ENTERTAINMENT: Suning Joins Sports Club with Soccer Buy

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Bottom line: Suning’s move into sports is aimed at providing content for its PPTV online video service, but is also the latest in a string of wide-ranging investments that reflect a company with an identity crisis.

Suning invests in soccer

Sports teams are becoming flavor of the day for Chinese firms with entertainment aspirations, with word that retailing giant Suning (Shenzhen: 002024) has joined the bandwagon via a new investment in a local soccer club. The company’s latest deal will see it invest 523 million yuan ($80 million) in the Jiangsu Sainty Football Club, which like many other professional Chinese sports teams is struggling financially.

Suning’s interest in soccer is probably related to its 2013 purchase of PPTV, a relatively large player in China’s crowded online video space. The Suning-PPTV tie-up left many people puzzled at thee time of that announcement, since the 2 companies have little in common. But Suning has been aggressively promoting the service in its trademark consumer electronics stores, and in August it announced a plan to invest 1 billion yuan into a campaign to sell smart TVs equipped with PPTV’s online video service.

Against that backdrop, this latest deal appears to show that Suning is now in the market for exclusive content that PPTV can broadcast over its online video service. Suning was quite vague about the actual nature of the tie-up, and is simply saying it will become a partner of the Jiangsu Sainty club in an unspecified capacity. (Chinese article)

Suning gave out the 523 million yuan figure to describe the partnership, though it never explicitly said it will invest that amount for a stake in the club. Reports from an event to announce the tie-up note that Suning was formerly a major sponsor of the club, and that this latest partnership represents an upgrading of that relationship. So perhaps that means that Suning is paying the sum for exclusive rights to broadcast the club’s games.

Corporate Identity Crisis

This tie-up is the just the latest outside its core retailing business for Suning, which in my view seems to be going through an identity crisis. The company was one of China’s leading traditional retailers through its chain of consumer electronics stores, and smartly realized the importance of e-commerce relatively early. It spent aggressively to build up its website and find synergies with its brick-and-mortar stores, though it has failed to find big success in that foray.

It purchased PPTV in 2013 as part of a broader consolidation that has seen nearly all of China’s major online video companies become part of larger media firms. This summer it also formed a new equity tie-up with e-commerce leader Alibaba (NYSE: BABA), which saw the pair make a major equity swap to buy shares worth a combined $6.5 billion in each other. (previous post)

Anyone reading all of this can probably see why I’m calling Suning a company with an identity crisis. This move into sports certainly looks relatively logical due to the PPTV campaign, and mirrors similar moves by a growing number of entertainment-minded Chinese companies. Alibaba chief Jack Ma has invested in another major soccer club in Guangzhou, and state-owned media giant Shanghai Media Group (SMG) and real estate leader Wanda have also made major investments in the space. (previous post)

Most of these sports investments are driven by a desire to get exclusive content, but they are also driven partly by Beijing’s bigger wish to build up China’s professional sport industries. In this case Suning’s motivations are probably mostly commercial, aimed at getting some exclusive programming. But there could also be some political elements, since the company and soccer club are based in Jiangsu province.

At the end of the day I don’t really have any objections to Suning’s move into entertainment, and its attempts to promote PPTV smart TVs through its traditional and online stores looks like a smart move. But the company really needs to find more focus and also execute better on its strategies, or risk seeing these newer forays follow a similar path to its faltering e-commerce business.

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