
long exactly the current frenzy of Chinese
investment into European football will
continue, however all agree that there’s still
at least 18 months of large-scale football
acquisitions to come. President Xi Jinping
is also likely to be in power until at least
2022 - when he will have ruled for the
unofficial maximum period of two five-year
terms - so the government’s football drive
is unlikely to die down anytime soon.
We will, they also predict, see major
football clubs continue to be the focus of
investment in the short-term - but any sports
organisation with IP, or a large following, will
also be on the radar. So too will organisations
that help develop talent and expertise in the
domestic Chinese sports industry, currently
dominated by large numbers ofWestern-
educated sports executives.
“I’d say we’re about two years into a
five or six year golden period of Chinese
investment in Western sport,” says Jarvis.
“Some of the biggest deals are yet to
come, and I think we’ll see some huge
acquisitions that, in terms of value, will
blow a lot of the deals we’ve seen in sport
this century - mainly by American and
Russian investors - out of the water. Keep
an eye out for the football agency sector,
too - both in the UK and the United States.”
“For me, we’ve got another 12-18 months
of this phase of land-grabbing investment,”
adds Fletcher. “After that point I think the
Chinese investments in major football
clubs will continue, but we’re likely to see
a rationalisation and increasing interest in
service providers - publishing, knowledge
and education providers operating in the
sports industry.”
China
An industry awakens
Destination Europe
13
9. Taking a ViewLEADERSReport Sport in China
An industry awakens
1716
intended to ‘bring about a fourth industrial
revolution’ through the exploitation of
China’s burgeoning online potential.
Digital entrepreneurship in China is being
encouraged from the top down.
And while CCTV is consolidating as a
traditional, linear broadcast business –its
dedicated CCTV 5 sports channel is still
the best way to reach vast swathes of the
country - OTT digital options now provide
attractive levels of penetration, engaged
and youthful demographics, and, crucially,
rights fees. ‘Attractive’ is of course a
relative term. Whereas CCTV’s 16 free-to-air
Chinese language channels are available to
400 million televisions across the country,
only 15-20% of those televisions have the
smart capability that allows them to receive
the offerings of the digital-only players.
Nevertheless, those digital players are
making serious moves. Over the last 18
TAKING A VIEW
nce upon a time not too
long ago, the only way an
international rights holder
could reach a Chinese
audience was to strike a deal
with monopoly government broadcast
giant CCTV. Penetration was high, but
rights fees were low to non-existent. A
slight relaxation of government regulation
– driven by necessity as internet usage
spread – has seen the paradigm shift.
Regional broadcasters with their own
competitive agendas became genuine
options for serious international rights
holders; the Premier League eschewed
CCTV and its previous pay-TV broadcaster
WinTV to sign an unprecedented six-year
deal with Super Sports Media Group in
China in 2012. As part of the deal, Super
Sports Media Group sub-licensed rights
to regional networks across the breadth
China.The next wave of innovation
was soon to arrive, as social media
platforms, messaging networks, and even
manufacturers of connected devices sought
to play in the content game. A digital
revolution was underway.
Although the environment is still heavily
regulated, and organisations wishing to
offer broadcast content must be partly
government-owned in order to qualify for
an OTT license, there has been a fair degree
of creative thinking in where those licenses
are awarded to.That creativity has been
spurred by Chinese State Council Premier
Li Keqiang, who unveiled his ‘Internet Plus’
initiative in April last year.The scheme is
O
Large-scale government projects and mandated billionaire investors
are one side of the story; the other side is the shifting media
landscape inside China, and the platforms simultaneously fuelling
and slaking the population’s thirst for sports content.
“Whereas CCTV’s 16 free-
to-air Chinese language
channels are available to 400
million televisions across
the country, only 15-20% of
those televisions have the
smart capability that allows
them to receive the offerings
of the digital-only players.”
10. Taking a ViewLEADERSReport Sport in China
An industry awakens
1918
to 24 months, a series of eye-catching
rights deals have catapulted the likes
Sina Sports,Tencent Sports, PPTV and
LeSports (or LeEco, or LeTV, or whichever
iteration is in vogue with the connected
device manufacturer this month) into
the wider sports industry consciousness.
Tencent kicked off the deals dominoes
in January 2015, extending the NBA’s
‘largest international digital partnership’
for a further five years. In August,Tencent
teamed up with rival operator Sina Sports
to acquire the Chinese rights to the Uefa
Champions League and Europa League
until 2018. And now, at the back end of
2016, there isn’t an international-stature
rights holder worth its salt that doesn’t
have a major digital deal in China.
So far, the trend for international rights
deals has not seen much emphasis placed
on exclusivity. New broadcast players
seem content to ensure that their platforms
are populated first, rather than focus on
exclusivity as a monetisation driver. PPTV’s
recent deal with La Liga, however, in which
it took the rights on an exclusive basis for a
figure believed to be around $50 million a
season, more than five times greater than
the previous, non-exclusive agreements in
the territory, is, in all likelihood, a sign of
things to come.
Sina andTencent are the groups behind
China’s two most prominent social networks
– Weibo and WeChat.Their strategy with
sports rights is to engage and build on their
ready-made audiences with live sports
content filtered through their platforms.
LeTV is perhaps the most interesting and
unusual player in the new-look market.
The LeModel
Alibaba, the online retail giant dubbed,
rather belittlingly, the ‘Chinese eBay’,
has a minority stake in LeTV. It’s perhaps
no surprise then that the new-model
broadcaster has started offering in-
game purchasing opportunities within its
broadcast coverage of both the Chinese
Super League and the English Premier
League. Like the look of that Nike ball?
Click on it to buy your own. LeTV has a
sports rights portfolio that now includes the
aforementioned soccer leagues, as well as
Wimbledon tennis,Tour de France cycling,
FEI equestrian events, and deals with
the US Golf Association and the English
Football Association.
LeEco, the parent company of LeTV and
LeSports, bills itself as a global technology
company delivering world-class media
and devices for the connected age. It is, at
its core, a hardware manufacturer betting
big on ‘the internet of things’. It makes and
markets smartTVs, smartphones and set
top boxes, as well as some more outlandish
products such smart electric cars and even
smart bicycles. Both the hardware business
and LeTV’s online broadcast platform
are being operated as loss leaders for
the moment as the group aims to build a
subscription base for its content offering.
That’s both inside China and abroad. One
of its most prominent rights deals of late
saw it pay $400 million for a three-year
package of rights to the Premier League
in Hong Kong, doubling what incumbent
broadcaster PCCW had been paying.The
deal coincided with LeEco’s plans to launch
a line of hardware products in the Hong
Kong market. As a marketing strategy
for physical products, it’s a compelling
proposition: buy this newTV because it’s
the only way you’ll be able to watch x, y, or
z sport over the next three years. Insiders
believe LeEco is aiming to be profitable by
2018, ready for an IPO.
Source: Nielsen – China and Football Report
PLATFORM PREFERENCES
THE CHINESE SPORTS PLATFORMS MOST FREQUENTLY USED TO ACCESS INFORMATION ABOUT SPORT.
1 TENCENT 69%
2 SINA SPORTS 57%
3 CCTV5 WESBITE 38%
4 SOHU SPORTS 36%
8 NETEASE SPORTS27%
9 HUPU SPORTS 24%
10 PPTV SPORTS 23%
WHICH OF THESE PLATFORMS
DO YOU FREQUENTLY USE TO FOLLOW SPORTS?
5 PHOENIX SPORTS 32%
6 LE SPORTS 30%
7 YOUKU SPORTS 27%
Source: Nielsen – China and Football Report
SLIGHT DECLINE
COLOUR CODING INDICATES THE RATE OF CHANGE OVER THE LAST THREE YEARS
ATHLETICS
24%
BADMINTON
36%
BASEBALL
10%
CYCLING
26%
GOLF
10%
MMA
14%
MOTORSPORT
21%
RUGBY UNION
8%
TABLE TENNIS
37%
TENNIS
20%
VOLLEYBALL
23%
BASKETBALL
40%
SWIMMING
34%
STRONG GROWTH STEADY GROWTH PRETTY FLAT
FOOTBALL
31%
11. Taking a ViewLEADERSReport Sport in China
An industry awakens
2120
Nacho Monreal. Put that out in a mature
football market and it will be lost at best,
ridiculed at worst. But in China it travelled
like mad because we were introducing
Chinese fans to a bit of the lifestyle
and personalities of our players and in
return the players were reciprocating and
becoming engaged with something that’s
really important in China, which is food,
and Chinese food at that.”
Speaking on the same panel at Leaders,
Sina Sports’ Head of Content Acquisition
Sam Li said that his experience suggested
that sports fans were more or less the
same the world over, but he did agree
with Allen that Chinese fans engage
heavily with behind the scenes content.
“There’s a curiosity about more than just
the football match in China,” he said.
Liberated, perhaps, from the constraints
and pressures of their home environment,
western clubs visiting China seem
emboldened to try new things to engage
fans.That willingness to experiment is
being capitalised on by the likes of Sina
Sports. “We license the MUTV product in
China,” explained Li of a deal the social
platform signed with Manchester United
in January 2016. Sina Sports committed
to showing MUTV content across its OTT
platforms, its website and mobile apps, and
the agreed that the pair would collaborate
to engage audiences during Manchester
United’s pre-season tour of China in the
summer. “During their China tour they
came up with this great benefit which was
the ‘superfans’ concept where we’ll take
two fans, put them in the players’ hotel,
fly them on the charter plane, get them to
meet all the players – basically, anything a
fan can dream off. And we said, well, we’re
going to make the fans do a lot more than
a raffle if this is the ultimate prize. So what
we did was ask fans to create content which
was called ‘my life with United’.The way
we’re going to pick the winners is to see
who has the most number of comments
underneath these stories. And the two
winners both had over 8,000 comments,
which was fantastic.”
Chinese sports fans – what they
want and how to communicate
with them
The marketing department at Premier
League soccer side Arsenal runs a model
which analyses various international
markets according to their stage of
soccer development.The model ranks
markets in four categories: emerging,
developing, performing, and mature.
According to Arsenal Head of Marketing
Charles Allen, speaking at the Leaders Fan
Marketing Summit in London in October,
the Arsenal model ranks the Chinese
market somewhere between emerging
and developing.The club pushes different
content to different markets depending
on where they sit within the development
model. In China, for example, there is a
demand for match highlights, as there is
everywhere, but there is a specific demand
for lifestyle content around star players
around London as a destination, and
around the colour red. “While an Arsenal
fan in the UK might be quite amused that
Alexis Sanchez has got two dogs and
they’ve got aTwitter account, in China
that’s catnip,” explained Allen. “One of the
most successful bits of content that we
put out into China was a dim sum making
competition between Aaron Ramsey and
“While an Arsenal fan in the
UK might be quite amused
that Alexis Sanchez has got
two dogs and they’ve got
aTwitter account, in China
that’s catnip.”
Sina Sports’ Sam Li
and Arsenal’s
Charles Allen on
stage at Leaders
1.375 BILLION
population of China
653 MILLION
active social media
users
680 MILLION
active internet users
577 MILLION
active social media
users via mobile
12. LEADERS
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