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The NBA in China: Opening a Super Market

By Michael Lee
Washington Post Staff Writer
Thursday, October 18, 2007

When Abe Pollin led the NBA's first venture into China in the summer of 1979, not every member of the Washington Bullets shared the team owner's enthusiasm. As players and their wives poured off a bus to take in the splendor of the Great Wall, Elvin Hayes and Dave Corzine refused to budge.

Pollin peered back and asked Hayes if he was coming. "I've seen a big wall before, Mr. Pollin," Hayes told him. Wes Unseld tried to persuade Hayes by telling him the wall was the only man-made structure that can be seen from outer space. To which Hayes responded, "I'm never going into outer space."

Pollin was so infuriated afterward he swore that he'd never take his team on another trip. "One of the wonders of the world," Pollin said recently in a telephone interview, "and they didn't get out of the bus."

Where Pollin's generosity with his players ended, the NBA's infatuation with China began. Over the next 28 years, the league's flirtation became a courtship, which is now a serious commitment, with the establishment of NBA China. The subsidiary -- which places all of the NBA's businesses in China under one umbrella -- was announced last month and is being ushered in this week with preseason games featuring the Orlando Magic and Cleveland Cavaliers.

The Magic will become the first team since the Bullets to play the Chinese national team in China as it opens a new sports arena in Macao on Thursday. The Magic defeated the Cavaliers, 90-86, in Shanghai on Wednesday, and those teams will meet again on Saturday in Macao.

The three games in China this week conclude an international NBA preseason that has already seen four teams -- Boston, Toronto, Memphis and Minnesota -- play in Italy, Spain, Turkey and England as part of NBA EuropeLive. The NBA's globalization efforts increased after the 1992 Dream Team's gold medal performance, but in recent years, the league has developed a special affinity for China.

It's easy to understand the NBA's desire to intensify efforts in China, with its enormous population (1.3 billion), booming economy (the world's fourth largest and steadily rising), interest in basketball (the NBA estimates that 300 million Chinese play basketball) and next summer's Beijing Olympics.

The league generated $50 million in China last year, making it its largest market outside of the United States and persuading league officials to expand the brand. "We looked at this as a way to help us accelerate the buildup of our infrastructure and operations," said Heidi Ueberroth, NBA president of global marketing partnerships and international business operations. "I think if it's successful, we'll look at it as the model for other areas."

"The dynamics in China -- with the incredible popularity of the game, the increasing urban middle class, the development of the arenas, the Olympics -- [are] creating such an opportunity for basketball and the NBA," she said in a telephone interview. "The challenge, and it sounds like a high-class problem, is really keeping up with the demand in a place that is so vast and broad, such as China."

To address that concern, the NBA hired Timothy Chen, former chief executive of Microsoft's China operations, last month to head the league's subsidiary in China. Chen, a native of Taiwan, started this week and is one of the best-known executives in China. He was chairman and president of Motorola in China for two years before joining Microsoft in 2003.

Chen received his executive MBA from the University of Chicago, where he became a fan of Michael Jordan and the Chicago Bulls, or "Red Oxen," as they are referred to in China. He is expected to help the NBA maneuver through a country where the right guanxi -- the Chinese word for political relationships and influence -- is required to persuade governments to provide the land necessary for new arenas and persuade local and provincial television stations to carry NBA games.

"His expertise just stood out, to build and grow a business," said Ueberroth, who led the recruiting process.

The NBA has already grown considerably in the country since 2004, when the league organized the first set of NBA exhibition games in China, between the Houston Rockets and Sacramento Kings, with a permanent staff of just three people in the country. Today, the NBA has a staff of about 80 with offices in Beijing, Shanghai and Hong Kong, as well as in Taipei, Taiwan.

The investment bank Goldman Sachs is assisting the NBA in the endeavor. The league owns 90 percent of the new subsidiary, with two 5 percent shares to be sold to Chinese investors and a U.S. media company believed to be Walt Disney Co., which owns ESPN and ABC. The NBA is also discussing forming a league with the 12-year-old, 16-team Chinese Basketball Association (CBA) -- the league that produced Rockets all-star Yao Ming and Milwaukee Bucks rookie Yi Jianlian -- after next summer's Olympics.

Before yesterday's Magic-Cavaliers game, NBA Commissioner David Stern said long-term plans called for setting up "the second NBA, the NBA of China." He didn't specify what form that will take, but Stern said the expansion will involve working with the CBA.

Though the NBA is the third-most popular sport in the United States, no professional sports league has a larger foothold in China. The NFL attempted to stage a preseason game between the New England Patriots and Seattle Seahawks last August, but backed out to focus on a regular season game in London this month. Earlier this year, Major League Baseball announced tentative plans to start its regular season in China.

But while those leagues were touch-and-go in their approaches to tap into the Chinese market, the NBA has spent the past two decades trying to become part of the fabric of the nation through television and grass-roots programs. "We're looking very long term here, in both our strategy and approach, to build the right foundation," Ueberroth said.

Basketball has been part of China since the 1890s, when Christian missionaries brought along the game that James Naismith had just invented. It was one of the few sports that survived after Mao Zedong took over in 1949 and attempted to rid the country of foreign influences. Beijing's Forbidden City, the Chinese imperial palace for more than five centuries, has a basketball court for guards to play ball on during breaks.

According to the NBA, basketball has surpassed soccer as the most popular sport among children in China, with a recent survey showing that 83 percent of Chinese males between 15 and 24 consider themselves NBA fans.

Tom Doctoroff, chief executive of greater China operations for the JWT advertising agency, said basketball is considered "the temple of individualism" in China, where "you are not supposed to strut your stuff or show off your stuff unless there is a societally mandated objective."

Doctoroff, author of the book "Billions: Selling to the New Chinese Consumer," said the NBA provides an alternative reality of creativity and expression that is attractive to the younger generation in China. "The NBA has an image of brashness and individualism and boldness, but it's quite inaccessible," he said.

"What the NBA is doing very well is taking that inaccessible heroism with a lot of on-the-ground marketing of the game."

NBA merchandise is sold in more than 50,000 locations throughout China, and shoe company Adidas has helped open 20 NBA-themed boutique stores. Nearly a third of the traffic for NBA.com comes from the Mandarin Chinese site, which was established in 2003, and the league's games are broadcast on more than 50 stations in China.

The success is far from overnight. Six years after the Bullets' visit to China, Stern invited the Chinese national team to the United States for a "friendship tour" of exhibition games against seven teams, including the Bullets. He got the state-owned China Central Television to televise the 1987 All-Star Game and struck a formal television deal two years later with the novel idea of providing the network with free programming. Fans in China watched videotaped games until 1994, when Game 1 of the NBA Finals between the Houston Rockets and New York Knicks was broadcast live at 8 a.m.

But the explosion in popularity truly occurred in 2002, when the Rockets selected Yao with the No. 1 pick.

"Yao really represents this tipping point for the NBA business in China. The emergence of the digital media, together with this growing middle class, really represents this perfect storm," said Terry Rhoads, managing partner of a Shanghai-based sports marketing firm. Rhoads is a former Nike executive who signed Yao to his first contract before forming his own company, Zou Marketing -- "Zou" means "Go" in Mandarin -- five years ago.

The NBA "didn't build Yao Ming. He sort of landed from [the] heavens," Rhoads said. "But they're not going to waste the gift that is Yao Ming. That's why the NBA should be applauded. They have an operationally sound and structured business model for China and that will help turn the China market into their most important and successful and lucrative market outside of America. If we go out 30, 40 years from now, crazier things could be said. China could be a basketball market that competes with the United States."

While explaining the NBA's potential growth in China, Rhoads suggested a parallel to Nike's success in the country. Nike and its chief shoe rival, Adidas, are both expected to reach $1 billion in sales next year. But Rhoads said that when he left Nike China in 2002, the company was worth $100 million. In 1994, when he joined the company, it was valued at $8 million.

"What could actually happen is, in the next three to five years, the overall sale for basketball product, not only for us, but for all brands, will possibly surpass the U.S," said Travis Gonzales, Adidas global public relations manager. "China is that market, if we're all doing our math right."

The Associated Press contributed to this report.

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