The N.B.A. Is Missing Its Shots in China
Foreign companies doing business in China must inevitably navigate the country’s distinctive brand of “state capitalism,” in which the invisible hand of the market is often hard to free from the tentacles of the authoritarian government. The companies that do best usually exercise patience, maintain a low profile and are careful not to give the state cause to regard them as a threat. When the N.B.A. revealed its ambitious plans for China, it was pursuing the logical next step to expand its already successful business there. But the logic of the Chinese state was very different. As Arthur Kroeber, the managing director of GK Dragonomics, a business consultancy in Beijing, puts it, “Foreign companies that come in here with announced, large, grand strategies — as well as these grand statements about what they are going to achieve — rarely are going to get there.” Stern and the N.B.A. owners were able to handle the players’ union in the lockout. The People’s Republic of China is proving much, much tougher.
Jiang Heping is arguably one of the most powerful figures in global sports as the head of China Central Television’s all-sports channel, known as CCTV5 and sometimes described as China’s equivalent to ESPN. Jiang’s office is inside the old CCTV building on Beijing’s bureaucratic west side. When I met him in December, it was a delicate moment. He was in a tough negotiation with the N.B.A. over the renewal of broadcast rights, with less than two weeks to go before the opening of the lockout-shortened N.B.A. season on Dec. 25. “To be frank, I haven’t found a solution,” Jiang told me, conceding that failure to reach a deal would mean a blackout of the N.B.A. on the country’s all-sports channel. Jiang, whose office is decorated with photographs of him with Shaquille O’Neal and Kobe Bryant, seemed genuinely anxious about the stalemate. The problem was advertising: CCTV was demanding changes in an arrangement that for years allowed the N.B.A. to sell a share of ad time during games for its own corporate partners. “I was instructed from above that we can’t maintain such a business model,” Jiang said, referring to the officials who run all the CCTV channels, which constitute the Communist Party’s most influential propaganda mouthpiece. The N.B.A.’s formal relationship with CCTV began in 1987 — the year Wilson Chandler was born — when David Stern visited Beijing with a demo tape in hand. Stern had no idea that China’s economy would soon remake the world — few people did — but he realized earlier than most that globalization would change sports by transforming games and players into commodities that television could deliver across borders. He made a deal to provide CCTV with videotapes of N.B.A. game footage, sent weekly from New York, in exchange for a share of advertising revenues. Since advertising barely existed in China, Stern later said he assumed he was largely giving his highlights away in exchange for exposure to the vast Chinese audience. Basketball already had a long history in China, having been brought to the country by the Young Men’s Christian Association a few years after James Naismith invented the game in 1891 in Springfield, Mass. Nearly a century later, rough highlights of N.B.A. games would begin appearing on a weekly CCTV sports program, and Chinese viewers would get their first glimpses of Magic, Bird and, most significant, Michael Jordan. By the 1990s, when Jordan’s Chicago Bulls were most dominant, CCTV was paying the N.B.A. to show its games, as were provincial and city TV stations. What’s more, advertising revenues were starting to materialize, as the games became a popular way for companies to introduce themselves to the Chinese consumer. Today a major chunk of the N.B.A.’s revenues in China come from marketing partnerships with multinational corporations and Chinese companies. The biggest boon for the N.B.A. came in 2002, when Yao was the first pick in the N.B.A. draft. CCTV5 soon began broadcasting live N.B.A. games throughout the week. Viewership soared, despite a time difference that meant N.B.A. games were on during the morning rush in China. Games between two ordinary teams might draw 10 to 15 million viewers (and perhaps three times as many if Yao was playing).
The N.B.A. had already opened an office in Beijing and inaugurated a series of annual preseason games in China when, in late 2006, Stern mentioned during the Reuters Media Summit in New York that the N.B.A. was also considering having its own league in China. Privately, N.B.A. officials were exploring how to incorporate an N.B.A. subsidiary company as a separate Chinese entity. In 2007, they made presentations to prospective investors and raised $253 million from some of China’s most powerful private and state-owned companies, as well as from ESPN/Disney. Goldman Sachs said this $253 million stake represented about 11 percent of the new company, which suggested that the total value was about $2.4 billion. The new subsidiary, N.B.A. China, was announced in January 2008, and in August, the N.B.A. used the 2008 Beijing Olympics as a stage to show off its global dominance. N.B.A. stars were playing for several countries, and more than 150 million viewers watched an opening-round game pitting the American team against Yao and the Chinese team. Then last year, within a matter of days, Yao retired and the N.B.A. owners locked out the players. “The lockout was a blow to the N.B.A. brand,” Jiang told me in December. But the top official in the Chinese league is a creature of the old age, an old-school Communist Party bureaucrat named Xin Lancheng, who put his foot down, prohibiting Chinese teams from signing N.B.A. players who were already under contract at the time of the lockout. Only free agents would be eligible — and they would have to sign that binding contract. This was partly about pride, and arrogance, but it was also consistent with an ethos that has prevailed since China opened itself to the outside world in 1978: foreigners are not invited to China to profiteer; they are invited to make the Chinese better. Even N.B.A. players.