White Paper

Chinese Sports Industry Trends & Popularity of

Sports Consumption in China as Reflected by
Media
By Yutang Sports

13th April 2017

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Since the second half of 2014 when the Chinese government announced the policy to increase
sports consumption in China, the Chinese sports industry growth started to speed up and attracted
much attention. In the last two years, the industry underwent eye-catching changes and a great
amount of developments in many areas. It witnessed the emergence of a new industry. Therefore,
we think it would be worth reviewing what have taken place, what people think, and what
opportunities there are in China with regard to the sports world.

There will be two sections. The first section looks at some of the primary trends in the industry in
the past two year, and the second section looks at how and how well sports/sports events have
been consumed by Chinese people on TV and digital media.

Section 1. Some Major Trends in the Chinese Sports Industry

Firstly, we look at a summary of the major trends in the industry.

1. Chinese government place a great focus on and robust supports for the industry.

Since the State Council released their proposals on “Accelerating the Development of the Sports
Industry and Promoting Sports Consumption (File No. 46)” in October 2014, the development of
the sports industry has been upgraded to the level of national strategy.

In 2015, the government successively released several policies and plans, including:-

 File No. 124 of the General Administration of Sport

 File No. 11 of the State Council

 3 Steps of Chinese Football Reform released by the National Football Congress

 The objective of building 20,000 football schools set forth by the Ministry of Education

 The total development objectives of over RMB 7 trillion set by all the provinces

 File No. 85 that promotes sports consumption

 Multiple special plans by the National Development and Reform Commission

According to some statistics, in 2016 there were 17 key Central Documents released, which refined
previous plans and broke down the industrial development objectives.

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2. Rights market remains competitive

“Not only LeSports, but also many other digital sports companies, including Tencent Sports, PPTV
and Alisports, are playing the same role in the Chinese market as traditional TV stations do in
developed countries - providing sufficient funds for sports events and organizations. Without our
work, government initiatives may not have been effective,” claimed Ma Guoli, Vice President at
LeSports, in an interview with Yutang Sports.

Ma is right. Private strengths, especially digital media companies, do make a difference.

2015 saw a sudden boom in the Chinese sports media rights market. China Sports Media acquired
a 5-year exclusive media rights for the Chinese Super League (CSL) at a price of RMB￥8 billion
( EUR€1.963 billion), which was regarded as “the most important breakthrough since free
competition was introduced into Chinese football TV rights purchase.” PPTV paid €250 million for
the 5-year exclusive rights of La Liga in China. Tencent Sports is reported to have signed a 5-year
contract with NBA worth US$500 million. LeSports also gained media rights for many domestic and
foreign events. As a result, the competition for sports media rights attracted a lot more attention
in the industry.

The competition for rights to top world events became fiercer in 2016. At the beginning of the year,
LeSports acquired the exclusive digital media rights of the CSL for 2016 and 2017 seasons on the
Chinese Mainland and in Hong Kong, Macau, Taiwan, the US, India, Singapore, Thailand, Southeast
Asia, Canada, etc.

Baofeng Group officially declared the formation of Baofeng Sports, which acquired digital media
rights of the CSL for the 2016 and 2017 seasons, and became official partner of the CBA for the
2016 and 2017 seasons, official sponsor of the Chinese Men's Basketball Team, and VR video
partner of the Chinese Women's Basketball Team.

CCTV acquired the exclusive media rights to the UEFA European Championship, and distributed the
digital media rights of the 2016 Rio Olympic Games at a price of RMB￥100 million, which was
bought by Tencent Sports. Alisports also acquired the streaming rights of Rio 2016 broadcast on
CCTV 1, CCTV 5 and CCTV 5+. According to Zhao Guochen, Operations General Manager at Tencent
Sports, during the Rio 2016, users on its digital platforms combined surpassed 600 million people,
with over 80% watching on mobile phones. Alisports and its partner Youku also claimed a rapid
increase of visits during that period -- over 2 billion.

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In a new battle for the rights to the English Premier League, Suning Group finally gained the
exclusive media rights for the 2019-2022 cycle on the Chinese mainland at a price of GBP£560
million, which is 11.67 times of the current price GBP£16 million per season, reported by the
Associated Press. With the price higher than that of NBC, China became the largest foreign rights
market of the EPL.

“We and Suning Holdings Group were very determined to acquire the EPL rights during the 2019-
2022 seasons on the Chinese Mainland,” said Lou Yichen, Chief Content Officer of PPTV.

Although the 2016 sports market was more rational, the battle for the media rights to top events
remained competitive.

3. Focus turned from media rights purchase to monetizing contents

When the industry become used to high media rights fees, the focus of attention moved from
purchasing to operation and monetizing contents.

Now, the combination of paid viewing and free viewing modes has become the main choice for
Chinese digital media companies. Tencent Sports and NBA China launched the NBA League Pass in
October 2016. Chinese domestic users purchasing the Pass can watch an overall 1300 games for
the whole season on the Tencent platform, as well as more live streaming, highlights and original
NBA contents. In the previous season only 600 NBA games were streamed there.

Four digital media companies, Super Sports, LeSports, PPTV Sports and Tencent Sports have got
digital media rights for the English Premier League on Mainland China in 2016, and they all adopted
both the paid and free modes.

In order to profit from paid content, all the companies are trying to improve their streaming
qualities. For example, Super Sports has introduced CDN optimization for its members, as well as
a member status extension benefit from a season to one year, a fixed 1080P HD picture, a priority
customer service hotline, commentaries in 3 different languages (Mandarin, Cantonese and
English), and a fan rewarding plan with a total value of 20 million Yuan.

LeSports take advantage of its comprehensive parent streaming website and provide member
benefits like 1080p/4k images, live streaming acceleration and non-advertising during streaming.
It also use new technologies like AR live and can have nine broadcasting signals displayed on the
same screen. Besides, a list of famous commentators are ready to commentate on these games.
Tencent Sports has started to use a newest studio with the newest technologies like virtual reality
and 3D.

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Because of the low acceptance of the paid views, expensive media rights fees are still a huge
pressure for these companies. Several have mentioned unbearable rights fee pressures.

Lou YiChen, the Chief Content Officer at PPTV Sports, told Yutang Sports that the pressure is hard
to imagine for outsiders, and rights operation is still in the exploratory stage for all parties.

4. Business giants enter this sports industry

Business giants entering the sports industry is the reason why the Chinese sports industry is
flourishing in the eyes of the public. They become involved by a few ways, such as establishing
sports companies, investing in CSL football clubs and purchasing overseas football clubs etc.

By September 2016 Alisports had been established for one year. To create a foundation platform
for the Chinese economy and to enable people to do business smoothly are the concepts of Alibaba.
Alisports is influenced by this philosophy. Since its establishment Alisports’ target has been to
create a foundation platform for the Chinese sports economy, hoping the combination of the
Internet and sports would make sports exercising easier. Alisports created the WESG (World
Electronic Sports Games) which has expanded into 125 countries, and have an exclusive
partnership with the leSF (International e-Sports Federation).

Just like the Alibaba, Wanda Goup is also one of the icons in the Chinese business world. The
President of Wanda Group, Wang Jianlin, established Wanda Sports and has invested in a series of
upstream sports resources.

On 18th March 2016, Wanda Group officially became a top partner of the FIFA, and soon afterwards
it set up the China Cup International Football Championship. On 16th June 2016, the company was
officially announced as FIBA’s exclusive business partner for the period of 2016 to 2033. They will
jointly organize several world-class basketball events. On 30th September 2016, Wanda announced
the company they bought, Infront Sports & Media, became the exclusive business partner of the
BWF worldwide and had obtained the business development rights of all BWF events from 2017
to 2025.

Wang Jianlin said: “On the surface it seems that I am making purchases in the sports industry, but
on a deeper level, Wanda Group is trying to enlarge and strengthen its business in related industries
like tourism through involvement in the sports industry.”

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The Evergrande Group is another such example which can’t be overlooked. In 2010 Evergrande
acquired the Guangzhou Football Club and officially named it as Guangzhou Evergrande Taobao
Football Club. In 2015 the Guangzhou Evergrande Taobao F.C. were awarded the triple crown of
the CFA SUPER CUP, the CSL Champions and the Chinese Football Association Cup. Behind all the
glory is the huge amount of salaries, transfer fees and bonuses that Guangzhou Evergrande Taobao
F.C. offers its players.

The Evergrande Group has become the second largest private property developer in China, growing
from a local real estate company. As an important part of the group strategy, what the Guangzhou
Evergrande Taobao F.C. brings to the Evergrande Group is not financial loss seen on paper, but
rather is the inestimable advertising value. Furthermore, the increasing brand awareness in China
and even across the world definitely benefits the whole Evergrande Group a lot.

Besides the Evergrande Group, there are also many other enterprises that invest heavily in Chinese
football clubs, such as Quanjian Natural Medical Group, Suning Holdings Group, China Fortune
Land Development Co. Ltd (CFLD) etc. Quanjian Natural Medical Group spent 600 million Yuan
competing in the China League in 2016, and then in 2017 it proposes to invest not less than 1 billion
Yuan to take part in the Chinese Super League. The clear advertising effects that football can
produce is the reason why they are willing to input such huge resources into professional football.

5. China’s overseas clubs acquisitions triggered international concern

On 6th June, Suning and F.C. Internazionale Milan announced that Suning Sports had purchased
70% of Inter’s shares for 270 million EUR (290 million USD) at a press conference in Nanjing. In his
speech, Zhang Jindong, the president of Suning Holdings Group, expressed his honour at becoming
the major shareholder of Inter Milan, one of the oldest and most famous clubs in the world.

Moreover, apart from Inter Milan, Chinese capital has been involved in the purchase of other
foreign football clubs, such as Slavia Prague in Czechia ; the Den Haag Football Club in the
Netherlands; FC Sochaux, Auxerre and Olympique Lyonnais in France; Atlético Madrid, FC Jumilla,
La Hoya Lorca, Espanyol and Granada in Spain; the City Football Group, Aston Villa, Wolverhampton
Wanderers and West Bromwich Albion in the UK; the Newcastle Jets in Australia.

Apart from the German Bundesliga, Chinese overseas purchasers have bought into all the top
football leagues.

6. Mass consumer market needs to be cultivated

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On 27th December 2016, the General Administration of Sport of China issued a report about the
national sports industry’s scale and growth in 2015. The report shows that in 2015, the Chinese
national sports industry had an output of 1.7 trillion Yuan. But among the 1.7 trillion Yuan, the
"sports goods and related products manufacturing" and "sports goods and related products sales,
trade and rental" (part of the sports service industry) accounted for 86.2%. That means the sporting
goods related market is still the main component of China's sports industry, as events and other
market sectors still need to grow.

Consumers particularly need to cultivate stronger exercising habits. Li Ning, Founder and President
of the brand Li Ning said: "Consumption is the most important. Otherwise it becomes an
investment rather than a consumption demand."

Therefore, looking at the whole picture, the investment enthusiasm of capital for the sports
industry is still unabated, but the real explosive growth of the China’s sports industry is still waiting
on the rise of a stronger consumption base.

7. Rapid development in consumer facing sports events and services

Although sports participation related consumption by the public still need to be stronger, consumer
facing sports events, services and companies have emerged quite fast, for example in the areas of
sports training, fitness exercises, and marathons.

In the case of marathons, up till December 2016, there were 328 marathons and related events
registered with the Chinese Athletics Association that year, only 134 in 2015, and just 22 in 2011.
Sponsors are also actively involved.

Dawei Wang, Deputy Director of the Track and Field Management Center of the General
Administration of Sport of China told Yutang Sports, "We were worried that this trend was fake,
but now we are sure it is a real demand, as after each event more and more people become
involved."

Businesses such as KEEP, Blue Birds Fitness, Plump, etc., which target the mass consumer sports
market (like the areas of fitness, road running, training and others) received capital investments.

It is worth mentioning that another market segment which involves both public participation and
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the direct consumers, the gaming industry, has not really opened for business as yet. In the view
of insiders, the likely loosening of the policy re the sports betting industry in recent years will
almost certainly trigger a boom in competition too.

8. The sports sponsorship market has potential to grow

After buying and creating a lot of sports IP in China, the operational side of business is now very
necessary. Sports sponsorship is an important source of rights holders’ income. On the other hand,
most people think that the Chinese market also has a great potential for sports marketing.

According to statistics of the General Administration of Sport of China, in 2014 Chinese national
sports and related industries reached a total size of 1.36 trillion Yuan. According to IEG, in the global
sponsorship market, sport accounts for nearly 67.96%. However, in China, we see the
entertainment market is more dominating when it comes to sponsorship. The 150 million Yuan for
the CSL’s naming rights is much lower than the naming rights fee of 500 million yuan for "If You
Are The One", "Where Are We Going Dad? 3" and other entertainment shows.

Therefore, in relation to Europe, the United States and other mature markets, there is great room
for the growth of sports sponsorship in China.

Last summer, the Hisense Group became the first Chinese sponsor of the UEFA European
Championship since the tournament’s establishment 56 years ago. Shuqin Zhu, Director of Hisense
Group, told Yutang Sports that they were quite satisfied with the effects of the partnership.

"From 7th June to 7th July, we surveyed 11 countries around the world. Our overall sales in China
increased by 8.7%. TV sales grew 56% year on year, and there was an increase of 65% month on
month. In other countries sales rose 6% as a whole." Shuqin Zhu said,"In around seven or eight
cities in France, Hisense products were sold out. Early last year we had just entered the French
market, but through Euro 2016, which lasted for less than a month, Hisense saved at least four
years of communication efforts with French consumers, which satisfied our demands very well.”

9. The rise of Winter Sports in China

Another highlighted market should be Winter Sports. The Executive Vice President of the
International Data Group and Co-Founder of IDG Capital, Xiong Xiaoge, has told Yutang Sports that,
one significant thing for the Chinese Winter Sports industry is the government’s commitment
when they bid for the 2022 Winter Olympic Games. Chinese President Xi said that hosting Winter
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Olympic Games in China would encourage 300 million Chinese people to participate in Winter
Sports. This promise would make a significant contribution to the development of the International
Olympic Movement.

At present, the gap between the 300-million target and the current number of winter sport
participants is still huge. In other words, the potential of Chinese Winter Sports is promising.

10. Sports industry professionals and experts are in great demands

The lack of talents is a common issue in every industry. Over the past two years, Chinese
government policy and capital investment were able to offer China's sports industry rapid
developments. However, the correct people to meet the needs of the industry’s quick
development are very few.

Many people have joined online digital media companies from traditional media enterprises. In
the meanwhile, the exchange of executives between large companies is also frequent. For example,
the former Senior Vice President of NBA China, Yang Dongwei, is now CEO of the Wanda Sports.
Similarly, 63-year-old Ma Guoli joined LeSports.

The history of Chinese sport industry professionals’ development has been very short and small-
scale. However, as a significant number of international sport events and international sport clubs
gradually enter the Chinese market, the demand for the right people are great.

Good coaches and athletes in some disciplines, researchers in sports science and sports equipment
development, managerial and business professionals for sports events and companies, especially
those with a global vision are all in urgent demands in the industry.

In a word, these are some of the major ongoing trends in the Chinese sports industry in the last
two years till now. Apart from this, we also want to show how sports are generally consumed in
China through some observations of Chinese TV media. This will be explained in Part 2.

Section 2. Popularity of Sports Consumption in China as Reflected by Media

The foundation of sports business is the consumption and participation of sports by the society. It
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is also an interesting question to look at what sports and sports events are the most popular in
China.

We use consumption of sports on Chinese television to study the popularity of sports in China, and
will also touch some digital trends in Chinese sports consumption.

There are a few types of TV stations in China. The State TV Channels and Provincial Satellite TVs are
accessible across the country. The other three types of TVs are only accessible within their own

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regions. CCTV 5 is a state TV channel dedicated to sports content. Although 17% of sports content
were broadcast on CCTV 5 and CCTV 5+, nearly 70% of the consumption were on the state channels.
Among the state TV channels, CCTV 5 is the most dominant sports TV channel in China. Therefore,
we use CCTV 5 to study the sports consumption trends.

TV ratings is the technical term we would use.

Firstly, we look at the overall consumption of sports. No matter from which angles you look at it,
for example the percentage of sports broadcasting compared with other contents, the average TV
rating rank of CCTV 5, or the overall length of TV viewing time of CCTV 5, sports consumption still
is not at its best stage in China and there even is a slight downward trend regarding TV consumption.

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We picked out the most popular sports content on CCTV 5 in 2016. It shows that Rio 2016 is the
overall most popular sports event among Chinese TV audience.

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After looking at the overall situation, we look at the individual sports and sports events acceptance
in China as is reflected by their consumption on TV media.

It turned out that in 2016 football, basketball, Rio 2016 and billiards were the most aired content
on CCTV 5, while the most watched sports/sports events from a ratings perspective were
respectively the Rio 2016, badminton, basketball, table tennis, volleyball, etc.

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Below there are some lists of the top 10 most watched matches in different sport disciplines in
2016, such as football, basketball and billiards.

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Because the Rio 2016 was the most popular sport event in China last year, we take a look at how
the Olympic Games were consumed with regard to the channels and the prominent trends.

We find that TV is still the most used channel in China for consuming Rio 2016 content. However,
digital and social channels have demonstrated a clear growth.

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Mobile consumption was a prominent trend, with nearly 80% of relevant content watched on
mobile phones.

However, the total length of TV watching time during Rio 2016 was shorter than the last few
Olympic Games.

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Badminton, swimming and volleyball were among the most watched sports during Rio 2016
competitions.

Digital was the new emerging trend in Rio. Star athletes and live streaming were the two most
fashionable elements during the Rio 2016. Fu Yuanhui and Zhang Jike were two of the most shining
stars.

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Chinese public’s attitudes towards Team China’s performance and medals in Rio 2016 were more
relaxed. The reasons that people follow Rio 2016 were also more diversified. Sport is not only about
national pride and the number of medals any more.

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Section 3. Conclusions

 Sports consumption is not very popular in China yet. It has large room to grow if we consider
factors such as the industry’s upward developing trend and the large population size of China.

 The consumption of sports on TV channels demonstrated a slight downward trend, but TV is

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still the No.1 channel for sports consumption. On the other hand, digital and mobile channels are
becoming stronger.

 The most popular sports and sports events from the top are the Olympic Games, football,
basketball, billiards, badminton and volleyball etc.

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Produced by:

Yutang Sports

LV Lei, Project Director

GU Xin, Journalist

ZHANG Tingting, Business Development Manager

Thank you very much for your time! Welcome to contact Yutang Sports for any questions.

Contact person: ZHANG, Tingting

Email: zhangtingting@ytsports.cn

Telephone: +86 10 6715 0501 ext. 808

www.ytsports.cn

http://en.ytsports.cn

Address: 219 Block 10, 1 Dongdadi Street, Dongcheng District, Beijing, 100062, China.

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