July 18 (Bloomberg) -- Jeremy Lin’s marketing potential is best cultivated by the Houston Rockets, whose experience with Chinese center Yao Ming has them better positioned and prepared than any other National Basketball Association team to reap a financial windfall from Asia.
Lin became a member of the Rockets when the New York Knicks declined to match Houston’s three-year, $25 million offer -- a back-loaded contract that, under the new collective bargaining agreement, would have cost his old team $25 million to $35 million more in the final season.
Because of their work with Yao, a six-time All-Star, the Rockets and Lin, the first Taiwanese- or Chinese-American to play in the NBA, have the underpinnings and understanding to seize marketing dollars from the world’s most populous nation, George Postolos, who served as Houston’s chief executive officer from 1998 to 2006, said in a telephone interview.
“It takes a consistent effort over time to figure China out,” said Postolos, who, like Lin, graduated from Harvard University. “You need to know the market and the key players, the companies that are most interested in developing a relationship with a sports team. The Rockets have been at it a very long time.”
The 7-foot-6 Yao played in Houston from 2002 to 2011. Asia-based companies, including Toyota Motor Corp., which put its name on the team’s arena, sought affiliations with the Rockets. Yao endorsement agreements also included deals with Apple Inc. and Visa Inc.
“Building meaningful business relationships in China takes years,” says Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon. “Houston’s history with Yao puts them well ahead of any other NBA team’s ability to leverage another athlete with appeal in that market.”
Yao this week formed a partnership with the NBA’s subsidiary in China, where 300 million people say they’re basketball fans.
The change of teams comes at a pivotal marketing time for Lin, 23, who wasn’t drafted by an NBA team and was released by the Golden State Warriors and Rockets before joining the Knicks last season.
Houston General Manager Daryl Morey said on Twitter in February, when Lin was starting to grab attention, that he failed to recognize how good the guard could become.
“We should have kept (Lin),” Morey wrote on the social media site. “Did not know he was this good. Anyone who says they knew misleading U. Just accept the mistake. Finally, really, happy for (Lin). Very hard working, nice & humble. He has a great, great future.”
The decision to pass on Lin, a restricted free agent, ended a period during which his return to New York changed from seemingly inevitable to fiscally unreasonable due to the structure of the Rockets’ offer.
On July 11, Knicks coach Mike Woodson said that the team would match any offer for Lin, who emerged as a star on and off the court in his one abbreviated season in New York. His return became much less probable after the Knicks signed 39-year-old point guard Jason Kidd and re-acquired point guard Raymond Felton in a trade with Portland.
Not long ago, sports marketers said, it would’ve been inconceivable that Lin’s future would be in Houston instead of New York.
Lin shot to stardom after joining the Knicks’ starting lineup and leading them to six consecutive wins. That streak was the launching pad for Linsanity, the label for the global hysteria that the player himself has moved to trademark.
Lin was both a basketball and business catalyst for the Knicks. His popularity fueled a rise in ticket prices, merchandise sales and television ratings. Media analysts credited the hysteria surrounding Lin with helping the MSG Network, like the Knicks owned by the Madison Square Garden Co., to settle its pricing dispute with Time Warner Cable Inc.
Analysts have said Lin’s most important financial contribution to the Knicks was his effect on the network, which last season charged up to $25,000 for a regular-season commercial and $40,000 for playoff spots, two to three times the previous amount. The Knicks also signed sponsorship agreements with Taiwan-based Maxxis International, a tire manufacturer, and Acer Inc., the fourth-largest computer maker whose deal expired at the end of the season.
Lin finished the year averaging 14.6 points and 6.2 assists. He had surgery in April to repair a torn meniscus in his left knee and missed New York’s opening-round postseason loss to the Miami Heat. Lin endorses Nike Inc. products and in March signed a two-year contract to promote Volvo in the U.S. and China.
Brett Schissler, an executive vice president with Steiner Sports, which focuses on memorabilia, says Lin had better play well or “his value in the United States goes from being somebody to a nobody.”
Lin last month hired agent Jim Tanner of the Washington law firm Williams & Connolly LLP, which represents NBA stars Tim Duncan, Grant Hill and Shane Battier, to handle contract negotiations and endorsements.
The ability of Houston -- and Lin -- to gain endorsement and sponsorship riches hinges on how he plays and whether the team wins, said Terry Rhoads, who left as Nike’s China sports marketing director in 2002 to form Shanghai-based Zou Marketing Inc.
“A lot of Chinese companies are waiting to see how he does on the court in 2012-13, and then they will decide whether to do courtside stadium advertising or enter into bigger and more comprehensive sponsorship partnerships,” Rhoads said via e-mail.
Lin might get help in the form of three-time Defensive Player of the Year Dwight Howard, who has demanded a trade from the Magic. The Rockets have made roster moves designed to enable them to make an offer that would be attractive to Orlando. The Los Angeles Lakers also are interested in Howard, perhaps the best big man in the NBA.
“Getting Jeremy is all about winning basketball games, being the best team on the floor,” Postolos said. “But, they will be able to take full advantage because they have brand equity in Asia. It will make sense to people that one icon is followed by another.”
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