Is Alibaba Positioning Itself to Become a Leader in Chinese Gambling?

Chinese e-commerce giant Alibaba has made two moves in recent weeks that indicate a growing interest in targeting the Chinese gambling market. On 2 March, it was reported that Alibaba Sports has partnered with leading Chinese sports marketing agency Oceans Sports & Entertainment to bring a legal form of poker to Chinese consumers.

Less than a week later, Alibaba hit the news cycle once again with the announcement that it has purchased a majority stake in Chinese lottery technology company AGTech Holdings. AGTech Holdings is heavily involved in management, technology software, technology hardware and terminals for China’s Welfare and Sports lotteries.

With a population of of nearly 1.4 billion people and a decidedly pro-gambling culture, China is a tantalizing market for the gambling industry. Alibaba stands to make a lot of money if it can successfully introduce poker to China while also serving as one of the key players in China’s only legal lotteries.

Introducing Match Poker to China

Alibaba Sports has partnered with Oceans Sports & Entertainment with plans of bringing a form of team-based poker that removes the chance element entirely. The goal is to bring a form of poker called “Match Poker” to China without running afoul of Chinese gaming laws.

Chinese law is notoriously strict when it comes to gambling. Only the state-sponsored Welfare Lottery and Sports Lottery offer anything that resembles legal betting. Everything else, including poker, is outlawed. Authorities regularly raid underground gambling rings and poker games.

Match Poker as an Alternative to Traditional Poker

The skill-vs-gambling argument as it relates to traditional poker has been raging for years. We could start that whole argument right here, right now and never come to a consensus. No matter which side of the spectrum you fall on, it doesn’t much matter. China’s definition of gambling clearly covers poker due to the element of chance involved in drawing cards at random from a deck and the ability to win or lose something of value (money).

Match Poker is played with the same basic rules of Texas Holdem, but with a twist. Teams of players are formed and then seated at different tables such that one player from each team is seated in a different position at each table. Players receive their cards via a mobile device and each table receives the same cards.

Players at every table start each hand with the same number of chips. Hands play out using normal Texas Holdem rules. You receive your cards, place bets, fold and generally do your best to win as many chips as possible or lose as few chips as possible. At the end of each hand, chip totals are tallied up and each team earns points based on the number of chips accumulated by the team as a whole.

The luck element is eliminated because each table is dealt the same cards. Skillful play is the only deciding factor in determining the winning team every round. This video from the International Poker Federation explains the concept well:

The Alibaba Sports and Oceans Sports & Entertainment Partnership

The goal between the Alibaba Sports / Oceans Sports partnership is to create a form of poker that can be classified as something akin to skill-based eSports rather than gambling. Thus, they can introduce poker to the massive Chinese market without getting themselves arrested for promoting illegal gambling.

Alibaba Sports was formed by the Alibaba Group in 2015 in a bid to cash in on the growing sports industry in China. A news report from CNBC explains that Alibaba Sports seeks to form a sports entertainment brand that integrates “e-commerce, media, marketing, video, home entertainment, cloud computing and other internet-enabled technologies to form a sports platform that will participate in different aspects of the professional sports industry, including sports copyrights, sports media, events, ticketing, etc.”

Oceans Sports & Entertainment is the largest sports marketing agency in China. Some of its business activities include sports sponsorship marketing, consulting, communications, event organization, property management and digital strategy.

Together, these two companies form a very powerful partnership in Chinese sports. As Inside The Games reports, revenues will be generated through “pay-per-play, subscriptions, sponsorship and media rights.”

The other major challenge will be keeping the interest of players, who cannot directly win cash by winning hands. Players will have to be attracted by the lure of competitive spirit, joining teams, earning sponsorships and competing in leagues.

Alibaba Acquires Controlling Stake in AGTech Holdings

Last weekend, Alibaba and its primary financial arm, Ali Fortune Investment Holding, announced plans to spend roughly $308 million to buy a majority interest in Chinese lottery tech company AGTech Holdings. The purchase includes about HK$1.86 billion in company shares and about HKD$712 million in convertible bonds.

AGTech’s primary business is lottery management in China. The company provides software and technology solutions, manages hardware terminals and provides consultation services for the lottery in 80% of Chinese provinces.

The purchase marks Alibaba’s return to the Chinese lottery market that it was forced to abandon last year due to burdensome regulations and a corruption scandal in provincial lotteries. Alibaba plans to puts its own technology expertise, particularly cloud computing and mobile services, to use in expanding the reach of the lottery in China.