NBA’s Investment in China is Paying Off
As the 2015/16 NBA season tips off this week, the momentum in China couldn’t be higher. The recent China games, that included NBA stars, legends and the great Michael Jordan, for two exhibition matches in front of sold out crowds in Shanghai and Shenzhen, was just another highlight for NBA and it’s road to success in China.
Since the China Games debuted in 2004 as the first American professional sports league to compete in China, the NBA’s has already achieved significant return on investment, with unprecedented levels of popularity and securing meaningful partnership opportunities.
Today, the NBA is China’s #1 most followed sports league and China is the world’s most basketball crazed nation. On Sina Weibo, the official NBA owned hashtag of the Global games #2015NBAGlobalGames hit a massive 210+ million reads. How did the NBA get so popular in China? Here we breakdown a few reasons for development:
The NBA started in China many years before other sports were introduced. During the Maoist cultural revolution of the 60’s and 70’s, the heavily protected country would not allow much outside influence into the country. But thanks the efforts of former NBA Commissioner David Stern, the sport had a jump start in China as he orchestrated weekly delivery of NBA tapes to China by plane in exchange for small shares of advertising revenues.
Ease of Play
There exist some fundamental advantages of the sport that allowed it to grow at the grassroots level. For one, it’s fairly simple to construct and maintain the court particularly in urban areas, as opposed to large fields of grass or artificial turf. Basketball courts in city parks, schools or residential areas are easily accessible to the public, particularly beneficial to China’s urban development.
The Jordan era of the 90’s succeeded by stars such as Iverson and Kobe in the 00’s became idols and ambassadors of the sport, but their China influence pales in comparison to Yao Ming. Having a Chinese born and bred 7-foot-5, six-time NBA All-Star was the major driver for exposing the NBA to an entire nation. Yao Ming and his Houston Rockets became a cultural phenomenon and household names in China. His influence is still vital as seen by the opening of the NBA Yao Basketball Club this past year, an after-school program that teaches kids about basketball and life skills.
Growing the Game
Much of the NBA China’s recent efforts have been focused on grassroots development of local basketball talent. In 2011, NBA China opened a training center in Dongguan, Guangdong, an institution for developing local youth basketball talent in partnership with the CBA. This past month, it was announced that this partnership will continue to serve through 2021. The NBA is also cooperating with the Chinese Ministry of Education for to include basketball programs in the curriculum and for construction of NBA branded courts in Chinese schools.
When it comes to the business end, the NBA has been making significant strides in turning the popularity of the brand into revenue. Highlighted by this year’s major deal with Tencent, one of China’s top Chinese internet services providers and China’s most valuable brand. The partnership went into effect on July 1st is a five-year extension of an existing relationship to become the league’s largest international digital partnership. The NBA will receive $500 million guaranteed with an additional $200 million expected to be earned through revenue-sharing.
Besides the major deal with Tencent, the NBA has also relied on licensing and merchandising deals. Such as with Harbin beer brand in China, owned by Anheuser-Busch InBev, which has NBA logos on its bottles, and revenue from Alibaba’s Tmall site for official NBA gear and merchandise.
The biggest deals are just around the corner, as broadcasting revenues will surely go up next year, when their 2012, $7.4 billion deal with CCTV will expire in 2016.
More to Come
Since Yao’s Rockets came in 2004, the NBA’s global initiative has grown massively. With a glance at the NBA’s official global site their efforts are obviously dedicated internationally, with significant focus on China. Adam Silver reported to the New York Times “greater than 10 percent” growth in 2014 and predicted double digit growth in the coming years. While revenue from China is a small fraction of the overall business ($5.5 billion in global revenue last season) Silver said the NBA would one day be bigger internationally than domestically, and Asia was a key factor. With over 300 million people playing basketball in China, it’s clear that the NBA’s commitment has been well worth the investment.