U.S. sports leagues focused on global growth have long looked to the Chinese marketplace as a potentially massive source of new revenue, but the NBA’s unprecedented crisis in the region this week could cause top executives to delay their expansion plans.
The NFL, NHL and MLB have all either held games in China or made it clear that the home of the world’s second-largest economy is a priority destination for their international tours. The NBA was in the midst of its own annual preseason promotional effort this week when Houston Rockets General Manager Daryl Morey tweeted and deleted a post in support of pro-democracy protests in Hong Kong.
Aside from a mass exodus from its Chinese sponsors, nearly all of which have suspended business ties to the NBA, the league has faced criticism from both Chinese fans and U.S. politicians over its handling of the incident. While the Chinese market has been lucrative for the NBA and its team owners, the prospect of a similar PR crisis could push other sports leagues to look elsewhere.
“I think they’d certainly be a lot more aware, a lot more cautious and I think that while they would love to have the revenue upside that the NBA appears to have, they really might be thoughtful about whether or not the potential downside, if they got something wrong, was too much to wear or was more than they’d be prepared to handle,” Rick Burton, who served as the U.S. Olympic Committee’s chief marketing officer at the 2008 Olympics in Beijing, told FOX Business.
For sports leagues and other U.S. companies willing to take the risk, the financial incentive is clear. In the roughly two decades since the NBA first established a presence in China, the league’s partnerships in the region have grown to a $4 billion business, with hundreds of millions of Chinese fans tuning into NBA games, buying merchandise and following the action on various platforms.
As a result, losing key business relationships in China would have a major impact on the NBA’s business. Tencent Sports, the NBA’s exclusive streaming partner in the country, has suspended broadcasts of NBA games in protest of Morey’s tweet, while e-commerce giant Alibaba and its affiliates have scrubbed listings for Rockets products from their websites.
Sports leagues eyeing China
The NFL has twice made plans to hold games in China – in 2007 and 2009 – only to cancel due to logistical issues. In 2017, Mark Waller, the former head of the NFL’s international efforts, said the league was aiming to play a game in China during the 2019 season.
While no game was ever scheduled, NFL Commissioner Roger Goodell once again identified China as a potential growth area during his annual “state of the league” press conference last January. At the time, he noted the NFL had experienced “double-digit growth” in its Chinese fan base over the last year.
“China is a priority market for the NFL,” he said, according to Reuters. “We believe that our game has a great deal of potential to expand to grow and bring new fans into our game."
MLB held two preseason games in China in 2008 and has since taken steps to help grow its presence in the region. In 2017, the league partnered with state-owned Beijing Enterprises Real-Estate Group to build baseball facilities in the country. MLB games are also broadcast in China.
The NHL held preseason games in the Chinese cities of Shenzhen and Beijing last September and has committed to stage further games in the country in the coming years, according to TSN. The league reportedly derives more than $5 million in annual income from the market. However, as relations between China and the West have deteriorated in recent years, the league has faced some criticism over its decision to visit a nation with a poor human rights record.
Any attempt by one of the leagues to capitalize on the NBA’s current issues by speeding up their own efforts in China would likely backfire, according to Burton.
“My sense is that another league trying to race into China because the NBA might have a problem would be obvious, and I think the Chinese probably would not appreciate that kind of blatant absence of sincerity,” Burton said. “I don’t think the Chinese people would appreciate that approach.”
US firms under pressure
Logistics are just one challenge for sports leagues or other firms attempting to establish a foothold in China. To maintain access to the Chinese marketplace and its massive pool of 1.5 billion consumers, U.S. firms are required to adhere to the Chinese government’s strict guidelines policing foreign businesses. Companies that run afoul of Beijing risk losing revenue streams worth billions of dollars in a matter of days, as well as possible backlash in the United States if their efforts to placate Chinese officials are perceived as choosing business interests over American values.
In the last few days alone, the NBA is just one of several U.S. businesses to come under pressure in China.
Video game maker Activision-Blizzard faces a social media outcry and an apparent employee walkout this week after it suspended professional Hearthstone player Chung Ng Wai and forced him to forfeit prize money after he expressed support for Hong Kong protestors during a live stream. The player, who goes by the name “Blitzchung” in gaming circles, donned a mask similar to those worn by protestors and said “Liberate Hong Kong.”
“While we stand by one’s right to express individual thoughts and opinions, players and other participants that elect to participate in our esports competitions must abide by the official competition rules,” Blizzard said in a message on the Hearthstone website.
The company did not immediately respond to FOX Business’s request for comment on the decision. Activision Blizzard derived $173 million in revenue from the Asia Pacific region during its most recent fiscal quarter.
Tech giant Apple also faced pressure after a state-owned Chinese newspaper accusing the company of supporting protestors by allowing an app in its app store that lets users track the movement of police in Hong Kong. Apple has yet to address the situation.
In January 2018, Marriott International issued an apology after Chinese authorities shut down their website over an online customer survey that listed Hong Kong, Macau and other regions as countries separate from China. China considers those regions part of its territory.