Explainer | Houston, we have a problem: what’s at stake for the NBA in the Hong Kong-China stand-off?
- The current furore over a tweet by Houston Rockets’ general manager in support of protesters could prove costly to the growth of top-level American basketball in China
- Forbes magazine estimated the value of NBA China’s operations at US$4 billion in early 2018
The subsequent backlash, both in China and now in the United States, has jeopardised efforts by the National Basketball Association (NBA) to expand its business in China, its most lucrative and fastest growing market outside the US, while potentially threatening its popularity in its home market.
Just how much is China worth to the NBA?
The NBA doesn’t report specific revenues, but Forbes magazine estimated the value of NBA China’s operations at US$4 billion in early 2018.
CCTV pulls NBA China Games broadcast in response to Silver’s support for Morey
How big is the NBA in China?
The NBA’s first efforts to develop the China market began in the late 1980s with a deal to share advertising revenue in return for games being broadcast on CCTV, the state broadcaster. The NBA later opened an office in Hong Kong, in 1992, and NBA China was formally launched in 2008, with its first office housing just three employees.
Today, the NBA has 200 employees around the country. The NBA’s growth in China has reportedly been in the double digits. In March, it opened its largest physical merchandise store outside of the US, in Beijing.
In May 2019, sports analytics firm Ampere reported that NBA basketball was now China’s most popular league sport, ahead of soccer’s English Premier League and Uefa Champions League. Alexios Dimitropoulos, senior analyst at Ampere, said: “In China, the NBA already boasts one of the country’s largest television rights contracts and that’s why the competition tours China and plays league matches locally.”
Ampere estimates that the NBA’s broadcasting fees in China will be US$300 million between 2020 and 2025. About 800 million Chinese watched NBA programming on TV, digital media or smartphones last season, said the league.
How big is basketball in China?
The NBA has estimated that some 300 million Chinese people play basketball recreationally and that about 500 million watched at least one NBA game last season. A Deloitte report estimated that there are 100 million Weibo followers of Chinese Basketball Association and NBA teams.
US Senator Rick Scott demands meeting with NBA boss over Houston Rockets furore
Does China have its own NBA?
China has the Chinese Basketball Association (CBA), which runs its premier basketball league with 20 teams. Former CBA player Yao Ming became chairman in 2017, and the CBA recently hired NBA China veteran executive David Wang as its CEO. That’s to help implement the “CBA 2.0” plan, which aims to professionalise the CBA along the lines of the NBA. A report by Deloitte said the CBA had revenues of US$140 million in its 2018-19 season, a rise of 21 per cent over the previous season.
How much will the NBA lose if it is shut out of China?
Euromonitor data suggests that the overall market value of China’s sports and recreational industries has grown from US$3.6 billion in 1999 to US$60.4 billion in 2019, while the US’ equivalent has grown from US$67.1 billion to US$180.8 billion and Japan’s has declined from US$68.3 billion to US$53.6 billion in the same period.
Forbes reported that the immense growth in China has been linked to the valuations of individual NBA franchises. In its report on the 50 most valuable sports teams globally, Forbes said the NBA’s representation on the list had “greatly increased” over the past seven years, as “investors are excited about the NBA’s international prospects,” particularly in China.
In February, Forbes estimated that the NBA’s revenues hit US$8 billion last season, up 8.5 per cent, in the 2017-2018 season, and that the value of an average NBA team at US$1.9 billion.
In a 2019 report for the CBA, Deloitte estimated that top-level basketball and professional football take up to 80 per cent of the Chinese sports sponsorship market.
How many Chinese play in the NBA?
How has the NBA expanded in China?
Yao Ming and other leading NBA players enjoy immense celebrity in China, and the NBA has developed a strong following among young affluent males in China, according to Minal Modha, consumer research lead for Ampere.
“The NBA has created a powerful global brand which resonates strongly with younger audiences in many of the markets we survey. This is partly due to the way they distribute the product, but also the impact of celebrity influencers who are helping to grow the game globally,” said Modha.
The NBA currently operates three academies in China – the most of any country – which are used to support and scout new talent. The NBA even partnered with the Chinese Ministry of Education to teach basketball to millions of schoolchildren in the hopes of creating the next Yao Ming, who is widely credited with raising awareness of basketball in China to unprecedented levels.
One of the other keys to the NBA’s success in China is its digital distribution partnerships, particularly with Alibaba and Tencent.
In July, the NBA and Tencent announced a five year deal worth US$1.5 billion, double the amount of the previous contract. Tencent began streaming full seasons of NBA games in 2015, while the partnership with the NBA goes back to 2009.
Tencent has said that 490 million fans in China watched NBA programming on its platforms, nearly three times as many as did during the 2014/15 season. An estimated 21 million Chinese fans watched game six of the 2019 NBA Finals on Tencent, marking the most-watched NBA game ever on a digital platform in China. In the US, that same game earned 18.3 million viewers. The NBA described the Tencent partnership as the league’s “largest international digital partnership”.
In March this year, NBA China and Alibaba Group announced an expansion of their partnership, with NBA content shown on Alibaba’s platforms for the first time, along with a dedicated “NBA Section”, which would combine content with shopping for NBA merchandise to nearly 700 million consumers. The NBA opened a flagship store on TMall in 2012.
How much will a backlash cost the NBA if Americans turn their backs?
It is election season in the United States. Thanks to the ongoing trade war with China, American views of China have grown pretty negative, with 60 per cent now viewing China unfavourably – higher than at any time since 2005 – against 26 per cent who view it favourably, according to August 2019 figures published by the Pew Research Center. Democratic candidates for president and Republican senators have both publicly denounced the NBA for kowtowing to China and silencing Morey.
A significant backlash in the US would be devastating. In February, Forbes estimated that the NBA’s revenues hit US$8 billion last season, up 8.5 per cent, in the 2017-2018 season, and that the value of an average NBA team at US$1.9 billion.
In 2016 and 2017, NBA finals enjoyed the best viewership on record, with an average of 20 million viewers. But those numbers have fallen, with 2018 having 17.7 million viewers in the US, and 2019 just 15.14 million viewers. Sports Media Watch reported that NBA viewership in the US was “flat” in the latest season.
The furore over the NBA’s silencing of Morey could have even more US sports viewers switching channels. The NFL, despite being America’s favourite sport to watch, had its popularity damaged during the fight between team owners, US President Donald Trump and players protesting police violence. Gallup polling noted a 15 per cent decline in viewership by Republicans, from 2012 to 2017. The drop in viewership directly affects a sport’s revenues, Gallup said.
