Own goal? China’s richest man fires warning on soccer splurge
>> BEIJING: China Inc’s record burst of investment in global soccer could leave investors burnt and out of pocket, says China’s richest man, Wang Jianlin, in the highest profile warning yet on a US$4 billion splurge since 2015 that has stunned European football.
The chairman of the sprawling Dalian Wanda Group is himself a major sports investor, sponsoring the Chinese league and last year taking stakes in leading Spanish club Atletico Madrid and Swiss sports marketing firm Infront Sports & Media AG.
But for Wang, owning a team is about influence — not profit, which he sees as easier to achieve through rights deals or owning competitions.
A score of smaller Chinese players have since followed Wang into the European soccer arena, encouraged by official enthusiasm for the game.
Part of the lure is mammoth TV deals as global viewers pay up to watch live sport: the English Premier League — the world’s richest — will see £8 billion ($10.5 billion) coming in over three years.
Not everyone along the scale, however, will see enough of that money to make a decent return, Wang warned.
“It can give you influence, but it won’t make you money. Every year you’re burning through cash — that is certain,” Wang told Reuters in an exclusive interview in Beijing.
While it is too early to assess how the soccer splurge will pan out, some brokers working on Chinese sports investments have queried deal valuations that they say have little precedent.
“At the prices they are buying it makes no sense to me. They are even buying minority stakes, where they have no control... Many of these teams are cash flow negative,” said one senior sports adviser, involved in deals between China and Europe.
The dash into soccer comes with the public backing of President Xi Jinping, who says he is an avid fan and wants China to one day host — and win — the football World Cup. China currently ranks 78th in the world, below Uzbekistan and Benin.
While Chinese buyers have snapped up clubs such as Italian giants Inter Milan and are said to be circling Liverpool, they have also looked to lesser-known teams — such as Hull City, currently being courted, according to industry sources, or clubs in the less cash-flush French league.
A report from Deloitte in April said that while 17 out of 20 English Premier League clubs were in the black in 2014/15, most other European leagues are less profitable.
Despite his warning, Wang said investment in sport remained a key area for the group, alongside entertainment and tourism. But, he added, Wanda would favour profitable sporting events over buying stakes in money-losing soccer clubs.
We’ve already invested over $2 billion in sports related acquisitions. But sports for us is perhaps different to what most people think of,” Wang said.
“We don’t want to acquire clubs... because these sorts of companies don’t make a profit.”