Global Economics

A Slam Dunk for the NBA in China

Along with eager sponsors and partners, the league looks to capitalize further on its mainland popularity with a recent exhibition tour and other initiatives

It's 9 p.m. on a Wednesday night and the sellout crowd of 13,700 at the Qizhong Sports Arena on the outskirts of Shanghai is pumped. Fans, including some rigged out with fluorescent Afro wigs and face paint, clap their hands in time with the theme song from the television program The Addams Family. Others stand up in their seats while friends snap their photos with camera phones.

It may only be a preseason exhibition game between the Cleveland Cavaliers and the Orlando Magic (won by the Magic, 90-86, on Oct. 17), but for Chinese who have paid up to $550 per ticket for a chance to see their NBA heroes LeBron James and Dwight Howard shoot it out in their own backyard, this is the real thing. Compared with China's staid local league, the NBA "is more exciting and has more show presence," says a 23-year-old fan sporting a fake diamond stud earring, hip-hop trousers, and a Dwight Howard No. 12 basketball jersey who calls himself "MC Hotdog."

Fans like Hotdog have made China the National Basketball Assn.'s largest market outside the U.S. The NBA estimates some 300 million people in China play basketball, and hometown Chinese heroes such as Yao Ming, the Houston Rockets' star center, and Yi Jianlian, about to debut with the Milwaukee Bucks, have helped make the NBA the most successful foreign sports league in China. To boost the NBA's popularity even more, the league sent stars from the Cavs and the Magic to play three games last week in Shanghai and Macao.

Lots of Room for Growth

NBA merchandise is available in 50,000 retail outlets, and Spalding sold more than 1 million NBA basketballs last year. NBA games are carried by 51 networks and television stations (up from 32 last season), reaching an average of 36 million viewers. Some games are also streamed on Web portal Sohu (SOHU). And traffic to doubled to 244 million monthly page views and 10 million unique users following the relaunch of the Web site at the beginning of the 2006-07 season.

Although the NBA does not break out figures by country, total revenues from broadcasting rights, branded product sales, and sponsorships in China are roughly $50 million. That's tiny compared with the $3.5 billion or so the league earns each year in the U.S. "It's safe to say we are just scratching the surface in China," says Heidi Ueberroth, the NBA's president of global marketing partnerships and international business operations.

Timothy Chen, former head of Microsoft's (MSFT) China operations and previous chairman and president of Motorola's (MOT) China unit, is now spearheading the league's China initiative. He started work on Oct. 15 as head of the NBA's newly created China division (BusinessWeek, 9/19/07). Speaking at a press conference in Shanghai on his second day at work, Chen said he hopes to double Web site traffic in the next few years, thanks to advances in 3G mobile (likely to launch in China next year) and mobile Internet technology. NBA Commissioner David Stern said the NBA is in advanced talks with two strategic investors who will take 10% of NBA China, while the NBA will retain 90% ownership.

Mainland Partners Line Up

With such a huge potential fan base, it's little wonder sponsors are eager to take advantage of the NBA's potential in China. "We want to connect with the Chinese consumer in every aspect, and basketball is very popular," says Neerag Grag, regional manager for Shanghai at Coca Cola (China) Beverages (KO), which co-sponsored the Orlando-Cleveland game in Shanghai as well as two exhibition games in Macao on Oct. 18 and 20 at the Venetian Arena, part of the new hotel-casino complex opened by Las Vegas Sands (LVS). "The NBA is part of our future," says Grag. Other multinationals partnered with the NBA in China include Gatorade, DHL, McDonald's (MCD), and Toyota Motor (TM).

Mainland companies, especially those with global ambitions, have recognized the value of marketing partnerships with the NBA. Sports shoemaker Li Ning and China Mengniu Dairy have the rights to use the NBA for marketing in China. Mengniu, one of the country's savviest marketers, ran an NBA promotion last season with scratch cards on 60 million milk containers. Appliance maker Haier (HRELF.PK) in 2006 signed a multiyear marketing deal with the NBA to help promote its products globally, which includes becoming the NBA's official partner for high-definition television, while computer maker Lenovo is the league's official supplier of personal computers.

While high-profile events such as the NBA China games create huge buzz, grassroots initiatives play a big part in overall marketing campaigns. Official NBA outfitter in China Adidas operates 1,000 stores in China, Taiwan, and Hong Kong and expects overall sales of Adidas products to reach €2.42 billion ($3.45 billion) in Greater China by 2010. Adidas launched a 5-on-5 summer league this year, which drew 1,000 teams in six cities, culminating in the finals at an outdoor court erected in downtown Shanghai during the NBA China games. "This is more of a permanent league, not just a carnival event," says Paul Pi, Adidas general manager in Shanghai.

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