Date
29 May 2017
Li Ruigang, “China's Murdoch”, made a winning bid of 8 billion yuan for the media rights of CSL for five years. Photo: Reuters
Li Ruigang, “China's Murdoch”, made a winning bid of 8 billion yuan for the media rights of CSL for five years. Photo: Reuters

China offers huge arena for sports media rights

China’s recent investments in sports have intensified the competition for broadcasting rights, transforming games on dull, muddy pitches into a heart-stopping media war where billions of yuan are at stake.

China Super League: from off-line to online

Let’s start with the sport that the country cares most – Chinese Super League (CSL, and its predecesor, Jia A League). Historically, broadcasting of matches on TV had little payout as a result of legacy media controls.

When CSL blew its first whistle in 1994, which was supposed to kickstart a new league of professional football, annual broadcasting fees brokered between the football league and the centrally controlled television station was a mere 560,000 yuan per annum.

By 2003, the price has reportedly climbed to 7 million yuan.

Competition from the Shanghai Media Group, another influential state-controlled entity, was a breath of fresh air for the game, with the rights for 2002-2006 rising to 37.5 million yuan per season.

Nevertheless, competition was moderate between the two state-owned entities. A series of controversial referee and match-fixing scandals sent the reputation of the games to a precarious level, and as a result, media rights nose-dived to a meager 7.3 million yuan in 2012-13.

It was only until 2015 that media rights returned to a normal range of 70-80 million yuan per season.

The year 2015 was, in fact, an inflection point for CSL. The change was partly triggered by the rapid ascendancy of Li Ruigang, a graduate of Shanghai Fudan University who once held the helm of Shanghai Media Group.

He was instrumental in bringing out the multimedia debut of Yicai Global, which is part of the China Business Network.

In 2009, Li, nicknamed “China’s Murdoch”, masterminded the formation of the China Media Capital Group (CMC), a new media and investment powerhouse which had its seed capital pooled from various state-backed policy banks and mega funds.

In 2015, CMC, through China Sports Media (also founded by a Fudan graduate), its newly acquired subsidiary, made an astonishing bid of 8 billion yuan for the media rights of CSL. 

The offer for a five-year contract (around 1 billion yuan for the first year, with the amount increasing every year, or an average of 1.6 billion per annum) silenced three other bidders as it was approximately 20 times the amount of the previous contract.

The unprecedented amount opened the curtain to a new stage of wealth and spectacle for CSL.

In 2016 LeTV wrote a generous cheque of 2.7 billion yuan for two-year new media (internet) rights to the games. And early this year, PPTV, a subsidiary of home appliance giant Suning, took up where LeTV had left.

CSL’s once dull football games have entered China’s new media age.

Thrilling footage of on and off the pitch drama, goals and the passion behind them are now screened in the prime hours of national and regional TV channels, cable and satellite TVs, internet portals and video-sharing platforms of many kinds.

English patience bears fruit

As China has established itself as one of world’s fastest-growing consumer markets, its huge population and its frenetic football fans have long been the targets of the English Premier League (EPL).

In addition to Beijing, Shanghai, Guangzhou and Shenzhen, the four mega cities whose spending power is comparable to that of Hong Kong (if not more), there are quite a few provincial cities which together form a vast yet untapped market for EPL.

However, up until 2013, the harsh reality for the English company was that in the six preceding years, the media rights that EPL received from China was a nominal sum of US$50 million for three seasons, or around US$16 million per year.

The fact that the ubiquitous and all powerful CCTV had not screened the games since 2002-2003 did not help its cause.

Part of the reason for this is that while buyers did believe in the value of the games, the seller might have been busy with the soaring business at home.

However, after the financial crisis started to spread worldwide, Europe was eventually affected.

The EPL then saw overseas (non-European) income as a viable solution to the cash crunch, and started sending its poster boys to the Far East despite its busy weekly games.

Patience finally bore fruit in 2013 when an upstart, privately owned Super Sports Media Inc. sealed a deal with EPL for an unusual six-year contract worth US$140 million, or an average of US$23 million a year.

The deal sparked a bidding war between it and its wholesale distributor, and resulted in PPTV splashing US$720 million for three seasons (2019-2022), or US$240 million a year. This is roughly 10 times the previous value!

While these sums for the two major broadcasting rights look enormous at face value, they are, on the per head basis, just pocket money if they are placed in the international context – both CSL and EPL’s China rights work out to just about 20 US cents.

Nevertheless, they do suggest that perhaps beyond the muddy ground, acres of prime locations are up for grabs by the brave.

– Contact us at [email protected]

BN/CG

Private equity investor and author

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