Sports broadcasting in China has never been a profitable business. But that has not stopped large companies from putting their money to work.
Tencent is the latest to make a huge bet on the sports broadcasting sector after agreeing to extend its broadcasting rights of live NBA games for five years. The US basketball league did not disclose the financial details of the transaction but Chinese media estimated the figure to be around $1.5 billion, or three times the value of the previous five-year deal.
By extending NBA’s broadcasting rights, the Chinese tech giant hopes to maintain its competitive edge in the sports streaming sector against Suning Sports. The sports unit of electronics retailer Suning Commerce Group owns the broadcasting rights of major soccer leagues such as the English Premier League, Germany’s Bundesliga and the Chinese Super League.
To some extent, Tencent is also battling against Alibaba which has a 20% stake in Suning Commerce. Alibaba’s video streaming platform Youku Tudou streamed all 64 matches of the 2018 Fifa World Cup last year through a sublicensing deal with state broadcaster CCTV.
These conglomerates are now taking the lead from the likes of Sina and LeEco, which dominated the industry in the first two years after Beijing put an end to CCTV's monopoly and allowed private companies to bid for broadcasting rights in 2014.
LeSports, the sports division of LeEco that was dubbed China’s ESPN, spent heavily to obtain broadcasting rights for major sports events in 2015 and 2016. The business was shut down earlier this year after its debt-laden parent was hit by a cash crunch following aggressive expansion.
Nevertheless, the likes of Tencent, Alibaba and Suning do not appear to be overly concerned about investing in an industry once beleaguered by overspending and poor management.
This is despite the fact that profits are nowhere in sight. Industry experts believe that most of the major sports broadcasting companies are still unable to generate sufficient advertising, subscription and sub-licensing revenue to cover their costs.
Some companies have kept themselves away from the race for expensive broadcasting rights and have tried to create their own corporate value instead.
Alisports, the sports division of Alibaba, has supported various domestic sports events in the hopes of raising its brand value. Alisports has sponsored the Hangzhou Marathon and the Chinese University Basketball Association, among others.
While operating with different strategies, these conglomerates share the same goal of capitalising on the increasing popularity of sports events in the world’s most populous country.
With a long-term, sustainable business model still to be developed, however, these conglomerates will have to continue to pump money in if they want to remain in the game.
