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ESPN scores in China with new Tencent deal

Daniel Roberts

The "worldwide leader in sports" is making moves to see that it lives up to its slogan.

Tuesday night, Disney-owned ESPN (DIS) announced a landmark long-term deal with Chinese technology giant Tencent (TCEHY) to provide exclusive Chinese-language ESPN content across Tencent platforms. The partnership represents ESPN's "most significant digital presence ever in China" and lasts through 2020.

Financial details of the agreement were not disclosed, but ESPN tells Yahoo Finance that it will result in "at least a couple dozen" new hires, with "dedicated resources" given to the Tencent relationship in Beijing, Los Angeles, and at ESPN headquarters in Bristol, Conn.

"This agreement is significant for us because it marks a major expansion in our global business and our brand," an ESPN spokesperson told Yahoo Finance. "We’re building for our future, and China is a huge market and this is a major elevation."

This is about far more than brand expansion. It's about China, the fastest-growing market for sports media consumption, and it's about mobile, the new frontier for media companies. Just look at Facebook (FB) for proof: mobile ads accounted for 80% of the company's revenue in the most recent quarter. Last month the social network rolled out a new feature for posting real-time updates during sports events. ESPN is still the country's leading sports media powerhouse, but saw its revenue decline last year after a 7 percent drop in subscribers, resulting in major layoffs last October. New platforms for sports video content have proliferated, catering to cord-cutters who don't want to pay to get ESPN. The company knows that mobile will be crucial for continued growth. And not just in the U.S.

It is ESPN that is marrying up in this union: Tencent's market cap of $167 billion is bigger than Disney's $154 billion. It is also bigger than U.S. tech behemoths like HP and Cisco. Tencent has massive, unrivaled scope in China. And now ESPN's content will be featured across all of Tencent's mobile web and mobile apps products, like QQ, a massively successful social platform that started in 1999 as an instant messenging service.

This isn't ESPN's first foray into China, but you could think of it as its first adult relationship there. Through a joint venture with News Corp. called ESS, ESPN had a small presence in the country, but ESPN got out of that deal. This is its first exclusive relationship with any major Chinese company.

China loves the NBA-- American basketball stars like Kobe Bryant and LeBron James have built massive global brands thanks to endorsement deals and appearances there. And to give a sense of scope and viewership potential there for ESPN: 184 million viewers in China tuned in for the 2010 Olympic basketball matchup of China vs Team USA, a game that started there at 10 p.m. Last year's Super Bowl got 114 million viewers.

As part of this new deal, ESPN commentators will provide live Chinese-language analysis to bolster Tencent's NBA coverage. ESPN will also produce a weekly talk show about the NBA exclusively for Tencent customers. These bells and whistles amount to a no-brainer for ESPN: provide as much NBA content as possible to fans in a country that has proven its love of the sport.

ESPN is banking on China embracing basketball at the college level, too. Tencent will be the "exclusive digital home" for NCAA March Madness basketball, and for the X-Games in China. 

American sports fans won't necessarily see the fruits of this new deal, but its significance is huge. And as Disney looks to keep growing its global footprint, this is a smart new way to monetize a respected division that has shown signs of weakness in recent years.


Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology. 

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