There is a crucial flaw in the NBA’s expansionary business model. Many of its players and managers are American, apparently. Their basketball skills are amazing. They organise thrilling matches. But they hail from a country with ingrained traditions of personal freedom. Some speak their minds.
Houston Rockets manager Daryl Morey retweeted the words “fight for freedom, stand with Hong Kong” when he could have put: “Long live His Excellency Xi Jinping!” A Chinese boycott of the NBA is now growing even faster than its Chinese audience was.
Most of the for-profit league’s revenues outside the US come from China. About 300m Chinese people play basketball. The audience for NBA is more than double the entire US population at 800m. Sponsorships have tracked growing viewership, valuing NBA China, the league’s local business operator, at more than $4bn.
About one-tenth of its revenues come from sponsorships and merchandising. These are taking a hit. The Rockets were highly popular. E-commerce sites including JD.com and Alibaba have taken down team merchandise.
Worse, state broadcaster CCTV is no longer broadcasting NBA matches. Tencent has suspended streaming of NBA pre-season games. Viewers on its platform last season almost tripled year-on-year to 490m viewers. In July, the online giant agreed to pay $1.5bn over five years, equivalent to almost a fifth of the NBA’s annual revenues.
The bulk of the league’s revenues come from TV rights sales. The US dominates. But with audiences there dropping, the NBA was depending on Chinese growth.
The position of the NBA and the Rockets is impossible. Disowning or firing Mr Morey – who deleted his retweet – would mollify chippy Chinese authorities. It would also set a deadly trap. Penalties would dismay some American fans and players, prompting further anti-Chinese comment.
The NBA aims to “build bridges through basketball”. The Rockets row has blown a hole in one of the most lucrative of these structures. This rule will increasingly apply to western commercial organisations: you can have freedom of expression or you can have rising revenues in China. You cannot have both.
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