NBA Has Hometown Edge in Courting China

In the mid-1800s, English textile makers eyed China and drooled over the fortunes to be made if every man in this teeming country added just one more inch to his shirttails.

Now, an Oregon basketball entrepreneur, Bruce O’Neil, is looking to this land of budding sports nuts with his own hoop dreams: What if 200,000 Chinese coaches a year took his online training course, at $40 a pop?

“It’s going to be a very big moneymaker,” O’Neil predicted about the website that his for-profit United States Basketball Academy plans to unveil in the next six months.

Since the days of Marco Polo, business interests have coveted this nation’s consumer market and have dreamed of making a killing. Now it’s the sports world’s turn.

Behind the star power of Yao Ming, the National Basketball Assn. fired up Chinese fans with its brand of hoops and hoopla, staging exhibition games recently at packed stadiums in Shanghai and Beijing as a homecoming for the 7-foot-6-inch icon, who now plays for the Houston Rockets.

Afterward, league executives were cheering as well. They came away with plans for doubling the stores selling NBA apparel in the country, along with names of Chinese companies interested in becoming sponsors -- and had nothing but blue-sky predictions.

“Over the next 20 years, the growth of the NBA in China will mirror or parallel the growth in China,” NBA Commissioner David Stern declared.

Although the Chinese sports market is still fraught with risks and regulatory hurdles, and may take years to develop, companies are driving to the money basket with the NBA and Yao. McDonald’s Corp., a corporate sponsor of the league and Yao, is planning to nearly double its stores in China to 1,000 by the 2008 Beijing Summer Olympics. PepsiCo Inc. and Reebok International Ltd. have deals with the star player, as does Walt Disney Co., which wants him to help open its Hong Kong theme park next year.

They are being drawn by China’s rising middle class and a nationalistic spirit expressed through sport. Businesses hope that the combination ignites a nascent $5-billion-a-year China sports market, causing it to explode with growth rivaling the annual $200 billion spent in the United States for anything related to sports.

“It’s a very concentrated effort to promote and develop professional sports in China,” said Richard Lee, Pepsi’s vice president of marketing in China. The prize: a land where each person gulps a mere 15 cans of soft drinks on average per year, compared with Americans’ 433.

Since Beijing landed the 2008 Summer Games, this nation of chain smokers and street corner board-game buffs has become seriously sports smitten. Patriotic pride swelled this summer when China’s Olympic squad won 32 gold medals in Athens, a record haul for the country.

Meanwhile, the nation is opening the door to international sporting events. Beijing played host to the women’s tennis China Open this summer and with Shanghai put on the first professional Japanese sumo wrestling match in China in 30 years.

Here in this sports-crazy city, government officials coughed up $300 million to build a venue for the Formula One circuit’s Chinese Grand Prix last month. This month, another first: a bullfighting festival, with Spanish matadors and Mexican bulls.

Still, nothing has captured the Chinese imagination like basketball, which along with soccer is considered a global sport.

Introduced to China in the 1890s, shortly after Dr. James Naismith nailed up the first peach basket in Massachusetts, the game has inspired millions who play hoops each day on crowded city playgrounds and in dusty countryside fields.

The game was already embedded in the Chinese psyche before the NBA started broadcasting more than a decade ago and its players became widely known.

“When I walked down the street in Shanghai and someone screamed my name, I was amazed,” said former Houston Rockets star Kenny Smith, a commentator for the TNT cable network who helped broadcast the recent preseason games.

The NBA has been plugging into basketball’s worldwide appeal and taking its show on the road since the late 1980s. Before China, it held games in London, Paris, Madrid and Barcelona in Spain, Rome, Berlin, Tokyo and Mexico City.

“What’s happened is that sport has entered the global economy in the way that McDonald’s or Coke or Nike have,” said Rick Burton, commissioner of the Australian National Basketball League and a former sports marketing guru. “The NBA is one of the best in the world at globalization.”

Yet for all the hype of the Chinese market, it can be a commercial arena that turns hostile quickly -- a lesson that has not been lost on the NBA, said Brook Larmer, author of the upcoming book “Operation Yao Ming.”

Fraud remains a major complaint, U.S. Embassy officials say. Regulations are vague. Chinese courts often don’t uphold Western contracts. It commonly takes years for outsiders to build up guanxi -- influence gained through connections -- before being deemed a commerce-worthy partner.

Despite impressive middle-class gains, the majority of China’s 1.3 billion people are peasants, and the average annual per capita income just slightly tops $1,000. That means even in Yao’s bustling hometown of Shanghai, few could afford the NBA ticket prices of $35 to $240 for this month’s games.

The Chinese government has yet to put a dent in piracy, and a blizzard of knockoffs will only create headaches for the logo-driven NBA.

Perhaps even more daunting are the uncertainties that come with doing business in a Communist land where the government controls many aspects of commerce.

Sports is no exception. In fact, China has long followed the former Soviet Union model, in which sports was viewed as a national endeavor, supported and dominated by layers of government.

Some analysts and businesspeople here say the system will inevitably change, with the central government turning over its hold on sports to private hands and nongovernmental organizations.

For now, though, the sports world must play politics according to the Communist Party rule book, and that can result in some uncomfortable blocked shots, as a consultant for Reebok found out.

The shoe company agreed to fix up a Shanghai public school play yard and pay the school in Yao’s hometown $20,000 a year as a goodwill marketing gesture, said Terry Rhoads, a Shanghai marketing consultant who helped broker the sponsorship deal. It even featured the hometown hero in a dedication ceremony last year at the play yard, dubbed Yao’s House because it is located next to the gym where NBA scouts first saw the budding star.

But this year, rumors began circulating that the local government wanted to evict Yao’s House for a new tennis facility -- a consideration local officials recently confirmed, though leaving details vague.

“At first, the feeling was pure shock, disbelief and anger,” Rhoads said. “Very much an attitude of we’re not going to take it. Then we realized -- it’s China!”

On a grander scale, the NBA and other outside interests have to step lightly, as the government-controlled Chinese sports establishment realizes and exploits the financial potential of its homegrown athletes.

In basketball, the government hopes to make money by remaking the Chinese Basketball Assn. into the NBA’s image. Last week, it unveiled plans to move the 12-team domestic pro circuit to private ownership by 2015.

Left unanswered, however, was the delicate question of how much the CBA will allow the NBA to cherry-pick its best players. Indeed, the government’s sports ministry had to approve Yao’s release from the Shanghai Sharks so he could go to Houston.

Potentially next off the bench to NBA stardom are two young players for the Guandong Tigers: point guard Chen Jianghua and 7-foot center Yi Jianlian.

However, they and other Chinese stars still must give up a share of their incomes to the Chinese government and their former domestic teams. And their endorsement deals still pale in comparison to those of athletes from other countries.

NBA officials say they are cautiously optimistic that they can avoid business snares in the Chinese market.

“We can rise above that a little bit easier than other companies, given the love of people here for the game and the growing interest in sports in general throughout China,” said Mark Fischer, managing director for NBA China. “Nobody is going to want to see basketball fail.”

Least of all the fans. If the sold-out games in Shanghai and Beijing are any indication, Chinese sports enthusiasts are hungry for the NBA formula of sport as entertainment -- where fans are “consumers” and games are packaged as “experiences” that include scantily clad dancers, hip-hop timeouts and T-shirts shot into the crowd.

In the carnival-like atmosphere before the Rockets’ game against the Sacramento Kings a week ago in Beijing, that global reach was on full display as fans milled around in NBA-licensed jerseys and mugged for photos with an Asian Ronald McDonald.

Wang Shengchun, 22, a Beijing University medical student, made the connection.

“The NBA is the best league of basketball in the world, has the best players from all over the world, and it could, by the way, earn a lot of money in the field of entertainment,” said Wang, adding that the key would be changing how the Chinese view their beloved game.

“In China, we can see basketball as a sport,” he said. “But Americans see basketball as entertainment. You can either watch a movie or go to a basketball game.”

And the choice is made easier because of Yao. With a wholesome humility and a new autobiography, he has marketing coattails that won’t quit.

In China, a vast nation eager to shed its overall sense of inferiority, Yao has become a hit because he has gone toe to toe with the best of the West but retained his Eastern demeanor, author Larmer said.

Near the trendy Nanjing Lu shopping corridor, Yao images loom large. Reebok has his face plastered on billboards and signs posted on buildings. Pictures of Yao holding a China Unicom cellphone greet cab riders to and from Beijing’s airport.

Eastman Kodak Co. got a taste of Yao power when, as a sponsor of the recent exhibition games, it had a promotional giveaway of tickets at some of its 9,000 express stores in China. Sales at those outlets soared during that period, said Christopher Adams, Kodak’s chief representative for China.

“Everybody wanted to see Yao,” Adams said.

The NBA is televised on 14 outlets in China, and this year the number of weekly live game telecasts will double to four on the state’s official CCTV network. And the government is paying the league, although not a huge sum, Larmer said.

“Without Yao, none of this would have happened,” he said.

Meanwhile, NBA officials say they have been approached by Chinese companies interested in becoming corporate sponsors -- not to sell to Americans but as part of a sort of boomerang strategy to influence Chinese consumers.

And even Yao gave a ringing endorsement of the NBA style when he was asked about the commercial effect of his return home in the exhibition games.

“As for the marketing of NBA products, I believe that’s one aspect that Chinese businessmen should learn from,” he told reporters.

In a sign of trickle-down basketball economics, people like O’Neil of the United States Basketball Academy are feeling the same commercial tingle.

O’Neil, a former University of Hawaii basketball coach, established his academy in 1991 before taking aim at the untapped Chinese market. His niche: training coaches from youth leagues on up and working intensely with the Chinese national and professional teams to improve their skills.

To that end, O’Neil said, he has traveled to China 35 times in 10 years and has hit pay dirt by signing a five-year deal to help government sports officials train and certify hundreds of thousands of basketball coaches.

He hopes his plan for an online course will push his basketball academy’s annual sales to $15 million from $2 million.

That’s the kind of math that made English textile makers swoon years ago. This time, the China dream is basketball.

“There are so many coaches in the China market,” he said, “that really don’t have a total grasp of the game.”