August 4, 2007
Sports Gold Mining in China
Establishing a foothold in China is a big-bucks proposition for U.S. sports leagues
Professional American sports leagues such as the NBA, NFL, and MLB are all looking to expand into China’s rapidly growing sports market, and benefit from overseas fan support.
The NBA has 92 employees working in four cities in China, a country where 300 million people ?the population of the United States ?play basketball.
The NFL is trying to reach 18-34 year-old men through fantasy football, video games and other online methods; the same things that U.S. guys are drawn to.
And Major League Baseball is hoping to find its Yao Ming, and give Chinese fans someone to cheer for.
The upcoming Olympics adds even more power to the sports business in the world’s biggest country; however, it is not the only reason for growth.
China has 1.3 billion people and a rapidly growing economy. Disposable income has grown by 11 percent annually since 1995, according to one study, and the size of the middle class is growing by 18 percent.
"I absolutely think there's opportunity in China," said Robert Tuchman, CEO of TSE Sports and Entertainment, who recently returned from a trip to Beijing to scout marketing opportunities. "There's no doubt that this is definitely the Holy Grail when you look at China's standing compared to the rest of the world."
Of the three biggest sports leagues in the U.S., the NBA clearly has the biggest foothold in China. The NBA makes $300 million from overseas each year, and China is the biggest contributor, said Heidi Ueberroth, NBA Entertainment’s president of global business operations.
“The NBA is unique in that, the very best players in the world aspire to play in our league,?said Ueberroth, the daughter of U.S. Olympic Committee chairman Peter Ueberroth. “The Chinese see the NBA not as an American sport, but as a global sport. It’s something people around the world have aspirations for.?
The NBA’s success comes because the Chinese have been playing and watching basketball since the 1890s and picked up the NBA starting in 1979.
The NBA’s Chinese website is the most popular sports internet site, averaging 12 million views a day, and NBA games are broadcast on 51 television networks.
However, Yao’s jersey sales rank sixth in China behind Kobe Bryant, Allen Iverson, LeBron James, Tracy McGrady, and Dwyane Wade; perhaps a signal that fans love basketball beyond the country’s biggest star.
Still, many experts believe giving Chinese fans someone to follow is a big part of the recipe for success there.
“That’s how it opens up,?Tuchman said. “When you have a player who can capture the excitement of a country, that’s when they can get drawn into a sport.?
Boston Red Sox president Larry Lucchino visited China recently and saw what could happen if a Chinese player makes it in America and fans connect with him.
“The transformation of the society is creating a middle class with leisure time and money for sports,?he said, answering an e-mail question about his trip. “There is a history there of baseball. The new media opportunities are gigantic.?
The Yankees and Mariners each recently signed two Chinese prospects, recognizing the enormous potential if they can raise the country’s first baseball star.
It also helps if a sport’s familiar, a part of the culture of a country that loves its recreation. That’s a model with which the NBA has found success, co-sponsoring a series of 2-on-2 tournaments being played in 112 cities this summer.
“Baseball has to be played day in and day out,?said Jim Lefebvre, manager of the Chinese Olympic team, in a recent interview. “When we play four or five games in a row, the players break down and get hurt. If China wants to compete, they have to play day in and day out and realize who they are competing with.?
Football might be furthest behind in China expansion, however, the NFL plans on catching up.
To most people outside of North America, football is a mess, filled with long breaks between the action sets, strange position names and complicated strategies.
Mark Waller, senior vice president-international for the NFL, said “I personally believe that following the Olympics is better than preceding it, I believe there will be more fan space, fan attention and government interest in how to fill stadiums.?/p>
While the NFL prepares to play a preseason game in China by 2009, it’s busy trying to build its brand. The league has sponsored a school-age, flag-football league for about 5,000 players, and an NFL game is shown each week on state-run TV.
The league also opened its first Chinese office in June, recognizing the need to establish a physical presence in China, and in addition is coming up with ways to market the game to fans through internet-driven products.
“Our emphasis is going to be around how much we can deliver to fans in a technological way,?Waller said. “It’s a sport that looks great on TV, looks great on the internet. We can do a lot around video gaming. It will be a technological-based modern approach underpinned with the ability for a limited number of people to play.?
Tuchman said finding business opportunities in China is the No. 1 project these days at his company, which caters to companies looking for sports-marketing investments around the world.
But it takes more than simply showing up.
“Things would be going a lot more quickly right now if there were more of a guarantee when dealing with China that things will go as planned,?Tuchman said. “Buying companies over there, getting data and the things that you need to have guaranteed before you make an investment is very difficult.?
One project to note might be NBA commissioner David Stern’s goal of establishing an NBA-operated league in China.
But the 12-year-old Chinese Basketball Association, which produced Yao and Milwaukee draft pick Yi Jianlian, is already well entrenched.
“Entirely unworkable,?is what Duke Professor Grant Farred calls the NBA’s plan to establish a league in China.
Farred wrote a recent book discussing the difficulties of assimilating different cultures into basketball. He recognizes the potential of the American sports projects in China but doesn’t think the partnerships will evolve so seamlessly.
“Can you imagine the Chinese government saying it’s OK for an American conglomerate to run the CBA? How unthinkable is that?? Farred said. “Also, is there a market for these games? On the one hand, lots of people will wake up at ungodly hours to watch Yao Ming play for the Houston Rockets. He’s great. But how many are going to pay good money to watch a bunch of also-ran Chinese??
And indeed, money is an issue.
One thing that struck Tuchman on his recent visit was for all the reports of an improving economy and growing middle class, Tuchman said he still saw a very poor, developing city in many places.
“You see all the billboards of Yao wearing his Rockets jersey,?Tuchman said. “You can bring in a lot of fans like some of the leagues are going to do, but when you want to convert fans into customers; you’ve got to have people with TVs and money.?
Where money exists, the Chinese seem more than willing to spend it on basketball.
The NBA says the branded sports apparel market in China is expected to grow 20 percent annually to $2.5 billion in 2010, and already about 20,000 Chinese stores carry NBA merchandise.
Despite the inherent roadblocks and his own skepticism, Farred acknowledges there is, indeed “a profound fascination, particularly with their growing middle class, in things American.?/p>
“There’s always going to be money to be made in China,?he said. “Nobody would deny that.?
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