ESPN and Tencent team up to cover sports in China

ESPN is partnering with Chinese tech giant Tencent in a deal that greatly expands the sports media company’s presence in the world’s most populous country.

The Walt Disney Co.-owned unit announced Wednesday that it will supply Chinese-language programming, events and content for Tencent’s live sports coverage, providing a new avenue of global growth for the sports broadcasting behemoth.

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ESPN will have a branded section on Tencent’s QQ Sports (Sports.qq.com), a leading Chinese online sports portal. ESPN’s content will also be integrated across other QQ.com channels.

Under terms of the licensing deal, Shenzhen-based Tencent will pay ESPN for content that will include coverage and analysis of NBA games, which are already hugely popular in China, and international soccer. Additional sports are expected to be added as other American sports leagues are looking to expand their global reach.

ESPN has had some exposure in China, providing programming that is piped into hotels and factories there. It also reached the market through the satellite channel ESPN Star Sports, a joint venture with News Corp. that ended in 2012.

But the deal with Tencent gives ESPN direct access to China’s consumers on their smartphones, a potentially massive audience. Eighty percent of the China’s 600 million Internet users connect via mobile devices.

“We are thrilled to collaborate with one of China’s most innovative companies, and our relationship with Tencent marks an exciting new era for ESPN’s global business,” Russell Wolff, executive vice president of ESPN International, said in a statement.

ESPN will have dedicated Chinese-speaking personnel and on-air talent to support the joint effort. Much of the content will be produced out of the company’s offices and studios in Bristol, Conn., and Los Angeles, which will staff up to handle the new initiative.

Tencent will also license from ESPN the exclusive, live digital rights in mainland China to the NCAA Men’s Basketball Championship Tournament, more than 100 regular season college basketball games and ESPN’s extreme sports event, the X Games.

The Tencent deal is representative of ESPN’s aggressive search for new business opportunities. It comes as the growth of one of its main domestic revenue drivers — the cable subscription fee — is slowing as many younger consumers turn to broadband Internet for video entertainment.

The deal is the latest in a flurry of pacts between entertainment companies in the U.S. and China. For Disney, the Tencent deal fits into its strategy to tap into China for growth and expansion. The company’s next theme park, Shanghai Disney Resort, is scheduled to open in the spring. Also, Disney’s franchise movies such as the “Avengers” series have performed well in China, which is on track to become the world’s largest film market.

Stanley Rosen, a political science professor at USC and an expert on China, said the region represents “the last big frontier” for ESPN, and if the entity can make deep inroads there, it could lead to significant financial rewards.

Tencent is one of the largest technology companies in the world, valued at $76.5 billion, according to data from the market research firm Millward Brown.

Marc Ganis, co-founder and managing director of Jiaflix Enterprises, which helps studios distribute movies in China, said ESPN chose the right partner to further tap into the Chinese market.

“Tencent is the real deal,” he said. “Quite a few of the Chinese companies that may have gone public so they have some cash to throw around don’t execute as well as their market cap would suggest. Tencent does. They don’t let themselves get distracted like some other large Chinese companies tend to do.”

In a statement, Tencent Senior Executive Vice President SY Lau championed the deal with ESPN, saying it would accelerate his company’s development “as a comprehensive and professional digital platform and set benchmarks for the Chinese sports media sector.”

However, Ganis said that Tencent and ESPN will have to work to develop interest in the X Games and college basketball content that is part of the deal.

“The Chinese people are not jonesing for American sports yet, other than the NBA,” said Ganis, who also is founder and president of SportsCorp Ltd., a sports business consulting firm. “That is going to take some time to build an audience. One of the limitations for building an audience for non-Olympics sports has been that their national sports channel has only so many hours in the day, and their primary mandate relates to Chinese sports, Chinese athletes and Olympic sports.”