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Spending big not a long-term policy for China’s sports industry

By Pu Yang 18 Nov 2015

At a national conference of the Chinese sports industry, Mr Liu Peng, the head of Chinese sport’s governing body, revealed that the country’s sports will become a RMB7 trillion industry by 2025, based on all provincial objectives to develop the rising sports industry.

It largely explains why China’s sports industry has been marked as an untapped gold mine since the country was about to inaugurate an unprecedented national sports reformation, driving investors to start a spending spree in the sector. One of the latest cases was the takeover of La Liga side Espanyol by the Guangzhou-based Rastar Group for over €60mn early this month. And now that €60mn doesn’t appear to be a big deal considering the efforts of the Wanda Group to buy Infront Media or its 20% stake in Atletico Madrid, not to mention the cutthroat competition for broadcasting rights to major sports events among several big spenders in China.

Some argue that the industrial structural transformation has led the capital flood into the growing sports industry in China. Alibaba Sports CEO Zhang Dazhong believes the changes are mainly resulting from an unprecedented stimulus policy backing the development of sports.

From a market dominated by state-owned monopolies to a capital-backed industry, the Chinese sports sector now has the opportunity to embrace the relevant government-oriented reform and the thriving internet industry. As Mr Lei Zhenjian, CEO of Letv Sports, noted, parts of the Chinese sports industry still require modernization. However, he believes high-tech and the internet will help it achieve a higher profile. Accordingly, capital needs to take the leading position there, Lei added.

Among the Chinese internet companies which tap into the sports sector, the efforts of Letv Sports, Tencent Sports and Sina Sports have been truly eye-catching with the signing of several lucrative broadcasting deals. However, many insiders are concerned about the less-guaranteed profitability of such big spenders considering some might struggle in later years when investors tend to be less supportive if their investments are not generating sufficient income.

For instance, Letv Sports, coming from a sports streaming platform to one of the leading lights in China’s growing sports industry, covers a variety of sports-related businesses such as live broadcasts, event operations, media platforms and even smart equipment. This requires a huge budget, particularly the media rights.

What really concerns some practitioners is that the growth in sports consumption falls far behind that of sports-related investment in China. However, the challenge also means there is a great opportunity to boost sports consumption in the country. As Chinese richest man Wang Jianlin recently argued, “The Chinese sports industry is still in its infancy”. With the power of capital investment and the rise of cross-industry ventures, we can see the opportunities to tap into sports tourism, sports plus finance, sports plus entertainment etc.

To conclude, Chinese sport is developing rapidly from “an infant” to a targeted RMB 5 trillion industry supported by government policies and the capital market whilst sports consumption is yet to be improved to activate the industry. And in the long run, “big spending is not a long-term policy”.


Proofread by John Devlin

Tags: Wang Jianlin
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