February 28, 2017 / 7:04 AM / 9 months ago

China's soccer frenzy has early signs of fatigue

HONG KONG (Reuters Breakingviews) - Fatigue may be setting in for some Chinese soccer investors. LeEco has just lost the rights to screen top Asian matches. The cash-strapped group, led by hyperactive entrepreneur Jia Yueting, has unique problems. Still, some others have probably over-stretched too.

Football Soccer - China v Syria - 2018 World Cup Qualifying Asia Zone - Round 3 Group A - Xi'an, China - 6/10/16 Fans cheer ahead of the match between China and Syria. The Chinese characters read, "China fighting". REUTERS/Stringer

On Tuesday, the Asian Football Confederation scrapped a 2015 contract with LeEco. The AFC didn’t say why, but Reuters says LeEco’s subsidiary LeSports missed a payment on a $100 million-plus contract giving it exclusive rights to show big tournaments like the Asian Champions League in China.

It is the latest setback for Jia’s beleaguered conglomerate, which sprawls from televisions to electric cars. In December, LeSports salvaged an English Premier League contract after reaching a last-minute compromise over $30 million of unpaid fees. Last month, Jia sold off various stakes to secure a $2.2 billion capital injection from a property developer.

Jia, though, is just one of many Chinese tycoons pouring record sums into clubs, players, broadcast rights and sponsorship deals. President Xi Jinping’s enthusiasm for the game has helped spark a frenzy. Clubs like Inter Milan in Italy and England’s West Bromwich Albion are Chinese-owned, while sides in the People’s Republic have signed stars such as Argentine striker Carlos Tevez.  Reuters says Chinese buyers spent more than $3 billion abroad over the past year.

But many deals are likely to be disappointing, at least financially. Wang Jianlin, China’s richest man, last year warned that buying sports teams was unlikely to make money. Rights to broadcast in China have soared to record highs, thanks to video-streaming platforms, but paying viewers are still scarce.

Meanwhile, mainland clubs have splashed out huge sums but are unlikely to make a good return: match-day receipts and broadcasting and advertising sales are slowly climbing, but not fast enough to offset the huge costs of poaching high-profile coaches and players.

The combination of trophy assets, high prices, inexperienced buyers, and weak finances is dangerous. And signs of strain are already appearing elsewhere. An $800 million-plus takeover of Italy’s AC Milan by a little-known Chinese consortium is dragging on. More Chinese players are likely to get stretchered off the field.

The views expressed in this article are not those of Reuters News.

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