The $185m investment by conglomerate HNA Group in China-based sports streaming platform Le Sports last week illustrates how China’s media sector is continuing to expand as the growth of e-commerce helps fuel a desire for content.
HNA, a diversified conglomerate best known for its HNA Aviation activities, supplied half the money via its HNA-Caissa Travel subsidiary and the other half through a fund advised by its private equity unit, HNA Capital. It now holds a 5.9% stake and invested as part of a round Le Sports aims to increase to more than $1bn.
Le Sports was spun out of Leshi Internet Information & Technology (LeTV), a group that began life as an online video streaming platform before expanding into fields including electronics and the development of driverless cars. Le Sports’ business revolves around the online broadcasting of premium sports content, though it is also involved with other sports media activities.
Much of the funding Le Sports is getting will go to support its ambitious growth plans, which mainly involve big spending on broadcasting rights. In the past month it has picked up the rights to broadcast Chinese Super League (CSL) football online at a time when the league is rapidly expanding, as well as the rights to the English FA Cup. It had already acquired the local rights to Major League Baseball.
Interestingly, the CSL deal may hold a clue to the kind of model Le Sports will pursue as an online broadcaster. Viewers will not only be able to watch matches but will also be able to buy official merchandise through a live shopping option on the platform, a development that will likely make it an attractive option for foreign sports associations looking to penetrate the country.
The round comes at a time when China’s media sector is growing due to a thirst for content. That thirst was behind e-commerce firm Alibaba agreeing to buy online video streaming company Youku Tudou in November 2015, in a deal that valued it at $4.4bn. Alibaba and rivals such as Tencent and Baidu have built up vast, diversified e-commerce offerings, but they need to add media content to attract and keep users.
Tencent was involved in its own big deal last week, investing a reported $61m in a $100m series B round closed by China-based live streaming service DouyuTV, while Kunlun Fight, the promoter of a global kickboxing tour, raised $31m as it aims to build up its business into an entity that could one day rival UFC.
Cinema however could well end up dwarfing online video in terms of money invested. Film and TV producer Linmon Pictures secured $76m earlier this month in a series B round backed by Tencent and fellow Chinese corporate Legend Holdings, but that was peanuts compared to the $3.5bn paid by conglomerate Wanda Group for US-based film studio Legendary Entertainment in January.
TV and film production is a business that is potentially extremely lucrative, particularly for a company like Legendary which specialises in blockbuster franchises, but it is also expensive. Wanda is reportedly seeking $1.5bn in equity funding for Wanda Pictures, which combines Legendary with its own production capabilities, but considering Wanda owns a huge Chinese cinema chain as well as US chain AMC, it should have little trouble with distribution – though conflict of interest issues may come up at a later date.
The deal may well also prove the first shot in a salvo that sees Alibaba, Tencent and other China-based corporates invest more heavily in overseas content producers. Media and e-commerce are coming together online, united by platforms such as Tencent’s WeChat app or Alibaba’s e-commerce empire, and tie-ups are likelier to become more common in future.