Wanda to build a solid foundation for China’s global soccer ambitions

When China’s Dalian Wanda bought a 20% stake in Spanish soccer club Atletico Madrid in January, it was hailed as the first major mainland Chinese investment in European sports, and sparked speculation that more money would be flowing from East to West. Wanda’s name has been linked to other deals for top European teams, including the purchase of Silvio Berlusconi’s 30% stake in AC Milan, speculation that Wanda denies. Still, the Chinese giant seems to be playing a much bigger game of diversification, and building a foundation for China’s global soccer ambitions.

In February, Wanda fueled further talk of its Western expansion into sports, with a much larger acquisition: the $1.2 billion purchase of Switzerland-based sports marketing agency Infront.

Other deals with Chinese companies are afoot. China sports firm Vansen Intl. is reportedly in talks with Dutch team Den Haag, and Hong Kong-listed Chinese electronics firm Tech Pro Technology is negotiating to buy French team Sochaux.

Giant egos may be at play — doesn’t every self-respecting multibillionaire own a team (or want one) these days? — but Wanda at least can put forward solid business and political cases for its sports scores. Not least of these is its policy of diversification, starting in property and real estate, and growing sideways into the cultural and entertainment sphere. Lateral expansion has already taken it into film production and distribution, and recently into e-commerce.

Infront has only a modest position in China, handling media finances for China’s main professional basketball league the CBA. But as China’s middle class grows, Infront has the potential to bring more money into Chinese pro sports, and to move league and team management to adopt more professional practices.

Among the things that drew Wanda to Atletico Madrid is its youth training academy, Infront Italy’s president Marco Bogarelli told the Italian media recently. Wanda chairman Wang Jianlin pointed to the training program at the time of his investment in the team. “(It) will no doubt be very useful for the growth of grass roots (soccer) in China,” he said.

Both money and skills are badly needed in Chinese soccer. While the Chinese women’s national team reached the World Cup final in 1999, the men’s team has qualified only once for the World Cup. And at club level, the game is an embarrassment, rife with corruption and boasting comparatively few native players. Wanda, which has owned the soccer team in its Dalian hometown since 1994, has witnessed this first hand.

The company mixes property holdings with culture. It bought exhibition circuit AMC in 2012, and established the largest chain of multiplexes in China on the back of its mall developments. It’s constructing a studio complex in Qingdao that will, at least partially, be financed by the sale of apartments and offices. And it is building a China-wide string of movie-related theme parks.

That hybrid personality makes Wanda ideally suited to make a success of an AC Milan takeover, with the club bemoaning how badly it needs to build a new stadium. Financially, Italian soccer clubs are very weak compared with their counterparts in the U.K., many of which have learned to maximize returns not just from ticket sales, but also from using their stadium grounds, which house restaurants, gyms and other facilities that make money during non-game days throughout the week. A new stadium for AC Milan would allow the team to reduce its dependence on sales of TV rights (which are in turn related to performance on the field, where the club’s fortunes have been sliding), and boost its ranking in the Deloitte Football Money League, which profiles the earnings of European soccer clubs teams — Real Madrid is No. 1, followed by Manchester United.

“Participating in the construction of stadiums with related commercial activities is a natural outgrowth of what the Wanda Group does,” Bogarelli says.

In Asia, Wanda’s huge resources and its growing communications-industry skills would be assets for a team’s brand- building. Atletico Madrid, which has the largest social-media following of any soccer team, recently announced it would play three matches in China this summer. It’s not a far stretch to envisage Atletico-branded activities in Wanda’s theme parks or avatars of Atletico players featured in online games.

Nor is it inconceivable that Wanda and its prominently branded European clubs might drive up the value of soccer rights in China, shifting them from ad-supported models to pay- or premium-models.

Those who saw the government’s fingerprints in Wanda’s earlier move into Chinese film see similar evidence in its move into the first division in global soccer. In early March, China’s central reform group, chaired by president Xi Jinping, announced plans to boost the sport, building more fields, and possibly making it compulsory in schools.

“We must develop and revitalize soccer to ensure we are a strong nation of sports. It is the desperate desire of the people,” said a statement issued after the most recent meeting of the central reform leading group.

Perhaps that hunger for soccer dominance will lead to a future World Cup being held in China — played in Wanda-owned stadiums.

Italian movie mogul Aurelio De Laurentiis, who owns Napoli, Italy’s most profitable soccer club, has long been looking to China as a potential partner for both his movie and sports ventures. He spoke to Variety’s Nick Vivarelli about the Wanda Group and about the sport he loves.

Is Wanda’s purchase of Swiss sports marketing firm Infront going to make a difference in Italian/European soccer?

Yes. First and foremost, because Infront has a deep understanding of the market. Infront and Wanda both understand that different countries have different economies, cultures and fans. China has the needs of a country with a young economy. Infront and Wanda will be able to push (soccer teams) in Italy, Germany and France to make a leap forward.

Movies and soccer are at the core of your entertainment-industry vision; do you think Wanda has a similar vision?

I’ve long said that movies and sports, especially (soccer), would gain more importance as global content on TV and other outlets. Wanda has understood this, and China and the U.S. — which are the last real markets for theatrical distribution of movies — will soon also become a huge market for global (soccer).

What are your thoughts on China’s decision to prioritize the sport?

I had an office in Beijing for several years, to develop movies and (promote soccer). Now I am very happy to see that Chinese President Xi Jinping will make China a (soccer) powerhouse. I think … (that the competition) will help European (soccer) become more powerful.

Original title by Variety: Wanda uses soccer buy to push into sports expansion