China is most eager to build a soccer powerhouse to rival that of any nation in the world and the elements are in place for the creation of a multi-billion dollar industry.
Gaetano Di Renzo sat in a hotel coffee shop in Rome surrounded by architectural designs and a grand plan to launch a football franchise and academy in Las Vegas. His project to bring the Major League Soccer (MLS) Las Vegas Heroes to the Desert City and create a soccer academy of the highest order run by Italy’s top football stars is backed at the highest levels of Nevada State government. Di Renzo, CEO and Founder of GDR Studio International, partnered with former Serie A football star Daniele Fortunato, CEO and Founder of F Group International, plans to deliver the US$ 1 billion Fusion Project to a country primed for soccer growth. If Di Renzo has it his way in creating an international soccer city the Las Vegas project will be closely tied to China’s emerging soccer kingpins.
“Did you hear that crazy interview with Jack Ma on his denial of buying AC Milan?” DiRenzo laughs taking another sip of espresso. “And, have you seen the reports on China’s plan to dominate football by 2050. How the world of football has changed from the days where it was all about Italy, Germany, Brazil and the UK. This is now the world’s number one business – bar none – and the Chinese are taking a piece of it.”
Di Renzo has set his sights on the biggest national sports market in the world with his Las Vegas soccer dream, but it is China that intrigues him. When Americans think of football, which they love with a passion, they think of stars like Manning and Brady, not Ronaldo or Messi. American youth are still more likely to pick up a baseball bat then head down to the soccer field to kick a ball around. Still, soccer’s popularity is growing, mainly because mothers see it as not as violent a contact sport as football. With over 13 million Americans playing the game, soccer is the third most popular team sport in the US, behind basketball and baseball.
The football-passionate Di Renzo knows all this. He has studied deeply the demographics and mechanics of soccer in the US as part of his Vegas initiative, but he truly wants to be a part of China’s Soccer Master Plan outlined by President Xi Jinping. Di Renzo likes the fact that a leader is a football fanatic – just like him. In 2011, then Vice President Xi was asked what his personal wishes for China were. Xi mentioned three, all centered on football: for China to qualify for the World Cup, host the World Cup and win the World Cup.
“Did you see the latest photos of Xi kicking a football around in his suit? It looks like he has talent,” muses Di Renzo. “The President’s enthusiasm is contagious as football fever sweeps the nation. The numbers are staggering and it is our intention to play a leading role in this phenomenon. We consider the Vegas project as a perfect model for China, and welcome partners to participate in Vegas and bring the Fusion Project to China on a national scale. After all, who better to work with than the Italians when it comes to this game.”
The China Soccer Master Plan does indeed have amazing implications for the industry on the Mainland and the world as a whole. By 2017, football training will begin in earnest on the grassroots level, with the Ministry of Education planning to increase the number of specialized schools from 8,000 to 20,000 to encourage more than 30 million primary and secondary students to practice regularly. Study-abroad programs will be rolled out to refine the best of the talent to emerge from this soccer playing mass.
Winning the Cup
On the road to winning a World Cup, China’s ambitious plan is to establish a three-tier amateur competition that includes club teams in 100 cities and involves over 50 million players. Some 70,000 soccer fields, or half a field for every 10,000 players, are in the planning stages. Training will be strengthened by 10,000 local personnel and 5,000 instructors to develop China-based clubs that dominate the sport in Asia and are renowned globally. This initiative has spawned a massive multi-billion dollar industry where F Group is competing with peers from Brazil to Monaco to make its mark in coming years.
“The plan is set for F Group to enter China as we are most impressed by the commitment of not only the government, but the private sector as well,” says Paolo Carlin, CEO of Carlin & Associates and financial advisor for Fusion Project. “We have seen the interest of groups like Dalian Wanda, Alibaba and China Media Capital (CMC) in placing billion dollar bets on the course of football in China and worldwide. We have something to offer this group as they set the agenda. The combination of Italian football know-how and club management with the China mission to win a World Cup is a natural combination.”
So how does China’s football prowess compare to the rest of the world? Last year, the men’s team ranked 97 globally. According to the Chinese Football Association, by 2030 China aims for the men’s national squad to be among Asia’s top teams and the women’s team to be one of the world’s strongest. Still, its men’s team has only made one World Cup appearance (2002), with a dismal no-goal performance in three games. This year, the national team made it to the final qualifying round for Asian teams aiming to play at the World Cup. With all China cheering their team on the World Cup dream seems one step closer.
“Italy is one of the most famous examples of a nation where football is more than a game,” adds F Group’s Fortunato. “It’s a passion and Italian fans have good reasons to be passionate.” The national team has won the World Cup four times, more than any nation except five-time winner Brazil. The so-called Azzurri won back-to-back titles in 1934 and 1938, a third cup at the 1982 Spanish tournament and a fourth in Germany in 2006.
Italian league teams attract the top football talent in the world and are consistently ranked among the best. It is no surprise that Forbes counts four Italian football clubs – Juventus, AC Milan, Inter Milan and Napoli – among the world’s top 20 most valuable teams. Juventus and AC Milan are nine and ten on the list, with a current market value of US$837 million and US$775 million respectively. The commercial success of Italian football is something the Chinese Super League (CSL) owners is looking to replicate soon.
China’s commitment to become the next big thing in football is already stunning the sports world. During the latest European winter transfer season, teams from the CSL spent a staggering €337 million to acquire players, almost a hundred million euros more than the €253 million spent by teams on English Premier League players. China’s football shopping spree dwarfed the combined spending of the French, German, Italian and Spanish leagues, according to reports from Transfermarkt.
The Chinese private sector is fully aligned with the state’s view of football – but perhaps for different reasons. China’s richest men and most powerful institutions have thrown their hat into the football ring in search of profits and prominence. None is more active than Wang Jianlin, Chairman of conglomerate Dalian Wanda Group Co., the richest man in the country with a personal fortune of at least
Wang recently made football news when he concluded a deal with FIFA to fill the spot when major sponsors like Johnson & Johnson and Germany’s Continental AG walked away due to a corruption scandal that tarnished the FIFA image. China’s entertainment and property giant will become FIFA’s first major Chinese partner, with the highest level of sponsorship rights for the next four World Cup tournaments, running all the way to the 2030 championship. The financial arrangements were not disclosed at the Zurich meeting.
The FIFA foray is a deal that Wanda has worked on since February 2015 with the completion of the acquisition of Swiss sports marketing and broadcasting company Infront Sports & Media AG for just over €1 billion. At the time, Infront was headed by Philippe Blatter, nephew of Sepp Blatter, the former long-time president of FIFA, who was succeeded in February by Italy’s Gianni Infantino. In November 2015, Wanda appointed Philippe Blatter to serve as CEO of Wanda Sports Holding and the younger Blatter was alongside Wang and Infantino at FIFA headquarters when the sponsorship deal was struck.
Wang has soccer ambitions beyond FIFA. Last year, Wanda announced an over US$50 million deal to buy a 20% stake in Spanish soccer club Atlético Madrid, currently valued at US$436 million. This deal was concluded at the same time Wanda announced a close to US$50 million investment to support the two- year development program for 180 young Chinese soccer players in Spain. A sponsor of the Chinese Super League, Wang used to own the Dalian Shinde FC, but left the market for commercial reasons and has yet to return.
Wanda’s Wang goes toe-to-toe with Li Ruigang, Chairman of China Media Holdings, a leading media fund, and former Chairman of Shanghai Media Group, one of China’s most powerful media companies. CMC owns a slate of major sports media rights including the CSL, China Football Association “Team of China” (National Teams), and China University Football League. Last October, Li signed an all-media exclusive global broadcast rights over the next five years for the Chinese Super League, the country’s highest tier of professional association soccer.
The CSL deal was sealed at Rmb8 billion (US$1.3 billion), with CMC outbidding China’s largest national broadcasting network CCTV, said to be considering a joint bid with Alibaba, and other suitors, including an affiliate of Dalian Wanda. The second and third place bidders, Great Sports Media Co. Ltd., a subsidiary of Shanghai Media Group, and CCTV Sports & Entertainment Co. were only willing to pay half the CMC amount.
The CMC arm involved in the deal, Ti’ao Dongli Sports Communications (also known as China Sports Media Ltd.), was acquired by CMC earlier in 2015 and has owned the CSL’s TV rights since 2001. The new deal was met with surprise as CSL sold its broadcast rights for US$13 million for 2015 and US$8 million in 2014, a far cry from the CMC bid. In comparison, domestic TV rights for the English Premier League cost about Rmb18 billion (US$2.8 billion), about Rmb200 yuan per person based on the UK population, while rights to air CSL games only cost 1.1 yuan per person.
Last month Li explained the deal to SBR: “The copyright of China’s sports games has long been undervalued. Compared to the price for the Premier League or the NBA, this is a low sum for China’s top soccer league’s exclusive rights. We have faith in China’s sports industry, and the money we pay can help our clubs purchase new equipment or improve coaching to create a better result. China is looking for experience in running a high-end or well-operated league and we are interested in many sports
The Li magic touch seems to have won the day on this one. CMC has already begun to monetize the CSL rights deal. In early 2016, Le Sports acquired the exclusive live streaming rights covering two seasons for China’s top football league at a reported Rmb2.7 billion (US$400 million). The sports arm of LeEco, previously LeTV Holdings will live stream the soccer matches starting in 2016 in China and other regional markets.
Overseas CMC joined with a Chinese investor group to buy a minority stake in English soccer club Manchester City for US$400 million. CMC and CITIC, one of China’s largest financial groups, are buying a 13% stake in City Football Group (CFG), controlled by Abu Dhabi interests that control Manchester City, New York City FC, Melbourne City FC and other soccer assets. The deal values CFG at US$3 billion. The capital from the share issue will be used by CFG to fund its China growth, further CFG international business expansion opportunities and further develop the portfolio of CFG infrastructure assets.
“Football is now at a fascinating and critical stage of development in China,” remarks Li, who joins the board of CFG. “We see unprecedented growth opportunities in its development as China’s most watched sport and its inspirational role of bringing people together with a shared passion. CFG, whom we have come to know well, represents a systematic approach to building a global platform for football know-how, player development, academy programs and commercial partnerships that will benefit China’s football industry on multiple levels.” Li notes that consortium partner CITIC Capital sees this investment as a prime opportunity for furthering the “contribution of China to the global football family”.
Jack Ma, Chairman of Alibaba Group Holding Ltd. and China’s second richest man has entered the China soccer club sweepstakes as well. Though a majority of Chinese soccer clubs are struggling financially, the trading value of some of these clubs is rising to astronomical levels. Alibaba paid Rmb1.2 billion yuan (US$193 million) for 40% of Guangzhou Evergrande, one of China’s top CSL clubs. For property tycoon Xu Jiayin, whose Evergrande Real Estate Group bought the struggling team for Rmb100 million in 2010, the deal means a return of 23 times over four years, or an annualized return of 120%.
The impact of the Evergrande Taobao deal has not been lost on the sports world. Based on Ma’s hefty price tag, Guangzhou Evergrande Taobao Football Club is the world’s 16 most valuable soccer team, ahead of Atletico Madrid. Currently, Evergrande Taobao FC is one of China’s most successful clubs. Under the leadership of former Italian national team coach Marcello Lippi, Evergrande became one of the richest clubs in Asia. Evegrande has taken the last four CSL titles, three under Lippi, and won the Asian Champions League in 2013 and 2015. Lippi resigned in 2015, replaced by respected Luiz Felipe Scolari, former Brazil national team manager and World Cup winner.
Evergrande could become the first football club listed in Asia after it filed for an initial public offering in China. The team filed with the National Equities Exchange and Quotations (NEEQ) to list on the new Third Board. The deal was reportedly arranged over cocktails between Ma and Xu. Evergrande valuation could surpass Rmb10 billion (US$1.6 billion), smaller than Manchester United Plc’s nearly US$3 billion market capitalization, but larger than more traditional publicly listed teams such as Juventus FC SpA and SS Lazio SpA in Italy and Germany’s Borussia Dortmund. Xu’s Evergrande holding company currently owns 60% of the team and plans to sell none of its shares in the offering.
Di Renzo concludes that China is well on the way to becoming a soccer super-power – on paper if not on the field. “There is no doubt that China’s richest and most powerful men have embraced the football culture, as a money spinning machine and a way of life,” he adds. “Our goal is to work with China to build another Manchester United, which we consider the most successful football club on earth with over 400 million fans. This vision is at the base of our model and it is in synch of where China wants to head.”
Financier Carlin adds that the partnership between the Italian and Chinese football worlds could yield interesting results. “We want to work with a Chinese football investor that can assist us in creating the Vegas international football city and allow us to forge the same model in a leading China market,” he says. “If that can be achieved what is the value created? Judging from what we are seeing in deal flow, there is no upper limit to how big this can get.”
Football History Repeated
China and Italy both have soccer cultures steeped in history – and we are not talking about the recent past. To the surprise of many Italian football fans, 2,500 years ago a sport called cuju was popular in China. Cuju roughly translates as “kick the ball with foot”. In a sport much like football, ancient Chinese stuffed feathers inside a leather ball to kick inside a rectangular field. To score, a player had to kick the ball through a piece of cloth hung between two poles. Just like today’s game, cuju players could touch the ball with any part of their body except arms and hands. Referees made sure that players followed the rules.
First used by military leaders as a competitive sport to keep soldiers physically fit, the game became widely played when royal courts organized cuju matches played by professional players. Unlike modern day football, the number of players to play cuju is flexible, ranging from two to 16, though royal court games usually numbered 12 to 16. Not all cuju matches are won by goals. In some tournaments, games are decided by scores given to players according to how they played the game. During the mid-17th century, cuju began to decline in popularity though its codes of play has survived throughout the ages.
About the same time China played cuju, the Romans enjoyed their own version of football. Soccer in ancient Rome had no rules, strategies or tactics. It was played by 54 players (27 on each team) with an aim to kick the ball into the opposing team goal. The sport became so popular it was included in the early Olympics. Aside from football played on a field, there was another game played on the streets. Roman orator Cicero noted the sport was mostly played by young boys who ran around town kicking a ball on the ground.
With 265 million active players globally, football arouses passionate devotion and has proven to be the road to riches for its players and team owners, impacting the lives of millions and pride of nations. Modern football was born in England in 1863 when a group of players agreed on rules for a ball-kicking game. The simplicity of football – it has 17 essential rules and requires only a ball and a patch of ground – is an equalizer. Football made its way across the English Channel to become wildly popular in continental Europe. During the 1914 Christmas truce of World War I, German and British troops were said to have played a match.
The renowned and much maligned Federation Internationale de Football Association (FIFA) was established in 1904 under Swiss law and is still the governing body of world football today. The first World Cup tournament was held in 1930 and the game has since become the most widely viewed sporting event in the world. Around 715 million people watched the 2006 final match held in Germany while the 2010 South Africa event was broadcast to viewers in some 204 countries.