|NBA hopes to continue taking great leaps forward in China with latest expansion|
|Written by Admin|
|Friday, 12 October 2007 07:27|
The lure of a country with 1.3 billion people, where 300 million play basketball - that's the entire population of the United States - is too lucrative to resist.
``We believe the potential of a market with four times the population of the United States ultimately must be at least what the United States is,'' said Adam Silver, the NBA's deputy commissioner, who describes China's growth potential as ``exponential.''
The NBA has never undertaken such an expansion, so the exact outline of what's about to unfold is unclear. But the direction is unmistakable.
Timothy Chen, one of China's best known business executives, begins work Monday as the chief executive officer of the company's new Chinese subsidiary - NBA China.
Chen was Microsoft's top man in China until he resigned last month. He'll be charged with pulling together TV rights, sponsorships, new digital offerings and, perhaps, a new freestanding NBA-branded league in a country where NBA merchandise is already sold at 50,000 outlets.
The potential growth is unmistakable.
The NBA generated about $50 million in revenue last year from China, the league's largest market outside the United States. That pales compared to overall NBA revenue of almost $4 billion. But the NBA's 80-person staff in China is set to grow five times in the next several years and Silver suggested revenue will make at least comparable gains.
Ninety 90 percent of the new subsidiary will be owned by the league. Two five-percent shares will be sold to Chinese investors and to a U.S. media company. Silver wouldn't confirm it, but the American buyer is reported to be the Walt Disney Company, which owns ESPN and ABC.
David Stern, the NBA commissioner, Silver, Chen and Heidi Ueberroth, who directs the NBA's international business, are set to be in China this week for three NBA preseason games in Shanghai and the former Portuguese territory of Macau.
``We're going to be meeting with several potential Chinese investors in NBA China,'' Silver said. He said the investment bank Goldman Sachs was working with the NBA and deals were likely to be closed in the next several weeks.
The key may be the 16-team Chinese Basketball Association. Begun 12 years ago, it was the proving ground for the Houston Rockets' Yao Ming and China's newest NBA player, Yi Jianlian, the Milwaukee Bucks' 7-foot power forward.
``Both the CBA and we recognize that we can increase the caliber of the play and the quality of the presentation,'' Silver said. ``In order to do that, it's going to require a much larger infrastructure as well as state-of-the-art arenas.''
The NBA is sure to bring its marketing savvy to the CBA, help build new venues and make a basketball night out a spectacle - not just a game. Players and coaches also seem likely to be crossing back and forth across the Pacific, though Silver was vague about exact plans.
``We don't know yet,'' he said. ``The goal would be to work with the Chinese Basketball Association on developing that league into a world-class operation.''
The NBA is succeeding in China where other sports properties like the NFL, MLB and top European soccer clubs have stumbled. Some believe the NBA's impact on the way China does business may rival the effect of next year's Beijing Olympics.
``The NBA is the one foreign sport that is doing it right in China, that's really reshaping the business of sports in China,'' said Terry Rhoads, who runs Zou Marketing, a sports marketing business in Shanghai. Rhoads signed Yao to his first contract with Nike before leaving to set up his own business five years ago.
``Every sports entity out there is looking at China,'' Rhoads added. ``It's such a mystery, but the NBA seems to be demystifying the whole idea. The NBA will become the Harvard Business School case study for how a foreign sports property builds a successful business in China.''
Rhoads suggested the NBA's rapid growth in China would be much like Nike's. He said Nike's revenue in China was $8 million 1994 when he joined the company, and $100 million when he left in 2002. Nike believes it can be a $1 billion business in China by next year.
The way the NBA operates in China is in sharp contrast to Europe's top soccer clubs like Barcelona, Manchester United and Chelsea, which make an annual summer blitz hoping for quick cash and exposure.
``Arguably, these European soccer teams have a greater following and more passionate support in China than any NBA team except the Rockets,'' said Chris Renner of Helios Partners, a sports marketing company in Beijing.
``But they come through here like carpetbaggers,'' he added. ``They just kind of show up on the scene, do a game, disappear, and then come back two years later. That's no way to win hearts and minds.''
By contrast, the NBA runs clinics, road shows, junior leagues and brings in a steady stream of players. NBA basketball has been on TV in China since the 1980s. At parks and schoolyards, Chinese teenagers play basketball - known in Chinese as ``lanqiu'' (pronounced lahn-chew) - dressed in baggy shorts, wearing baseball caps cocked sideway on their heads, and even trash-talking in Chinese.
``The NBA has proven they're part of the furniture, part of the landscape now,'' Renner said.
Three NBA preseason games this week in China sold out in hours. On Wednesday, the Cleveland Cavaliers play the Orlando Magic in Shanghai. On Thursday, the Magic face a China All-Star team in the former Portuguese territory of Macau. And on Saturday, the Cavaliers play the Magic in Macau.
The NBA last week concluded a series of preseason games in Spain, Italy, Turkey and England featuring the Toronto Raptors, Boston Celtics, Memphis Grizzlies and Minnesota Timberwolves.
The preseason games have been overwhelmingly successful. But they may become relics, particularly in China.
``Over time we need to develop a stand-alone business in China that is not dependent on traveling NBA players and NBA teams from the States,'' Silver said. ``Similar to Madonna going on tour; that can only be the exception, not the rule. We need to develop the game within China.''
Basketball has always been popular in China, introduced in the late 19th century by missionaries. Only soccer rivals it for popularity. But in the last half-dozen years its popularity has grown rapidly because of Yao, a growing middle class and pressure on China's communist government to allow more media freedom in the run-up to next year's Olympics.
``The Olympics is the Olympics,'' Rhoads added. ``But it's kind of like the circus coming to town. The NBA seems like it's going to be here forever.''