Can sports save Alibaba Group?

In a bid to diversify its portfolio and cope with market volatility, Alibaba Group Holding Ltd.  has started to invest in different industries, moving beyond its traditional business. The company’s current portfolio comprises e-commerce, media, marketing, video, home entertainment, cloud computing, and other Internet-enabled technologies.

Recent reports indicate that Alibaba now aims to capitalize on the massive sports industry in China. Possible avenues of involvement for Alibaba Group include sports copyrights, sports media, event coverage, ticketing etc.

In the wake of the economic slowdown in China, the e-commerce market has also felt the heat and stock prices have declined. Alibaba currently stands at $62.59, compared to its initial public offering price of $68.

To counter this persistent economic downturn, many major Chinese players have opted for other ventures to hedge their risk. Alibaba and Baidu Inc.  have expanded into the Chinese taxi industry by acquiring a stake in Didi Kuaidi and Uber, respectively. Alibaba Group also invested in Aliyun, a cloud-computing platform, in July 2015.

Alibaba also said in a press release that it plans to integrate e-commerce, media, marketing, video, home entertainment, cloud computing, and other Internet-enabled technologies. This will assist it in forming a sports platform, which would cater to a vast Chinese audience. The latest push into the sports industry also indicates that the company is concerned about China's economic growth going forward. Given the drastic cut in consumer spending, Alibaba expects lower-than-estimated figures for Gross Merchandising Volumes (GMV) for the second quarter.

Given its sheer size, the Chinese sports industry holds tremendous potential. As reported by numerous media outlets, many US and UK soccer and basketball leagues have shown interest in expanding into Asia. After an agreement with Bayern Munich and Real Madrid to sell their merchandise on its web portal, Alibaba further intends to improve its product offering by capitalizing on the coverage and media aspect of the Chinese sports industry.

According to research conducted by Repucom in 2014, China has around 170 million supporters of the Barclays’ English Premier League, the UK's top soccer league, which is contested by 20 teams.

Tencent Holdings ADR has also signed a deal with the US National Basketball Association (NBA) to stream games for Chinese audiences. According to the NBA, nearly 300 million people play the sport in China. It plans to feature two pre-season games in China next month.

Conclusion

Bidness Etc believes that diversification is the best strategy in the sluggish economic environment n China. However, proper diligence and prudence must be exercised to determine the possible risks as well as the human resource requirements that will come with the diversified portfolio. This is primarily because the new focus areas require a wide range of expertise and sector understanding if Alibaba and its competitors want to realize its true potential and ensure that it actually helps them mitigate the impact of China's slowing growth.

Taken from Bidness ETC