Eastern promises: Lagardère’s Chinese venture

As Lagardère Sports and Entertainment celebrates the opening of its major new office in Shanghai, the company’s chief executive, Andrew Georgiou, explains how local knowledge is helping the agency get ahead in the country, and why no one in the west has yet truly understood the growth of China.

Eastern promises: Lagardère’s Chinese venture

"Everyone is talking about China," says Andrew Georgiou, chief executive of Lagardère Sports and Entertainment.

“In this business, you can’t help but hear about it. But the numbers in this market are frightening. People haven’t got their heads around what it means. The growth of this country is terrifying and I think in the west in particular, but even here, people haven’t even begun to understand the implications.”

Georgiou is speaking with SportsPro in Shanghai’s Hyatt on the Bund hotel, with the city’s vast and luminous financial district lightning up the skyline behind him. It’s an impressive sight and, for all that discussion that has taken place over the past few years about China’s ascension to the status of global superpower, it perhaps takes being here and seeing the investment in action to appreciate the scale of what is being done.

This November will mark half a decade since Xi Jinping assumed the office of president in China and, alongside its wider economic growth over that period, a sub-plot has developed relating to the country’s rise to global preeminence in the sporting world. Xi has made sport a key pillar in his long-term plan to strengthen China’s international dominance, with a two-pronged strategy involving both increasing influence overseas – through massive investment in European soccer clubs, for instance – and attracting greater investment into the country from western sources.

For Georgiou, who describes his “journey with Lagardère” as having started three years ago, when he was named chief operating officer of the division, this has presented an opportunity he knew he – and the agency – could not afford to miss.

Though it has already been in operation for nearly a year, the official opening of Lagardère’s Shanghai office took place in August, with the agency inviting some of its biggest clients along to commemorate and celebrate the occasion. The magnitude of those guests – with senior representatives from the likes of Formula One and Bundesliga soccer giants Borussia Dortmund in attendance – is indicative of the level of desire that exists to crack this market. Lagardère is working with both, in varying capacities, to help grow their stature in China. The Asian market as a whole, says Georgiou, is “a real geographical strength” of Lagardère’s.

Chinese fans cheer on German soccer side Borussia Dortmund during a pre-season friendly in the country. The Bundesliga giants have made a significant push into China, aided by Lagardère.

“We’ve been [in China] for 25 years already, and we’ve proven that we know how to operate in this part of the world and in China specifically,” he says. “The Asian Football Confederation [AFC] is one of our biggest rights holders but we’ve been in and out of China for 25 years, whether it’s been the Asian Basketball Confederation, whether it’s been the Asian Tour, whether it’s been the Chinese Golf Association or the China Football Association, we’ve been coming in and out of here with European football clubs for years, we’ve been selling the Premier League into this market for years.

“The foothold that we’ve had in this part of the world for over 20 years, and the people we’ve had on the ground, and our understanding of the market and how it works, I think, is a really core strength. If you look at what is clearly a shift in terms of how sport is being driven – and how the economy is being driven – and how influential Asia and China is, our understanding and knowledge here is a really big strength as well.”

None of this would have been possible at this scale for Lagardère Sports and Entertainment if not for the major restructuring the company underwent in 2015, when several Lagardère-owned properties were merged to form the new umbrella entity. This included World Sport Group, the subsidiary for which Georgiou had previously served as chief executive, as well as major players such as Sportfive and Lagardère Unlimited.

If not necessarily struggling, the various divisions were not entirely thriving, either, and Georgiou says that the tensions between the different properties and different geographies in the company made it a “real difficult place” to work.

It is now a “radically different organisation than it was three years ago”, he says, with the restructure preempting a cultural shift “that had to happen, but which has happened as a consequence of the series of steps that we as a management team took along the way and the approach that we took in doing it”.

“Taking apart all the individual agencies and putting it back together in a completely different way allows us to take advantage of our global footprint, which was never really the case before,” Georgiou explains. “It’s allowed us to focus on what we think we can be good at, what our core strengths are, versus all the things we were doing across the different agencies.”

Financially, too, things have “improved out of sight”, but it is in the perception of the company across the industry that Georgiou finds the greatest succour. “We’ve got some really good success stories now that’s proving to the market how the business has evolved and how we are back now, being successful,” he says. “I’ve said a number of times, the key change for me out of all that has been the cultural change we’ve put through the entire organisation and it’s probably the thing of which I am the proudest.

Georgiou says that the restructuring of Lagardère Sports and Entertainment has contributed to the agency's rapid turnaround in fortunes

“That journey has been transformative for the entire business in a really positive way, and I think my measure of that success over the last three years has been how the market has responded to us, how it is responding now to, ‘OK, you guys are back in the game, we want you at the table and we want to hear what you’ve got to say – we want to engage with you.’”

Georgiou says the company has taken this experience into China, where it has looked to hire “authentically local people, Chinese people who understand the Chinese market and Chinese consumption patterns” to populate its Shanghai office. Those patterns are not something a westerner, even with the sports industry experience of several key figures at Lagardère, could hope to pick up, and local knowledge will be absolutely key to penetrating the Chinese market in any meaningful sense. It is not just the level of investment and cashflow in China that Georgiou is talking about when he claims people “haven’t begun to understand” this marketplace. The really interesting narrative, he says, is the growth of the rapidly emerging middle class.

“In 2009, China had 150 million middle class consumers,” he says. “In 2022, they’re projected to have 550 million middle class. That’s a 400 million person increase in the middle class alone, and the fastest growing segment within that is the upper-middle class, the ones with more disposable income. That represents a population increase of just middle-class spend that is bigger than the entire United States of America. What you’re going to see here is demand – because that middle class for me is a proxy for demand – that is going to increase by the size of the United States in the next couple of years.”

The important thing to remember, Georgiou says, is that “China is one market, one territory, one country – there’s different provinces but it’s one country – and in domestic terms, that middle class is going to be getting behind one league”.

If western soccer fans thought that the expansion of the China Super League (CSL) had been aggressive already – particularly in 2015 and 2016 when Chinese teams spent hundreds of millions on players from soccer leagues across Europe – they haven’t seen anything yet, according to Georgiou.

Georgiou with senior management figures from Lagardère’s Shanghai office. Georgiou says the agency has focused on hiring "authentically local" staff in China.

“In Europe, there’s about 550 million middle class, the same as the projected figure for China,” he says. “But how many leagues are they supporting? That consumption, that thirst for consumption in Europe, is supporting domestic leagues at all levels. You’ve got so many leagues in Europe being supported by the same number. In China, you’ve got one league.

“That power of demand and consumption is going to support that league and so the CSL is going to become the biggest league in the world over time because it’s got the commercial framework to make it work. If the government can get that generational change to support the grassroots, it’s unstoppable. I think you can tell that I think China’s going to be pretty important.”

The real challenge, Georgiou adds, will not be in attracting big-name European and South American players to China, but in developing that “generational change” and encouraging a wave of Chinese talent into the game. The point at which the CSL will be able to recognise itself as a true success, Georgiou says, will be when a Chinese superstar is playing in the league, and chooses to stay there.

“With the globalisation of sport, you can see the Premier League, the Champions League – you can see the best football in the world in China,” he says. “We need to provide the opportunity for the grassroots to come up and actually develop and earn a living from playing football that is genuine and real and lucrative that inspires the next generation of kids to use football as a career for the future.

“It is just trying to find that balance and that is really hard to find. I think we’re going to see ebbs and flows over the next 30 years of how that management happens of injections of foreign stars, creation of local stars and you’re going to see Chinese stars coming to other markets, coming to Europe. But there will be an inflection point when the Chinese stars are saying, ‘I’d rather just stay at home. I’m getting paid basically the same, the quality of football is pretty high, and in fact now all the international stars are coming here.’ When that happens, it’s just going to go nuts.”

Shanghai SIPG’s Brazilian forward Hulk (right) is perhaps the biggest name star to move from European soccer to the China Super League so far, but Georgiou says there is much more to come

With the current Premier League and La Liga hegemony, though, isn’t it difficult to envisage that shift happening at any time in the near future?

“I remember a time when [Italy’s] Serie A was the number one league in the world and the Premier League was nothing,” Georgiou responds. “That didn’t take long to change. I don’t see why, given the economic size between the Premier League and China – 65 million Brits v 550 million middle class Chinese – how that can’t be a concern about where the economic power is going to drive the development of the sport. I say that while tempering the fact that a grassroots generational change is still required in China to get to that point. The economic success is happening quickly but the cultural change, to create that authentic football culture, is generational. It’s not going to happen overnight.”

As that generational momentum grows, the movement of capital which has already been encouraged by President Xi’s policies will only increase, too, with more global institutions looking to take advantage of that expanding middle class in China, and more Chinese brands seeking to develop their worldwide footprint. Ultimately, “this is why we’re here in Shanghai,” Georgiou says, “and why it’s happening now”.

“We previously had an office in Hong Kong which serviced the China market,” he adds, “but we’re opening an office in Shanghai principally because we’ve got a lot of demand from our current clients like European football clubs who are saying, ‘We want to do more here’, or Formula One, who want to develop their business here, as well as Chinese brands who are saying, ‘How do we grow our business outside China?’”

Having a presence on the ground, with a wealth of local knowledge and experience, is crucial “because the consumption in China is very different than it is anywhere else in the world”.

“It’s almost a snapshot of the future, of where I think the western world is going,” Georgiou says, “but China has just leapfrogged because it doesn’t have that baggage of cable, of TV, it doesn’t have that and it’s jumped to where it is now.

“You can see the starting points of how that’s changing in the western markets as well with the decline in viewership, declining subscriptions of traditional models and the rise in mobile, and this market is all mobile. As a business, I think we’ve got the history, the network, the knowledge and now the people on the ground to help us take advantage of that growth.”