Bilibili seals three-year China broadcast deal for League of Legends World Championship

Chinese video sharing and online-gaming website Bilibili has sealed a three-year deal for exclusive broadcast rights to Riot Games’ annual League of Legends World Championship, its winning bid of ¥800m (€102m/$113.1m) beating off other gaming content platforms competitors such as Douyu, Huya and Kuaishou.

Beijing News reported that this is the first instance of a bidding process for the exclusive media rights of an esports event property in China.

The deal begins in 2020, when the finals of Riot Games’ flagship global event will be held at the 56,000-capacity Shanghai Stadium. Six other cities across China will be hosting different stages of the championship, though Shanghai is the only location so far confirmed. The finals of the 2017 League of Legends championship was held at the 44,000-seat Beijing National Stadium.

Ivan Zhang, vice-president of Huajin Capital, told SportBusiness: “I suspect the markets are highly concerned about whether Bilibili can generate enough revenue from the deal to cover its cost.”

“Bilibili is unlike its competitor Huya, which has built a sound system to generate revenue from live esports events,” Zhang adds. Huya generates most of its revenue from sales of virtual gifts and items, which viewers can buy as “tips” for their favored gamers and broadcasters. In Q3 2019, Bilibili’s net loss for the three months ended September 30 also expanded 61 per cent year-on-year to ¥405.7m.

“Bilibili reached 100 million monthly users for the first time in May this year, while market competitors Douyu had 153.5 million, and Huya 116.6 million during the same period.

“Bilibili has just started, while Huya has been involved in the live esports events broadcasting industry for several years, and has a huge existing user base. Bilibili is likely to be trying to use the World Championship as a quick way to kick-start its own user base to compete.”

Bilibili chief financial officer Sam Fan said in a statement: “Looking ahead, we will continue to convert our growing traffic to paying users, further improve our gross margin and continue to work to achieve sustainable growth.” The company has been broadening its services beyond video-sharing and game publishing to live-streaming, online comics and e-commerce to boost growth and reach a market capitalisation of $10bn, a goal set by chief executive officer Chen Rui, who said in September: “A $10bn market cap is the minimum size for content platforms that wish to remain up and running in China three years from now.” At the time of writing, Bilibili’s market capitalisation is $5.6bn.

The growth strategy isn’t unsound, according to Zhang. Bilibili has its content community that produces anime, comics and gaming (ACG) content, which is quite popular among younger demographics. If they can attract League of Legends fans to their platform, there could be a fair amount of viewership retention, which would be a big boost to their user numbers, he said. But ultimately the ¥800m millstone Bilibili is reportedly paying is cause for question.

“The price is really too high, and I have reservations if these broadcast rights are really worth that much. With the current state of the Chinese economy and the ongoing trade war, investors pay more attention to profitability.”

The strategy of building on massive media rights acquisitions still holds a stigma for market investors, according to Zhang. OTT platform LeSports, which spent heavily to obtain broadcasting rights for several major sports events, was valued at ¥24bn after a Series B+ round of funding in May 2017. But the company’s business slumped after a debt crisis led to missed payments for rights deals.

“LeSports once tried to grow their user base by acquiring media rights at all costs, but ultimately the strategy failed. It’s likely investors will be concerned about whether Bilibili can succeed using the same strategy,” Zhang added.