Alibaba Would Probably Join The Escalated War In Chinese Online Sports Industry

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(Chinese Version)

Some media agencies recently exposed that Alibaba would probably buy into Sina Sports. Ma Yun’s private equity Yunfeng Capital will lead this investment. The amount is up to the level of a hundred million dollars, making Alibaba very likely to be the largest shareholder. Until then, Sina Sports would split from Sina and operate independently and in the future it would also be listed independently.
In fact, Alibaba had talked to Sina two years ago, planning to invest in its sports and video business. In the beginning of this month, the two jointly organized Kobe Bryant’s Chinese fans meeting. Sina had been planning to make its sports business independently operating since 2012. Wei Jianglei, the former senior executive of Lenovo, joined Sina early this year. He acts as Sina’s senior deputy president who is directly in charge of Sina Sports. He is also the adjunct general manager of Sina Sports business division. This can be seen as the sign of its split.

Not only Jack Ma wants to join the fight in sports industry

The State Council issued guidelines to accelerate the development of sports industry and promote sports market in last October. Since then, capitals have been favoring the investment in sports industry. The sports industry is probably standing at the edge, preparing to ride the wind.

Alibaba, which is always favoring ecological construction has early layouts in sports. On the one hand, it has been actively investing football teams, getting 50 percent shares of Guangzhou Evergrande Football club with 1.2 billion RMB as capital injection. On the other hand, it has been trying to integrate Internet business with sports, in order to build the Alibaba ecology which Ma Yun dreams of.

Alibaba first tried to build alliance with BesTV and PPTV which hold large amount of content rights related to sports. When this attempt failed, it turned to Sina. During the porcess of NBA’s new media copyright negotiation, Tecent stole its thunder with the offer of 5 years 0.5 billion dollars’ investment. After the previous not-so-positive attempts, Alibaba finally successfully bought into LeTV, winning 7.3 percent of its shares, making its second-largest shareholder. The reasons for Alibaba to buy into two sports content platforms of the same type in a row, are not only because of its vision for sports industry’s bright future, but also being afraid of putting on the wrong stakes.

However, with sports industry’s rapid development, not only Ma Yun wants to profit from it. LeTV got more than 400 competitions’ broadcasting rights with high bid. IDG Capital Partners, the investor of SSports insists on operating FA Premier League which has been on the deficit for years. PPTV signed off the broadcasting rights of La Liga’s five competitions with the offer of 0.25 billion euros. Sina made the deal with the exclusive copyright agent of FA Premier League, winning its next season’s Internet broadcasting rights with the offer of more than 7 million dollars. Tencent went even further. It got NBA’s exclusive Internet broadcasting right with the stunning 0.5 billion’s investment, ending the previous situation of NBA Internet broadcasting rights shared by three parties, Sina, LeTV, as well as Tencent.

It’s not easy to run the sports business

Huge investments from Internet companies have made sports copyright market become the new battlefield for capital and strategy. Fierce competition has made the price of sports copyright become higher and higher. According to PPTV, the fees to purchase sports copyright have been growing as 3 to 4 times more every year. However, regardless of the painful high price, new media has to fight for the broadcasting rights. In the era of content as the king, the ability to control high-end resources has become increasingly important. Holding more copyrights means being able to integrate or even monopolize more superior resources, which can attract higher network flows and more advertising sponsorships.

However, in the broad view of China’s sports broadcasting websites, although they have developed rapidly with the help of huge users’ market, the majority of platform income or service model have not gained substantial developments. For now, there are two kinds of sports transmission platforms, large-scale sports competition broadcasting platforms with broadcasting rights and broadcasting signals collecting sites. Although the models differ from each other, they gain profits only through cut-in commercials or paid advertisements on the websites.

Meanwhile, with the game of sports competition copyrights going on, sports broadcasting would gradually turn to the model of paid videos. But high copyright expenses and comparatively single profiting channel have made these video websites inevitably rely on large capital injections with the aim of occupying market and gaining more users within a short period of time. However, paid models have a long way to go due to numerous reasons, such as low audience shares, few exclusive contents and quite complex settings. Some sports Internet broadcasting might come to a premature end because their audiences are less than 10 thousand people or big advertisers could not be attracted by small projects like them.

Thus domestic sports content industry is in urgent need of constructing a complete business ecological chain from upper contents production, to content collection platforms’ operation to terminal devices, then looking for new opportunities to layout sports industry.

Players are finding new ways to compete in the field of sports industry

Facing the pressure of comparatively single profiting channel, numerous giants who joined sports industry have made their attempts to use Internet as the driving force to bring new values to the sports industry.

After buying out NBA’s exclusive Internet broadcasting rights with high price, Tencent has combined online videos with its strong socializing system, trying to build the sports socializing model. If it proves to be a success, besides the traditional revenues from advertising and online games, value-added services and sports products online purchases would jointly become a part of Tencent sports industry chain. Qihoo 360 Technology invested in Yuepaoquan, a software designed for localized socializing by running together. It tries to combine O2O with sports. In the field of sports’ smart hardware, traditional sports equipments manufactures have also been trying to find the opportunities to integrate with technology. Besides Nike plus series of smart devices, Xiaomi and Sports manufacture Li-Ning have jointly launched smart football.

To Alibaba, if its attempt to become the shareholder of Sina Sports proves to be successful this time, it would have direct or indirect financial links with LeTV Sports, Sina Sports and You First Sports sponsored by Suning. Among which, LeTV holds the majority of competition broadcasting rights in football, basketball, golf and more. Also, it has the best image quality during the live broadcasting among the exsiting internet broadcasting platforms. Sina Sports has a better editing team which can offer timely coverage and in-depth analysis for competitons. However, with all these good cards in the hands, without the ability to jump out of the restrain of single profiting channels and look for more ways of internet flows cash ability, the advantages might have no use.

Thankfully, Alibaba’s integration capability has always been good, it might look for integration opportunities combining sports with other business groups. For example,
Using its advantages in e-commerce to jointly sell merchandise and tickets with other clubs, cooperating with Taoba’s other services such as crowd-fundraising and digital entertainment products, it can even work with Alibaba’s Go Travel Product to launch sports travel service. The combination of different services with external investments meets Jack Ma’s idea of Alibaba Greater Ecology.

With sports industry’s rapid growth and fierce competition, only Internet giants with comprehensive strength who are good at ecological construction would become the new favorite in the field. Future sports industry has the chance to break the restrains of traditional sports broadcasting platforms, based on Internet and truly stands at the height of the industry, integrate various segments and upgrade into new production mode. Sports ecosystem with a complete industrial chain would definitely become sports industry’s new trend for development.

 

[The article is published and edited with authorization from the author @Houxiaojue, please note source and hyperlink when reproduce.]

Translated by Selma Xu(Senior Translator at ECHO)

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