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13-06-2014, 08:18 PM
China’s billionaires seek hidden value in soccer
WEI GU THE WALL STREET JOURNAL JUNE 13, 2014 10:27AM
China’s billionaires are investing hundreds of millions of dollars in Chinese soccer, and it isn’t just for show.
Although a majority of Chinese soccer clubs are struggling financially, it is still possible to earn a return that beats that of real estate and even e-commerce.
Last week, Alibaba Group Holding, led by founder Jack Ma, paid 1.2 billion yuan ($205 million) for 50 per cent of the Guangzhou Evergrande soccer team. For property tycoon Xu Jiayin, whose Evergrande Real Estate Group bought the then-struggling team for 100 million yuan in 2010, the deal means a return of 23 times over four years, or an annualised return of 220 per cent.
There are other benefits. A soccer team can be a powerful marketing tool. As in most of the world, soccer in China has the highest marketing revenue and most TV viewers of any sport. Soccer matches accounted for half of all the sports games broadcast on China Central Television in 2013. Investments in a club help build government relations, because Beijing is keen to promote sports.
INTERACTIVE: Plan your World Cup with our tournament predictor
DETAILS: World Cup team previews, group stage fixtures and match schedule
“It is no coincidence that three of China’s 10 richest people are all investing in football,” said Rupert Hoogewerf, publisher of the Hurun China Rich List. “There is an element of ego, and there is an element of business sense.”
It helps when China’s top leader is a fan. “ Xi Jinping likes football,” Mr Hoogewerf said. “It is very good for developing local government relationships, and gives people access to networks they won’t normally have access to.”
A picture of Mr Xi kicking a football in Dublin’s Croke Park stadium in 2012 was placed in the Chinese president’s office, according to state media. Mr Xi has said he would like to see China qualify, host and win a World Cup one day. The country of 1.3 billion people has played only once in the World Cup, in 2002.
Business people, including China’s richest man, Wang Jianlin, have taken the cue. The company he founded, Dalian Wanda Group, agreed in 2011 to give 500 million yuan to China’s football association for activities such as training Chinese youth football players in Europe. Wanda is renewing the program for another three years, and it has come up with a new plan to spend 200 million yuan annually over the next 10 years to train young football players in China.
Still, on the international stage, China remains much stronger in sports such as table tennis, badminton and diving. The state has invested heavily in sports that have potential to garner a large number of Olympic medals. China ranked No. 2 behind the US in total medals at the 2012 Summer Olympics.
Chinese love watching football on TV, but the Chinese Football Association has only 8000 registered players, equal to one for every 173,000 people. In terms of participation, average Chinese prefer strolling, badminton and cycling, according to Cvsc-Sofres Media, a media research firm.
It remains to be seen whether Chinese billionaires can kick the national team into shape. China’s place on the ranking of national teams has mostly stayed within a range of 70 to 100 out of 207 teams since 2008, according to FIFA World Ranking, although the team is currently ranked 103.
But things are looking up. The new investors are bringing capital, management know-how and marketing expertise to domestic clubs. In November, Guangzhou Evergrande clinched the Asian Champions League title, making it the first Chinese club to win the tournament in more than two decades. Evergrande turned around the club by signing up Italian football manager Marcello Lippi, who formerly headed Juventus Football Club, and Argentine striker Lucas Barrios on a four-year deal for a domestic record contract.
Unlike Evergrande’s Mr Xu and Wanda’s Mr Wang, Mr Ma isn’t an avid fan. He has kept quiet about why he is buying a football team, except to say that it is cheap.
Chinese are becoming more interested in health and sports as they get richer. The government has encouraged sports-related entertainment. What the country lacks is an inspirational team.
Based on what Mr Ma paid, Guangzhou Evergrande is the world’s 16th-most-valuable soccer team, ahead of Atletico de Madrid, a Spanish team valued at $328 million by Forbes.
“Because Chinese football is so underdeveloped, there are a lot of opportunities,” said Leo Liu, CEO of soccer gaming company KT Football and a former member of China women’s national soccer team.
“More involvement of businessmen will help unlock the hidden value of this growth industry.”
WEI GU THE WALL STREET JOURNAL JUNE 13, 2014 10:27AM
China’s billionaires are investing hundreds of millions of dollars in Chinese soccer, and it isn’t just for show.
Although a majority of Chinese soccer clubs are struggling financially, it is still possible to earn a return that beats that of real estate and even e-commerce.
Last week, Alibaba Group Holding, led by founder Jack Ma, paid 1.2 billion yuan ($205 million) for 50 per cent of the Guangzhou Evergrande soccer team. For property tycoon Xu Jiayin, whose Evergrande Real Estate Group bought the then-struggling team for 100 million yuan in 2010, the deal means a return of 23 times over four years, or an annualised return of 220 per cent.
There are other benefits. A soccer team can be a powerful marketing tool. As in most of the world, soccer in China has the highest marketing revenue and most TV viewers of any sport. Soccer matches accounted for half of all the sports games broadcast on China Central Television in 2013. Investments in a club help build government relations, because Beijing is keen to promote sports.
INTERACTIVE: Plan your World Cup with our tournament predictor
DETAILS: World Cup team previews, group stage fixtures and match schedule
“It is no coincidence that three of China’s 10 richest people are all investing in football,” said Rupert Hoogewerf, publisher of the Hurun China Rich List. “There is an element of ego, and there is an element of business sense.”
It helps when China’s top leader is a fan. “ Xi Jinping likes football,” Mr Hoogewerf said. “It is very good for developing local government relationships, and gives people access to networks they won’t normally have access to.”
A picture of Mr Xi kicking a football in Dublin’s Croke Park stadium in 2012 was placed in the Chinese president’s office, according to state media. Mr Xi has said he would like to see China qualify, host and win a World Cup one day. The country of 1.3 billion people has played only once in the World Cup, in 2002.
Business people, including China’s richest man, Wang Jianlin, have taken the cue. The company he founded, Dalian Wanda Group, agreed in 2011 to give 500 million yuan to China’s football association for activities such as training Chinese youth football players in Europe. Wanda is renewing the program for another three years, and it has come up with a new plan to spend 200 million yuan annually over the next 10 years to train young football players in China.
Still, on the international stage, China remains much stronger in sports such as table tennis, badminton and diving. The state has invested heavily in sports that have potential to garner a large number of Olympic medals. China ranked No. 2 behind the US in total medals at the 2012 Summer Olympics.
Chinese love watching football on TV, but the Chinese Football Association has only 8000 registered players, equal to one for every 173,000 people. In terms of participation, average Chinese prefer strolling, badminton and cycling, according to Cvsc-Sofres Media, a media research firm.
It remains to be seen whether Chinese billionaires can kick the national team into shape. China’s place on the ranking of national teams has mostly stayed within a range of 70 to 100 out of 207 teams since 2008, according to FIFA World Ranking, although the team is currently ranked 103.
But things are looking up. The new investors are bringing capital, management know-how and marketing expertise to domestic clubs. In November, Guangzhou Evergrande clinched the Asian Champions League title, making it the first Chinese club to win the tournament in more than two decades. Evergrande turned around the club by signing up Italian football manager Marcello Lippi, who formerly headed Juventus Football Club, and Argentine striker Lucas Barrios on a four-year deal for a domestic record contract.
Unlike Evergrande’s Mr Xu and Wanda’s Mr Wang, Mr Ma isn’t an avid fan. He has kept quiet about why he is buying a football team, except to say that it is cheap.
Chinese are becoming more interested in health and sports as they get richer. The government has encouraged sports-related entertainment. What the country lacks is an inspirational team.
Based on what Mr Ma paid, Guangzhou Evergrande is the world’s 16th-most-valuable soccer team, ahead of Atletico de Madrid, a Spanish team valued at $328 million by Forbes.
“Because Chinese football is so underdeveloped, there are a lot of opportunities,” said Leo Liu, CEO of soccer gaming company KT Football and a former member of China women’s national soccer team.
“More involvement of businessmen will help unlock the hidden value of this growth industry.”