It's Still the Same Chinese Super League, but the Sports Business Behind It Has Changed Completely

Big money pouring into Chinese football is taken as a sign of a boom. It is also, of course, taken as a sign of a bubble.

The 2016 Chinese Super League season kicked off last weekend. One very expensive player, Alex Teixeira, ran around the Nanjing Olympic Sports Center in Jiangsu. When he scored his second goal in the second half, everyone probably breathed a sigh of relief: the match had been worth the money.

To get Teixeira, Jiangsu Suning paid 50 million euros, a record transfer fee in Chinese history. Seven years before Teixeira arrived, the league's title sponsorship was worth only 45 million yuan. Now it is the four-year, 600-million-yuan deal Ping An signed in 2014.

This weekend most of the country was as warm as spring, and the smog did nothing to dampen fans' enthusiasm. By five o'clock on Saturday afternoon, crowds in blue Shanghai Shenhua jerseys had already gathered at Shanghai's Hongkou Football Stadium, waiting for a match that would start at 7:30.

Nearly all the stars who broke the league's transfer record one after another last winter took the field: Elkeson, Ramires and Teixeira. The combined market value of Super League players now stands at 354 million euros. A year ago it was only 179 million euros, and in 2009 all the players together were worth just over 32 million euros.

This was the first round of the Super League's "8-billion-yuan era."

Over the past year, capital has come roaring in. In a congratulatory video, Cai Zhenhua, president of the Chinese Football Association, said: "That the Super League has broken through in value in this area (broadcasting) shows that we already have what it takes to become one of the world's top leagues."

One of those who breathed a sigh of relief must have been Zhao Jun. She was too busy to finish our interview. Zhao is general manager of Win Power, a company that has handled the Super League's business for more than a decade and has now become the center of the league.

In October 2015, Win Power won the tender with a bid of 8 billion yuan, becoming the league's partner for television feed production and media rights for the next five years. Li Ruigang, chairman of China Media Capital (CMC) and an investor in Win Power, was then added to the Chinese Football Association's executive committee last December.

Less than two weeks before the season opened, LeSports bought exclusive new-media rights for the next two years from Win Power for 2.7 billion yuan.

Other internet companies have rushed into teams and clubs. Suning, a traditional retailer that moved into e-commerce, took over the former Jiangsu Sainty club for 523 million yuan. JD.com has been a Super League partner since 2013. Alibaba's Taobao took half of Guangzhou Evergrande in 2014. Even LeEco, which won the league's new-media rights, recently became a shareholder in Beijing Guoan.

All of this is taken as a sign of a boom in Chinese football. It is also, of course, taken as a sign of a bubble.

Eight billion yuan over five years works out to 1.6 billion a year. The Super League's value has suddenly been pushed to a startling level: a full 20 times 2015's less than 80 million, and more than the mainland China rights to the English Premier League, La Liga and the NBA combined. The 2002 and 2006 World Cups each brought in about 8 billion yuan in total broadcast revenue.

The market has changed since ten years ago. In February 2007, Tiansheng paid US$50 million for three years of exclusive mainland China broadcast rights to the English Premier League and tried to earn the money back by charging viewers.

It did not work. In 2007, Tiansheng's digital pay-TV business took in less than 13 million yuan, and 2008 was no better. Tiansheng then began sub-licensing Premier League rights to some TV stations. But the expensive rights still dragged the company down, and it declared bankruptcy in August 2010.

Ten years on, both Li Ruigang and Zhao Jun are bullish on this market. "You need to give this industry some stimulus, so that the interests within it form a virtuous circle. Our investment in the Super League is more about how it lifts the whole football industry, and we hope to earn returns in a systematic way," Li Ruigang of the China Media Capital fund said in an earlier media interview.

LeEco released figures for the first match of the 2016 season, Guangzhou R&F against Hebei China Fortune. Its 4.1 million views set a new record for a LeSports live broadcast. At halftime the LeSports app jumped to first place in the sports category of Apple's App Store, and seventh overall.

Not long ago, LeSports received money from Win Power, and LeSports also invested in Win Power. Together with Octopus TV, the sports livestreaming service it recently acquired, and the football app Soda Football, LeSports now holds a monopoly on the Super League's new-media broadcast rights.

This is also the main way Win Power plans to recoup the 8 billion yuan it committed last year. "At the current rights price of 1.6 billion, TV stations can recover 5% at most. Most of it has to come from the internet," Zhao Jun told QDaily. "We have worked on the Super League for more than ten years, and we understand it better than most people."

From the 2018 season, paid viewing will also become a new source of revenue for Win Power and LeSports. Yet in an interview with QDaily last October, Zhao Jun said: "Charging for the Super League is impossible within two or three years."

You can indeed see some changes in how the Super League is organized and run. The question now is whether those changes truly match all this capital. Capital usually stands for expectations about something's future. Will the Super League really be that good?

First, the changes.

At 90 minutes per match, 8 billion yuan in broadcast fees means every minute of play is worth more than 70,000 yuan.

Viewers have moved from television to the internet. Some fans downloaded LeEco's desktop client or app for the first time just to watch the Super League. "At the last World Cup, 60% of fans already watched online," Chen Rong, a securities analyst at Guotai Junan, told QDaily. Judging by this round of the Super League, the share should be even higher.

Control of broadcast rights has also passed from the big TV stations to rights agencies like Win Power. "In the past, CCTV had enormous influence over sports broadcasting. If it didn't broadcast an event, that event's reach was greatly reduced," Chen Rong said.

"Back then (in 2004), the ideas of media rights and feed production had only just appeared, and TV stations were starting to have to pay rights fees," Zhao Jun said. "People weren't used to it yet. CCTV, for example, began refusing to cooperate."

But things are different now. With the internet drawing viewers away, CCTV is worth far less as a channel. Doing without CCTV is no big deal, as several matches on Friday and Saturday afternoon showed.

LeEco and Win Power also tried some new tricks in their broadcasts: two commentary channels, one in Mandarin and one in Cantonese, and six camera feeds. There was also a live comment feed where fans could vent their feelings and opinions about the match.

It was LeSports' first Super League broadcast, and it broke a viewing record, but the Guangzhou R&F vs. Hebei China Fortune match had problems: the picture was not very smooth. "Some viewers say today's stream has been a bit laggy. But I can promise it won't lag tomorrow," a LeSports commentator said as the match neared its end. Sure enough, Saturday's broadcasts were much better. Still, LeEco's stream ran ten to twenty seconds behind television. One consequence: if you chat with friends or scroll through Moments while you watch, someone may spoil the match for you.

"Right now, the part of the sports industry internet companies influence most is media broadcasting," Chen Rong said. "In other areas, the internet's influence is still fairly small." That influence also shows up in ticketing. Damai sells single-match and season tickets for Guangzhou R&F and Shandong Luneng, while Weisai Times sells tickets round by round.

Then there are the players and clubs we mentioned at the start. Jiangsu Suning and Guangzhou Evergrande, the two clubs with internet backers, spent most freely in the winter transfer window that just closed. They set three of the four highest transfer fees.

But for now, the matches themselves have not changed.

Neither the league's format nor the rules of football leave any room for the internet, and transfers still run on the most traditional method: negotiation between clubs. In match operations, the most central part of the business, the internet barely registers.

The other core of a sporting event, the venue, is much the same. LeEco, the most deeply involved, has done no more than rename Beijing's Wukesong Arena the LeSports Ecology Center. The "smart stadium" that internet companies love to talk about has yet to appear.

Internet companies' interest in sport comes from a change in policy. Limits on capital in the sports industry are slowly being lifted, and the government has sketched out a five-trillion-yuan market. Internet companies have no reason to ignore it, especially since sport is part of the content business, where internet companies got their start.

But internet companies are not like the property developers who sponsored the Super League five or ten years ago. Back then, developers put money into football to stay on good terms with the government and polish their brands, which in turn made it easier to acquire land.

The best early example is Wanda. Through football it expanded from Dalian to the whole country and moved from housing into commercial plazas. Within three years of buying into the Guangzhou club, Evergrande Real Estate added nearly 90 million square meters to its land bank. In 2013 it held more land than any other property company in China, nearly 50% more than the runner-up, Poly Real Estate.

Internet companies want something different from what property companies wanted. "For internet companies, sport is mainly a way to grab traffic," Chen Rong said. "As Joseph Pulitzer famously said, the news that most catches the public's eye is sports, scandal and crime."

That holds for every internet company. LeSports still makes most of its money from membership fees and advertising tied to broadcasting events, and traffic is the foundation for growing both. Win Power is the same. A company that has been selling rights for more than a decade naturally cares most about audiences. Only when more people watch the Super League can it sell the rights it holds at a good price.

LeSports has already moved into running events. It holds the operating rights to the International Champions Cup, city marathons and the Women's Super League, among others.

But running these events well is not simple. It first has to build a popular following for a sport, then handle scheduling, venues, security and every other piece. After that, LeSports also has to build each event into a brand and make it part of how people live. None of this is easy. LeSports is still a long way from becoming a core player in the sports industry through running events.

Then there is Weisai Times, the ticketing company, which is trying to copy its model from the film industry: moving from ticketing into sports marketing and distribution, and then into running events. "We use big data to shape the sports industry," Su Pei, head of the Weisai brand, told QDaily. "Weisai Times is still laying out its plans, and we can't reveal too much yet."

But how internet companies will bring their "internet" strengths to bear in these areas is still unclear. They are still feeling their way, and so far no mature product has reached the market. Chen Rong's explanation: "The internet can make distribution more efficient, but in other areas it can't bring disruptive change for now."

The sports industry as a whole is indeed changing.

Many less popular sports are being brought into China. World Triathlon Corporation, the American company Wanda bought, runs the Ironman triathlon series. Alisports' partners include AIBA, the international boxing federation, and Germany's wige, which provides technical support for motor racing. LeSports holds rights to more than 300 events, covering winter sports, golf, rugby and almost every niche sport there is.

Plenty of internet buzzwords are mixed in. Alibaba, another company that has set up a separate business just for sport, mostly wants to tie e-commerce to the sports industry. "Maybe in the future, when a match ends and the players take off their jerseys and sign them, we could sell them right there," said Liu Yong, vice president of Alisports. His talk was full of fashionable, vague terms: "using e-commerce to find more ways to monetize sports IP," building "sports social networking," and moving into the "sports service industry," which covers "sports tourism, event marketing, venue design, sports consulting and so on." He even said, "Alisports wants to be the foundational platform of China's sports industry and make exercise simple."

Stripped down, Alibaba's "sports social networking" means sports fans can find other people online to play a game with. As for smart stadiums, internet companies all want to use their technology to rebuild sports venues so that they plug more neatly into their internet businesses.

All of this is a pleasant vision, far more concept-packaging than concrete plan or product.

Colin Currie, managing director of Adidas Greater China, predicted that 1 trillion yuan would flow into the sports industry in 2016. The financial writer Wu Xiaobo has also predicted that the sports industry will take off in 2016.

This year also brings two big events, the Rio Olympics and the European Championship, and many internet companies are already preparing. At the end of last year, Sina announced its strategy for the Rio Olympics. Liu Jianhong, chief content officer of LeSports, also said LeSports would bring a whole new way of covering the Olympics.

Another battle is about to begin. Who will win this time?