The NBA's full court press in China
Why do the values of teams continue to rise? The same reason five Chinese TV networks will be covering the all-star game.
NEW YORK (FORTUNE) - The NBA has committed its share of fouls in recent years -- it's never a good thing for a player to go after a fan in the stands -- but franchise values keep rising and corporate sponsors are jostling to get into business with the league. A big reason why is China.
So why do the values of NBA franchises continue to rise, and why do corporate sponsors jostle with one another to get into business with the league? A big reason is China.
Basketball's popularity is booming in China, thanks in large part to two decades of spadework by the NBA. League games have been televised weekly in China since 1991, and its stars have been visiting ever since. The NBA's appeal in China now goes well beyond the national pride in 7'6" Yao Ming of the Houston Rockets, a one-man marketing machine who boasts endorsement contracts with such global companies as Reebok International (Research) and PepsiCo (Research).
No sports league has done as well as the NBA in exporting itself to China. "The NBA is poised to continue its evolution from an urban basketball league to a global entertainment company," says Rick Horrow, a sports analyst and visiting expert in sports law at the Harvard Law School.
For evidence, look no further than the NBA's All-Star weekend, about to get underway in Yao Ming's adopted hometown of Houston. Five Chinese TV networks, including the big national broadcaster CCTV, will send crews to provide coverage. By contrast, U.S. coverage will be on cable's TNT, which can't match the ratings of the U.S. broadcast networks.
The Chinese networks will telecast such events as the T-Mobile Rookie Challenge; Sprite Rising Stars Slam Dunk; Foot Locker Three-Point Shootout; PlayStation Skills Challenge; RadioShack Shooting Stars; NBA All-Star Jam Session presented by Nokia.
Yes, there's also a basketball game on Sunday night.
To expand its reach, the NBA announced earlier this month that it will offer live webcasts of games over the Internet in China with a partner called NuSports. The NBA also operates a Chinese Web site with a local partner, Sohu.com, which gets about 3 million page views a day.
"We have a very sophisticated base of fans who follow the game and play the game," says Heidi Ueberroth, executive vice president of the NBA, who oversees the league's global expansion.
Analysts say the NBA generates about $3 billion a year in revenues, about 20 percent of it from overseas. China is the league's biggest market outside of the U.S., and revenues are growing by better than 10 percent a year, according to Ueberroth. She's made five trips to China in the past year, and the league has about 50 employees in China, Hong Kong and Taiwan, most of them Chinese nationals.
They get a big assist from marketing partners like Adidas, the German-based shoe and sportswear company, which brought Rockets star Tracy McGrady to China last summer to introduce his T-Mac sneakers. Besides McGrady, NBA stars LeBron James and Allen Iverson visited China last summer, courtesy of their sponsors, Nike (Research) and Reebok.
"Basketball's the most important sport in China," says Lawrence Norman, a marketing executive with Adidas, which has about 2,000 stores there. It expects to double that number by the time the Olympics are held in Beijing in 2008.
In a twist on the usual pattern of globalization, a Chinese sportswear manufacturer called Li-Ning recently signed a promotional contract with a little-known Cleveland Cavaliers player named Damon Jones who is known as a showy three-point shooter. Chinese fans tend to favor smaller, quicker NBA stars. McGrady has the best-selling NBA jersey in China, followed by Iverson and then Yao.
"They're very proud of Yao Ming, and they watch him on TV, but Tracy is a wing player, he's more athletic, he's more entertaining and they like his style of play," says Norman.
Nothing appears likely to slow down the NBA's marketing machine in China. A week ago, according to The Washington Post, a Chinese flooring company announced a partnership with the league and its retired Hall of Famer David Cowens. Cowens, who is 57, told reporters he likes quality flooring because he used to fall down a lot during games.