Caixin
Feb 28, 2017 07:04 PM
BUSINESS & TECH

LeSports Loses Broadcast Rights for Asia Champions League

(Beijing) — LeSports, the sports media arm of technology group LeEco, confirmed on Tuesday that it has been stripped of its rights to broadcast the Asian Football Confederation (AFC) Champions League in China, dealing a blow to its ambitions to become a major player in the fast-growing online sports streaming industry.

Neither LeSports nor the AFC gave any reason for the confederation’s decision to terminate the four-year $100 million deal, but media reports said the company had failed to meet several payment obligations.

Under an agreement signed in 2015, LeSports was given exclusive rights to transmit AFC games in China between 2017 and 2020, which included qualifying matches for the World Cup and the Asian Cup. The deal was part of a spending spree that won the company a slew of broadcast rights, both exclusive and non-exclusive, to competitions including the Chinese Super League, the NBA, Major League Baseball, and English Premier League (EPL).

But in a statement on Tuesday, the AFC said it had “no alternative but to terminate the contract” and said it had found a new partner to stream the competition in China — China Sports Media (CSM). Also known as Ti’ao Power, CSM is a subsidiary of private equity firm China Media Capital.

LeSports also issued a statement apologizing to subscribers, who pay 59 yuan per month to watch sports programs on its platform, and pledging to compensate them for the loss of the AFC competitions.

“We regret to say that users will not be able to see AFC Champion League games on our platform… We apologize. We’ve let everyone down,” it said.

The statement offered a customer support number for subscribers to call for further details, but a spokesman for LeSports said it hasn’t yet worked out a compensation plan.

“We are still deliberating on the details of the arrangement as not all users paid for a LeSports subscription to just to watch the AFC games,” he said.

LeSports is being forced to divest some of its broadcast rights, which suggests that China’s sports broadcasting market isn’t yet mature enough to make a subscription model work, said Zhang Qing, CEO of sports consulting firm Key-Solution.

“The company will have to handle this well and compensate subscribers,” he said. “The best option would be to make more use of the content it already has, for example showing more match-related programs and providing more statistics and analytics to flesh out content during matches.”

LeSports and other media platforms have spent billions of yuan over the last few years on deals to broadcast live sporting events in an effort to grab a growing share of consumer spending on leisure and entertainment.

By October 2015, the company had signed more than 250 agreements, chief operating officer Yu Hang, who is responsible for deals and overseas strategy, told a news briefing at the time. Sources told Caixin last week that Yu is planning to leave the company.

Chief executive Lei Zhenjian admitted in November 2016 that “monetization for quality sports matches is not as easy as we expected. This has caused a large cash void, and we are now being tested over the stamina of this company.”

The loss of the AFC contract is just the latest problem to hit LeSports. Super Sports Media, the current owner of English Premier League broadcast rights in China, revealed in December that the company had missed a $27 million payment deadline and threatened to “cut off the signal” for Boxing Day matches on December 26 unless the money was paid.

LeSports’ plan last year to invest 2 billion yuan for a 50% stake in one of China’s top soccer clubs, Beijing Guoan, also fell apart, with the club’s chairman saying in September that the deal had been terminated because the company failed to make its first scheduled payment.

The cash squeeze facing LeSports is related to the financial difficulties facing its parent company, technology conglomerate LeEco, run by billionaire Jia Yueting. He admitted in a letter to employees in November that the group was facing a cash shortage after spending billions of yuan on breakneck expansion into areas such as smartphones, electric cars and film-making.

Ending: Contact reporter April Ma (fangjingma@caixin.com)

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