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The NBA’s burnt bridges in China won’t be mended easily

James Harden #13 of Houston Rockets looks on during the preseason match between Toronto Raptors and Houston Rockets at Saitama Super Arena on October 10, 2019 in Saitama, Japan. (Takashi Aoyama/Getty Images)

A Tweet by Houston Rockets general manager Daryl Morey has plunged the NBA into its most complicated crisis, after what started as a mostly China-Houston issue became a full-blown China v NBA war when league commissioner Adam Silver said there would be no punishment or censure for Morey.

Morey’s tweet – in support of protestors in Hong Kong – was swiftly deleted and the sentiment was rebuffed by the Rockets and the NBA, but nonetheless kicked off a week of national outrage in China.

An array of NBA China’s Chinese-owned official partners halted business with the league, including smartphone maker Vivo, China’s biggest travel website CTrip, dairy products company Mengniu, fast food chain Dicos, skincare brand Wzun, home appliance group Changhong Electric, sportswear giant Anta, China Mobile subsidiary Migu, food and beverage brand Master Kong, car rental company eHi Car Services, home appliance manufacturer Meiling, and financial firm Xiaoying Technology. An industry observer tells SportBusiness that the lowest value of the NBA China’s “official partner” category is more than $6m (€5.4m), and a conservative estimate of the value of these suspended sponsorships involves over $500m annually.

The New York Times reported that the Rockets could lose about $25m in sponsorship for the 2020-21 season, and Yahoo Sports reported at least five unnamed teams concerned that the NBA’s $116m salary cap for the season could drop by as much as 10 to 15 per cent.

In the short-term, while the NBA Global Games went on as scheduled last week, with the Brooklyn Nets and the Los Angeles Lakers playing in Shanghai and Shenzhen, sponsorship booths and press conferences were cancelled. The broadcast of the games was removed from state-run television, all Chinese sponsors were scrubbed from the event, and marketing collateral nation-wide removed.

The sponsor’s logo on Cameraman vast is covered by the tape during a preseason game between the Brooklyn Nets and the Los Angeles Lakers as part of 2019 NBA Global Games China at Shenzhen Universiade Center on October 12, 2019 in Shenzhen, Guangdong, China. (Zhong Zhi/Getty Images)

But what of the long-term effects?

For starters, the NBA has several lucrative real estate projects that will be greatly affected. Chinese state media Xinhua reported in April last year that NBA China had partnered with Chinese real estate investment company, the Hongkun Group, to launch a themed “lifestyle” complex in Tianjin, with similar properties planned in Wuhan, Chengdu, Changsha and other Chinese cities. These 12,000 sq m ‘NBA Centres’ are meant to immerse fans in an interactive world of all things NBA, featuring recreational basketball courts, retail stores selling NBA merchandise, and children’s game centres.

In addition, the relationship between the NBA and the Chinese government is likely to take a backward step, despite Silver’s best efforts after jetting to Shanghai to try and ease tensions. A well-placed observer familiar with both the Chinese landscape and NBA dealings tells SportBusiness: “Previously when NBA commissioners came to China, they would be received by senior government officials from the Central Government. That level of access is certainly not going to continue.”

While Tencent, the NBA’s exclusive digital partner in China, resumed broadcasting games from the league last week, tensions are still high at the Chinese conglomerate, according to an employee at their sports division, who said to SportBusiness: “Tencent Sport’s NBA content team has a headcount of around 150 people, and if the partnership with the NBA does end, the worst-case scenario will be huge layoffs.”

There were signs late last week that the Chinese government has moved to tone down the level of fervor in Chinese media. Hu Xi, the editor of Global Times, said: “This issue with the NBA will subside gradually, and the media should stop fanning the flames further.” The Chinese foreign ministry has also issued statements saying that “mutual respect is the foundation for all future economic and political exchange and cooperation”, a softening of the intially strident pushback to Morey’s tweet.

Still, employees at NBA China tell SportBusiness that Moray’s comments had posed the 200-strong team a genuine dilemma, and some have considered resigning. One employee said: “We feel sandwiched between our jobs and our duty as Chinese citizens.”

A sponsor of NBA China also told local media: “The NBA has always had a good reputation in China, and were very aggressive in negotiations, and required us to make payments for our sponsorships upfront. We have learnt our lesson, given we didn’t anticipate such a change in political climate.”

Zhang Qing, the chief executive officer of Chinese sports consulting firm Key Solution, adds: “This really is a lose-lose situation. In the long run, the commercial value of the NBA in China is going to take a great hit, as well as affect the value of any NBA stars coming to China to build interest in the league. For NBA China sponsors and partners, this has really been a huge waste of their sponsorship dollars.”

For those sponsors, this whole fiasco may trigger a shift in their strategy toward China’s domestic league, and several of them will be looking enviously at Chinese sportswear company Li-Ning, whose share price has more than tripled this year so far, and has gained a further nudge after the NBA’s fallout with China.

The company, which trades on the Hong Kong Stock Exchange, saw its shares jump by about four per cent last week, with traders bullish on the brand in anticipation of heightened interest in the Chinese Basketball Association and a rise in patriotic buying.

Expectations are that more Chinese fans will switch to watching the domestic league, which will bolster sales at home-grown sports gear makers. Other Chinese basketball-linked companies that recorded stock price spikes includes Dongguan Winnerway, whose parent company Guangdong Winnerway Holding owns CBA title-winner Guangdong Southern Tigers, and Shenzhen-listed tyre maker Qingdao Doublestar, the sponsor of CBA team Qingdao Eagles.

Silver himself admitted during his visit to Shanghai that CBA chief and ex-Houston Rockets star Yao Ming is “extremely upset”, “extremely unsettled” and “extremely hot”, and said: “I am hoping that together, Yao Ming and I can find an accommodation. But he is extremely hot at the moment, and I understand it.”

Yao has wasted no time moving on from the NBA China crisis, with the CBA holding a press conference this week to confirm that the CBA 2019-2020 season will officially kick off on November 1, and that the new season’s CBA All-Star Game will be held in Guangzhou on January 10 to 12 next year. It will certainly be a key marker to find out if Chinese fans and sponsors have moved on from the NBA just as quickly.

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