The company that paid a record 8 billion yuan ($1.2 billion) for broadcast and streaming rights to China’s top soccer league said its controlling shareholder is in talks to sell part or all of its stake to retail giant Suning Holdings Group Co. China Sports Media Ltd. Chairman Li Yidong said in an interview last week that Suning is negotiating to buy as much as 56 percent of the company, a stake that could be valued at about 2.8 billion yuan.
Closely held China Media Capital, led by media mogul Li Ruigang, owns the stake under discussion, he said. China Media Capital, also known as CMC, will continue to enrich and expand investments in sports, especially soccer, it said in an emailed response to a request for comments about the talks.
Suning didn’t immediately respond to requests for comment. For Suning’s billionaire Chairman Zhang Jindong, who amassed his fortune in retail, buying control of China Sports Media would build on his ambitions to create a soccer giant after acquiring Italian club Inter Milan and local team Jiangsu Suning.
He’s among the growing number of Chinese tycoons embracing a government push to transform soccer with the goal of building a 5 trillion yuan sports market in the country by 2025.
“Without the development of football, you can’t imagine the sports industry in China can develop,” said Li, who’s not related to CMC’s chief.
He said the valuation of CMC’s stake was based on a recent transaction that valued China Sports Media, or CSM, at 5 billion yuan. The sale discussions grew out of previous talks between CSM and Suning’s streaming unit PPTV over media rights, CSM’s Li said.
The four-year streaming deal the two companies agreed to will generate enough revenue to cover the 8 billion yuan investment in rights by the company, which had net income of 160 million yuan last year, Li said.
PPTV last year agreed to pay as much as $650 million for rights to England’s Premier League, and in March this year took over the rights to the Chinese Super League for an initial 1.3 billion yuan. Betting on soccer rights may not be a sure thing.
LeSports, a unit of the struggling LeEco group, previously owned Super League rights, and took in revenue that came to about 10 percent of its investment, according to a person familiar with its operations. The streamed matches would typically attract 5 million viewers in a market that would require multiples of that to become profitable, said the person who was not authorized to speak publicly.
The value of CSM’s soccer rights may depend on shifting rules for the league. CSM’s Li has sought talks with Chinese soccer authorities over new rules requiring teams to use younger players, while limiting participation of non-Chinese players on each squad, he said. “This affects our commercial valuation,” Li said in Beijing, likening the government’s younger-player policy to forcing theater audiences to watch understudies perform at Broadway musicals. “Those policies are unfair to the investors and us.”
CSM, the company Li founded in 2003, outbid three rivals for the soccer rights in 2015, offering a 20-fold increase over the amount paid by previous holder China Central Television. Soccer isn’t the only game for CSM. CSM is preparing a bid this month for rights to China’s top basketball league, Li said.
The amount the company will be prepared to pay for those rights may be reduced should the league push through proposed changes that would limit the number of expensive foreign recruits and force teams to field younger players.
The value of a five-year contract for the China Basketball Association rights could be 4 billion yuan to 6 billion yuan, though those figures could halve because of the uncertainty around the rules on players, Li said. The rights are currently held by Dalian Wanda Group Co.’s Infront Sports & Media AG. Li, who has an ambition to turn CSM into China’s version of global sports titan WME-IMG, said he has no plans to sell his stake. “I am the founder just like the captain on a ship. I have to stand there and make everyone comfortable,” he said.