The NBA Nets a China Star
Until now, it has been a forgettable summer for National Basketball Assn. Commissioner David Stern. In June, the NBA finals drew record-low television ratings. In August, former referee Tim Donaghy pled guilty in a betting scandal. And last week, the Portland Trail Blazers' No. 1 draft pick Greg Oden saw his rookie year wiped out with a knee injury.
Stern is turning to an unlikely location for some relief: China. In recent years, the NBA as well as Major League Baseball and the National Football League have recognized the potential of a huge Chinese fan base. And among the Big Three, the NBA enjoys a vast head start. Its popularity in China has grown immensely over the past decade, buoyed both by the success of homegrown NBA talents such as Yao Ming and also aggressive, savvy grassroots marketing efforts to promote the league. "The NBA stands head and shoulders above any other international sports property" in China, says Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon.
Now the NBA is hoping to pad its lead. On Sept. 19, the league announced in Beijing that it had hired Timothy Chen, head of Microsoft's (MSFT) China operations, to lead its newly created NBA China division. The move consolidates the NBA's China operations, which had been run regionally under New York's direction, under one roof and under the supervision of Chen, whose success in turning around Microsoft's fortunes won him wide recognition in Asia management circles. Before joining Microsoft, Chen was chairman and president of Motorola's (MOT) China subsidiary.
Experience in Forging Relationships
And the NBA is certainly more popular in China than Microsoft. According to the league, there are as many basketball fans in China—300 million—as there are people in the U.S. "It's clear that China is the No. 1 growth opportunity for basketball in the coming years," says Neal Pilson, founder of sports consulting agency Pilson Communications and former president of CBS Sports (CBS).
At first blush, Chen is an unusual hire, given Microsoft China's success and his lack of a sports or media background. However Heidi Ueberroth, the NBA's president of global marketing partnerships and international business operations, who led the job search for a China CEO, says a key aspect was Chen's ability to forge relationships with Chinese companies and the government. Also, as the NBA expands its digital media strategy in China, his tech industry experience should serve Chen well, says Ueberroth (daughter of Peter Ueberroth, former MLB commissioner and head of the Los Angeles 1984 Olympic Games).
To the NBA's benefit, basketball has been played in the country for a long time and its rules aren't nearly as arcane or idiosyncratic as those of football, for instance. The National Football League, whose only rival in the U.S. on Sundays is religious services, has been slowly branching out to China. For instance, the New England Patriots have a Chinese Web site and the team was scheduled to play an exhibition game in Beijing against the Seattle Seahawks last month. But the NFL called off the game in April, saying that the league needed to focus more on a New York Giants-Miami Dolphins regular season game set for London on Oct. 28.
NBA on Chinese Cell Phones
Major League Baseball, too, has stepped gingerly into China. The New York Yankees baseball team, whose ace pitcher Chien-Ming Wang is Taiwanese, is working with the Chinese Baseball Assn. to help train players and coaches. Last year, MLB's No. 2 official, President and Chief Operating Officer Bob DuPuy, said that the league hopes to have teams play regular-season games in China "in the very near future." But baseball still is much more popular in Japan and Taiwan than in China, where basketball reigns.
In fact, in China the NBA is one of the most visible U.S. media properties, sports or otherwise. Chinese fans can watch games on state-run CCTV or 50 other regional networks. Chinese companies as diverse as appliance-maker Haier (HRELF.PK) and dairy provider Mengniu are marketing partners. And the league has inked deals with local partners such as big Internet portal Sohu.com (SOHU) to show Webcasts and on-demand broadband video.
Most recently, on Sept. 14, Beijing mobile content provider KongZhong (KONG) launched the NBA's mobile Web site, cn.nba.com. There, cell-phone subscribers can watch live games and highlights and get other services such as ring tones. Sam Sun, KongZhong's chief financial officer, says this is the first such deal that the company has made with a U.S. media property.
The deal makes sense, he says, because most of the NBA's core Chinese fans are 18- to 25-years-old and are prime consumers of digital media. Sun also says the NBA is a good teammate: "Since we signed on, we have met quite a few [of the NBA's] media and marketing partners," he says; and not just Chinese giants such as Lenovo (LNGVY) and Sohu, but also multinationals such as Motorola, Chen's old haunt.
In terms of corporate hospitality, treating fans like customers, and making the most of sponsor relationships, the NBA sets the standard, says Terry Rhoads, managing director of Shanghai sports business consultancy Zou Marketing. "They are making sponsors happy," he says, adding that the contrast is especially strong with China's domestic sports leagues. "The NBA is really kind of changing the Chinese sports business industry," he says.
Just in Time for the NBA China Games
The hiring of a manager with Chen's bona fides underscores the NBA's big ambitions for China. Right now, the league has 80 people on the ground in the region, in offices in Beijing, Shanghai, Hong Kong, and Taiwan. Under Chen's lead, Motorola grew from 160 people in China to more than 13,000. "I think we can do similar things," he says. Ueberroth suggests 500 may be a more immediately reasonable goal, but points out that, in Chen, the NBA has an executive who is "able to take the business and grow it significantly," while also "oversee[ing] significant investments in China."
Observers have speculated that the creation of NBA China means a full-fledged Chinese NBA league is not far from becoming a reality. "The most logical new initiative would be a new league," says Swangard. "The existing domestic sports league in China, the Chinese Basketball Assn., could benefit from the kind of expertise the NBA has in running a professional sports league." Ueberroth and Chen demurred on the subject of a startup league, but NBA Commissioner Stern has publicly broached the idea. With U.S. and Chinese corporate partners buying a 10% ownership stake in NBA China, the "deep pockets will allow them to start acting on these ideas," predicts Rhoads.
Chen officially starts his new job on Oct. 15, just in time for the NBA China Games, which tip off on Oct. 17 in Shanghai, where Lebron James and the Cleveland Cavaliers will play an exhibition against the Orlando Magic. The next day, the Magic play the Chinese national squad. Then, the Cavs and Magic play on Oct. 20 at the just opened Venetian Macao, the world's largest casino (BusinessWeek.com, 8/28/07). Says Chen, who lived with his family lived in Chicago during the Michael Jordan era: "my son was the one who was the most excited."