A few weeks ago, following a tweet made by Houston Rockets General Manager Daryl Morey triggered a crisis between the NBA and China.
Then China Central Television announced it would cancel its plans to show the upcoming NBA games between the Los Angeles Lakers and Brooklyn Nets. It also announced that it would investigate all cooperation and exchanges involving the NBA.
Then things got even worse with a myriad of Chinese companies suspending their efforts with the NBA:
- Chinese smartphone brand Vivo, which was the presenting partner of the NBA’s upcoming games in China, said it was also suspending of its efforts with the NBA, saying it had “strong dissatisfaction and condemnation” of what the NBA was doing.
- Anta Sports Products, a Chinese shoe brand that garnered headlines for signing a shoe deal with Klay Thompson, said on Weibo that it was suspending contract negotiations with the NBA.
- The NBA store near Tiananmen Square, the league’s largest overseas retail store, had replaced items from the Houston Rockets with merchandise from other teams, the Wall Street Journal reported.
- China’s leading e-commerce platforms, including Alibaba’s Taobao, JD.com and Pinduoduo, blocked products related to US basketball team the Houston Rockets. Online searches for Houston Rockets merchandise on the platforms turned up a message saying “items not found”, according to the South China Morning Post.
- The NBA and the Nets were scheduled to dedicate a new Learn and Play Center at a primary school in Shanghai as part of the league’s NBA Cares program. The event was canceled by the Education Bureau.
NBA Commissioner Adam Silver, in a statement, also addressed the ongoing controversy, noting that the league’s initial statement “left people angered, confused or unclear on who we are or what the NBA stands for. Let me be more clear.”
“Over the last three decades, the NBA has developed a great affinity for the people of China. We have seen how basketball can be an important form of people-to-people exchange that deepens ties between the United States and China,” Silver said. “At the same time, we recognize that our two countries have different political systems and beliefs. And like many global brands, we bring our business to places with different political systems around the world.”
Silver noted the league’s efforts around diversity, saying that “values of equality, respect, and freedom of expression have long defined the NBA – and will continue to do so.”
In closing, Silver shared the following:
“It is inevitable that people around the world – including from America and China – will have different viewpoints over different issues. It is not the role of the NBA to adjudicate those differences. However, the NBA will not put itself in a position of regulating what players, employees and team owners say or will not say on these issues. We simply could not operate that way. Basketball runs deep in the hearts and minds of our two peoples. At a time when divides between nations grow deeper and wider, we believe sports can be a unifying force that focuses on what we have in common as human beings rather than our differences.”
All this brings the following question: How big is the NBA in China? How much is at stake for the NBA?
Let’s starts with a couple of stats:
Put simply, the NBA is “the biggest” international market for the NBA.
300 Million people play basketball recreationally in China
500 Million Chinese watched at least one NBA game last season.
The NBA is the most popular sports league on social media with 100M Chinese social media followers.
And the Rockets are among the biggest team brands there, no doubt because Chinese star Yao Ming — a Basketball Hall of Famer — spent his NBA career with Houston.
The NBA’s relationship with China dates back about 30 years to the time when former Commissioner David Stern struck a deal with Chinese television to show games on a tape-delayed basis. Stern even talked about having an NBA-sponsored or branded league in China.
The first game between Yao Ming and Shaq was watched in 2002 by 200M Chinese people on TV. That same year, the NBA opened an office in Beijing.
From there things really took off. The first NBA game in China took place in 2004.
Then in 2008 NBA China was officially founded.
The in 2014 NBA China and the Chinese Ministry of education teamed up to grow basketball in elementary and middle schools across China.
In 2016 Lizhang Jiang bought a 5% stake in NBA team the Minnesota Timberwolves.
The NBA also forged strategic deals with prominent Chinese tech companies as part of its strategy to drive the adoption of the NBA in China. For example in 2015 the NBA signed a $500M deal with Tencent which allowed Tencent to carry games and video highlights of NBA games on its popular Chinese platform.
This deal with Tencent allowed the NBA to extend its reach in China in a big way as Tencent owns WeChat which is a major messaging platform with 1B+ monthly users.
The NBA also signed a deal with Weibo a popular Chinese microblogging site which has 400M+ monthly users.
Initially, the first NBA office there had three employees. Now, about 200 NBA employees work in China in offices in Beijing and Shanghai.
Games are streamed live and Chinese media cover all the league’s biggest events such as All-Star weekend and the NBA Finals. The league has played preseason games there for years, has three NBA academies in the country, designed to find the next star prospect, and big-name players go there every offseason to promote their brand.
Retired Miami Heat guard Dwyane Wade has a lifetime contract with Chinese apparel company Li-Ning. Golden State guard Klay Thompson has a 10-year deal with another Chinese shoe company, Anta. Five-time champion Kobe Bryant has been visiting China annually for about two decades and is a massive star there, even now that his playing career is done.
The league has navigated its way around one thorny issue related to the U.S. and China in recent months: a trade war between the nations that includes back-and-forth tariffs. The Hong Kong tweet, though, is likely to present a much bigger test for the NBA.
“What I can tell you for sure is it’s not going to erase the decades of work that, you know, myself and everyone else in the NBA has put in in building a tremendous base for basketball in China,” Golden State Warriors COO Rick Welts said Monday in an appearance on CNBC. “And I think this will pass. And I do think our future in China is probably pretty remarkable.”
So how much revenue does China generate from China?
NBA revenue from China, and a conservative estimate puts that at $500M annually based on deals that are publicly known, is part of basketball-related income which impacts the salary cap and how much money is available to players on an annual basis. With the NBA generating about $8B in revenue annually, China represents 6%+ of NBA’s global revenue.
It is also worth pointing out that in July, China’s Tencent reached a five-year, $1.5B deal to remain the league’s exclusive digital partner in China, and it is the NBA’s largest partnership outside of the U.S. CCTV has a lucrative financial partnership with the NBA televising multiple games live each week, including coverage of the playoffs.
So there is a lot at stake here for the NBA….
Bottom line: The NBA has a long history with China. It should not come as a surprise that the NBA is being very careful on how it is handling the situation with China. With 6% of its global revenue coming from China there is a lot at stake here. One should also give credit to NBA commissioner Adam Silver for defending the interest of the NBA as well. And like Adam Silver rightly said “At a time when divides between nations grow deeper and wider, we believe sports can be a unifying force that focuses on what we have in common as human beings rather than our differences.” Let’s hope that the NBA commissioner’s prediction becomes a reality…