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Is the NBA’s centralised approach holding its teams back in China?

Ding Yanyuhang of the Dallas Mavericks warms up before the 2018 NBA China Games match between the Dallas Mavericks and the Philadelphia 76ers at Universidade Center in Shenzhen, China. (Photo by Zhong Zhi/Getty Images)

  • All sponsorship deals in country are run through NBA China
  • Teams can only activate and sign individual partnership within 150-mile radius of their arenas
  • A loosening of restrictions could hurt competitive balance.

Two years after the NBA teams carved out some additional American marketing ‘territory’ from the league, some of them are looking to do the same in China.

Before 2016, if an NBA team wanted to put up advertising billboards, buy radio or television ads, set up in-store promotions, launch targeted digital and social campaigns or activate corporate partnerships, it could only do so in an area within 75 miles of its arena.

Outside of that radius, everything was controlled centrally by the league, with advertising deals signed through its headquarters in New York and the resulting revenue divided equally among the 30 franchises.

Teams had long been pushing to increase that area and, two years ago, the radius from their arenas was doubled to 150 miles, allowing teams to reach an estimated 100 million additional fans, or about 30 per cent of the country.

In China, now unquestionably the league’s second home – deputy commissioner Mark Tatum estimates NBA China is now worth $4bn (€3.5bn) – the centralised model still rules: all sponsorship deals are run through the satellite office and revenues are divided equally.

Some teams believe that with greater direct reward, and thus greater incentives, they could grow the pie for everyone.

“When Steph Curry goes to China and he does his deals with Vivo phones and with eHi Car Services, and then he does an Under Armour camp, there are millions of people who absolutely love him, and they are going to watch the NBA more,” says Mike Kitts, vice-president of corporate partnerships for the Golden State Warriors.

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Stephen Curry (Kyle Terada – Pool/Getty Images)

But these solo activities for players happen within a framework that lies outside of the team’s purview, with the team unable to leverage what can be an extremely lucrative trip for their player. Is it time to revisit the rules for what teams can and cannot do abroad?

“It’s the million-dollar question,” says Kitts. “Yes, in some cases as a team you can think that it might be great [to do more globally], but let’s not lose sight of the fact that we’re part of the most powerful global league that there is, with probably the most impressive aggregation of talent from around the world in any one sport.

“I’m proud to say that we’ve been banging on the door of the NBA a little bit to continue to evolve. The biggest challenge that [NBA commissioner] Adam Silver has is continuously balancing the power. If he were to just open the floodgates, the Warriors, the [LA] Lakers and the [Houston] Rockets would basically run away with this thing [in China] and there would be a competitive imbalance. There needs to be revenue sharing, there needs to be certain guidelines that provide some level of competitive balance. But I think the NBA and the teams are both going to benefit when the guard rails are widened a little bit further than they are today.”

One team executive privately discussed scenarios in which teams could be incentivised to grow their Chinese social media accounts, for example, or play more often in China, if they could earn more revenue as a result. Another way in which team interests could be satisfied without straying too far from the current path would be if a team signed a deal with an existing league partner, thus avoiding a conflict of interest with NBA China’s own commercial undertakings. If the team in question could keep a percentage of those new proceeds, with the rest going into a revenue share, it might be enough to warrant a team’s individual efforts, without putting the collective model at risk.

Tatum defended that model to SportBusiness on the sidelines of October’s Fiba World Basketball Summit in Xi’an, China, saying that it is “part of our construct, part of our constitution”.

NBA Deputy Commissioner Mark Tatum (Mike Stobe/Getty Images)

And Scott O’Neil, chief executive of Harris Blitzer Sports & Entertainment, which owns the Philadelphia 76ers, adds: “I think that, generally, the owners of the NBA are old-fashioned American capitalists and they believe that the best way to create value is through the centre in this case. I think if we felt differently, we would act differently.

“Our perspective is very much to work within the system and make sure that if there’s an opportunity, we’re working to create value. Some might see it as kind of restrictive, but it’s not a secret when you look at the growth in franchise value over the last seven years that NBA China is one of the things fueling that growth.”

What to do about the China question will – again – be up for discussion when the teams congregate in January for their annual sales and marketing meeting. And there’s an external issue that may also be on the agenda – the competition.

“The NBA’s brand and marketing power in China has, until now, been generally strong enough to withstand any competitive threat, from a sponsorship sales point of view, from any individual European football club,” explains Mark Fischer, chief executive of Eastbridge Sports Management and the founding managing director of NBA China.

But because other top sports entities, most notably the top European football clubs referenced by Fischer, are not restricted in the same way that NBA teams are, they can sign deals with Chinese brands whenever and however they please, tapping into huge new areas that NBA teams individually cannot touch.

Because all NBA teams can offer Chinese partners is in-arena signage, hospitality, and local promotions, Fischer says, interested brands will either target areas where they have local businesses or teams that get good audiences in China, but that pool is quite small.

European football clubs face no such barriers; they control all their own in-stadium signage, for example, and can market these to Chinese brands without restrictions, so the pool of brands they might go after is much larger and includes any Chinese brand that wants to align with a major European club to exploit that club’s popularity – both in China and globally.

For now, at least, teams are generally content with the egalitarian model that exists in China, even if the larger ones would still like some more autonomy.

“Let’s continue to take baby steps – that can still be seen as progress,” says Kitts. “A portion of [team-led] deals should probably go into a revenue share so that all boats rise, but it doesn’t mean they have to rise at the same speed. I don’t know that I have the true solution, but there are solutions that can benefit everybody.”

Interim

There’s still plenty that teams can do to tailor their marketing efforts towards the Chinese market, even if they can’t strike their own deals in the country.

The NBA designates a maximum of 14 home games for nationally-televised broadcasts (during which the league takes over the onsite advertising), but teams still get to control the signage for the remaining 27 or more games.

With every minute of the NBA streamed live in China via streaming platform Tencent, there are plenty of opportunities to showcase Chinese brands to Chinese fans. The Warriors, for example, have a dedicated ad with Chinese liquor brand Moutai on the side of their pole pad, with the brand also the official baijiu – a fierce Chinese spirit – of the Warriors. Moutai can’t activate that partnership in China, but millions of fans back home see their logo each game.

The other main way that teams can score wins in the Chinese market is simply more exposure, whether by lobbying the broadcast partners, including CCTV and other regional stations, to screen more games or by actually travelling to the country during pre-season. The NBA can require that each team travels abroad once every four years, but with only two out of 30 teams playing in the annual China Games, “it’s incumbent upon us to make sure they know we want to play in China”, says O’Neil, “and as you can imagine we’ve made that pretty clear”.

Winners

It’s clear that certain teams would be more invested in China than others if given the chance.

The Houston Rockets are often referred to as “China’s team”, mostly thanks to their long association with Yao Ming, though youngster Zhou Qi is helping to continue that link.

Meanwhile, the Dallas Mavericks, who were the first team to feature a Chinese player when Wang Zhizhi made his debut in 2001, have focused on the Chinese market in recent months through some social media initiatives, and recently signed China’s Ding Yanyuhang to their G-League affiliate team, the Texas Legends.

Until recently, the Brooklyn Nets’ roster included Taiwanese-American Jeremy Lin, whose ancestral roots make him one of the most popular players among Chinese fans. But the Nets now have arguably an even stronger connection to China in new owner Joseph Tsai, who helped found Chinese tech giant Alibaba and is currently its executive vice-chairman.

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Jeremy Lin (Michael Reaves/Getty Images)

Earlier this year, the Nets hired a global tourism director who has been “strategically cultivating relationships in the tourism industry”, Brett Yormark, chief executive of the Nets’ parent company BSE Global, tells SportBusiness. The role involves meeting with tourism bureaus and agencies in China to drive visitors to Brooklyn’s Barclays Center, where the Nets play their home games. The team, like several others now do, also has a full-time employee dedicated to the Chinese market, who manages the Nets’ Chinese website and accounts on social media platforms Weibo and Hupu.

In October, Tsai was added to the board of NBA China, though curiously the league declined to reveal which executives he would be joining. When the board was formed in 2008, it included two owners – Herb Simon of the Indiana Pacers and the Minnesota Timberwolves’ Glen Taylor – plus other executives and representatives of NBA China’s five strategic partners, which include ESPN and Bank of China.

With China a growing priority for many of the teams, a spot on the board of NBA China is far more coveted today than it was a decade ago, but Yormark was keen to state that Tsai’s new role wouldn’t conflict with his ownership priorities. “Joe has built one of the most successful businesses in China – and arguably the world – and is able to provide a lot of perspective on how to grow the NBA business there. His involvement in NBA China is about broadening the awareness and reach of the league in China. By growing the NBA, the profile of all 30 NBA teams will benefit and we will have better opportunities to cultivate new Nets fans.”

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