Every time the NBA-China scandal seems to be fading, another eruption underscores the increasingly difficult tightrope leagues, athletes and media companies walk as they do business with communist China.
Just in the past few days, LeBron James unleashed a furor from fans in both Hong Kong and the U.S. when he described Houston Rockets general manager Daryl Morey as "misinformed or not really educated" for his seven-word tweet that ignited the initial uproar. Then, NBA commissioner Adam Silver acknowledged that his league had lost millions since Morey's tweet and stated that the Chinese government had asked him to fire Morey. But the Chinese foreign ministry turned around and denied Silver's claim, putting another round of pressure on the commissioner, just as normalcy seemed to be returning.
On Friday night, hundreds of activists attended the Nets-Raptors preseason games wearing shirts and holding signs in support of pro-Democracy protestors in Hong Kong.
The NBA has far and away the largest Western sports presence in China, but it's hardly alone in having to navigate the challenges of doing business there. The NFL, MLB, the NHL, MMA, esports leagues -- virtually every professional sports entity has worked to establish a foothold there, wooed by the country's exploding economy and a population more than four times larger than that of the United States.
But according to experts, and as the NBA discovered swiftly, China's burgeoning power has wrought a government even more committed to controlling the flow of information to its people and stifling dissent.
"Both the state and Chinese people are aware of the leverage they have over profit-seeking entities that are desperate to maintain access to the Chinese market," Jonathan Sullivan, the Director of China Programs at the University of Nottingham Asia Research Institute, said by email. "Of course, it is the state that sets, adjudicates and enforces the rules. And if you transgress you can expect to be punished, at a time and method of the state's choosing."
Bill Bishop, a former media executive who has spent more than a decade living in China and analyzing the country, says the dynamics recently making headlines are not new.
"But the NBA events ... made it much more of a mainstream issue," he said. "In many ways, it's harder for the leagues to keep their souls but also expand into China."
Nevertheless, the NBA's numbers in China reveal why leagues have persisted in trying to find their footing there. Plainly, there's just so, so much money to be made.
Earlier this year, the NBA expanded its deal with internet behemoth Tencent to stream live games and make an array of content available to the company's one billion users. The new contract, which begins next year, pays the NBA $300 million annually for the next five years -- representing a threefold increase from the previous deal. (In 2016, ESPN and Tencent agreed to a five-year distribution agreement in which ESPN provided content to be shared across Tencent's many platforms in China.)
The NBA has a long-standing contract with government-run CCTV to broadcast games live throughout the country, and though the financial specifics of that deal aren't clear, the NBA has suggested that the benefits are enormous.
"The value we generate from CCTV through sponsorships and all of our other initiatives --- it's hard to put a price on that," David Shoemaker, then the CEO of NBA China, told Forbes in 2017.
Beyond its broadcast and social media deals, the NBA makes money in China from corporate sponsorships. There also are NBA training academies, NBA-themed play zones for kids in malls, NBA-themed "lifestyle complexes," an NBA 2K League for gamers, an NBA youth development program and more. On top of all that are the millions made by individual players through sponsorship contracts with Chinese companies.
Sports Business Journal recently estimated that the NBA's presence in China is worth $5 billion to the league.
"I don't know a Chinese male that is not crazy about the NBA," said Jim McGregor, a marketing expert who has lived in China for three decades and served as the chairman of the American Chamber of Commerce in China. "I'm telling you, living on the ground here, I'm from Minnesota, and every time I meet somebody here, they talk about the Timberwolves."
This is exactly what every other league is chasing as they look to China.
MAJOR LEAGUE BASEBALL first opened an office in China in 2007. Ten years later, MLB announced a joint partnership with a Chinese state-owned real estate group to build 20 development facilities -- along the lines of the training sites baseball has set up throughout Latin America and other parts of the world.
The training centers are geared toward kids ages 7-12, as MLB tries to drive interest in the sport while taking advantage of growing disposable income among the Chinese middle class. Last year, Tencent signed a multiyear deal with MLB to stream 125 regular-season games, plus the playoffs and World Series. The agreement also has Tencent partnering on a traveling baseball show and hosting a digital MLB Fan Club, along with streaming a series of MLB-run youth events.
TheLos Angeles Kings and Vancouver Canucksplayed exhibition games in China in 2017, marking the first NHL events there. The owner of one of the game's sponsors is a Chinese billionaire who has invested heavily in the NHL. The league also signed a five-year deal with Tencent to stream games and provide sponsorships, merchandise sales and development of a mobile game.
While the NFL has made its move into Europe, with annual regular-season games now in London, its efforts in China have been mixed. Commissioner Roger Goodell recently described China as a "priority market," but plans to stage an exhibition game that began in 2007 haven't moved forward for a range of reasons -- some political, some logistical.
"It's very difficult to put [a game] on there," said Marc Ganis, a longtime sports marketing expert whose company secures sports contracts in China. "London is a lot closer than Beijing or Shanghai are. And then the thing that can't ever be ignored is the political risk. ... How do you know that the political support you might have today in China might dissipate by the time the game is played? What if they don't allow you to broadcast the game out of the country?"
In 2017, the NFL and Tencent announced a three-year deal for the company to stream some preseason games, all Thursday, Sunday and Monday night regular-season games, assorted other regular-season matchups, the playoffs and the Super Bowl. Goodell said the league has seen "double-digit growth" in China, and the league says participation in the sport -- both contact and flag -- has been growing steadily. Three years ago, the league said research showed that interest in the NFL had grown from 1.6 million people to 19 million.
The NFL also has deals with several traditional broadcast partners there, as well as major media and merchandise partnerships with the Alibaba Group, which was cofounded by Hong Kong billionaire Joseph Tsai, who owns theBrooklyn Nets.
TSAI THRUST HIMSELF into the NBA controversy when he penned an open letter on Facebook. After Morey angered the Chinese government and some of its people with a tweet supporting Hong Kong residents who have been rallying for Democratic reforms and against Beijing's hold, Tsai wrote that Morey had touched on a "third-rail" issue in China. His post reflected the government's message that the protesters are separatists trying to undermine China's sovereignty.
"Had Morey made the objectively uninformed statement that 'HK rioters under the guidance of foreign black hands are seeking to undermine Chinese sovereignty' ... I have no doubt that this would have been a complete non-issue," Sullivan said.
"And that brings us to the crux of the issue for us in the West," he said. "How do we feel about, and how do we deal with, the fact that 'our' behavior and 'our' values are susceptible to the wonts of an authoritarian state?"
James, meanwhile, fueled the situation with his comments that Morey "was misinformed" in his tweet. James later tried to clarify his position by saying he wasn't addressing the substance of Morey's tweet but the fact that "so many people could have been harmed, not only financially but physically, emotionally, spiritually."
His comments were hailed in China and ripped and ridiculed in Hong Kong and in the U.S., where critics said he put his own financial interests in China ahead of free speech and democracy. In Hong Kong, some fans stomped on James jerseys and cheered as one burned.
In 2015, James signed a lifetime deal with Nike. His longtime business manager and partner, Maverick Carter, has said the deal could be worth more than $1 billion. Nike, with James as a primary spokesman in China, received 17% of its $37.2 billion in brand revenue from Greater China in fiscal 2019.
James earned a reported $32 million from Nike shoe sales last year, significantly more than any other active player, Forbes reported. A year ago, he embarked with Nike on a clothing design collaboration with Chinese esports star Jian Zi-Hao.
James also has served Tencent as a spokesperson, consultant and endorser of NBA 2K Online in China.
THE ESPORTS INDUSTRYis also grappling with this issue. Just days after Morey sent his tweet, Blizzard Entertainment suspended a professional Hearthstone player in Hong Kong after he expressed support for the protesters during a postmatch interview. Wearing gear often donned by the protesters -- goggles and a gas mask -- Chung Ng Wai (known as Blitzchung) shouted, "Liberate Hong Kong, revolution of our times."
Soon after, Blizzard announced that it had suspended Chung for a year and withheld his prize money from the event. Tencent owns 5% of Blizzard.
The action prompted a small protest by employees at the corporate offices in Irvine, California, elicited Twitter rebukes from at least two U.S. senators and prompted criticism from human rights organizations.
Blizzard ultimately announced that Chung would be able to keep his prize money, and his suspension was reduced to six months, but the company reaffirmed its position that its players essentially need to stick to sports during official events and broadcasts.
Vice reported Wednesday that three American University college Hearthstone players received six-month bans after holding up a sign during the tournament that read, "Free Hong Kong, Boycott Blizz."
Across the sports world, the message has become clear.
"The Chinese government has been very good about exporting their campaign of terror, if you will, to corporations, including sports entities, around the world," said John Pomfret, a former Washington Post Beijing bureau chief and author of a book that traces the history of U.S.-China relations. "Everyone is afraid, and they're afraid because the red line has been moving in a negative direction for a long time."
If that wasn't already clear to the NBA, it is now. After the Morey tweet, 11 of 13 Chinese companies that have sponsorship deals with the league temporarily halted them. Long-planned broadcasts of two exhibition games were canceled, and the broadcast partnerships, including with Tencent, appear to be in limbo. CCTV and Tencent have said they would not show or stream Rockets games, and Silver made his comment that the Chinese government had asked him to fire Morey onThursday at the Time 100 Health Summit.
"We said there's no chance that's happening," Silver told ABC's Robin Roberts. "There's no chance we'll even discipline him."
He added, "Our games are not back on the air in China as we speak, and we'll see what happens next."
All of this serves to underscore the push and pull league officials, coaches and players are facing as they try to weather the controversy.
"These players have a real issue if they're very active speaking out in the U.S., but then when they come to China, they clam up," said Bishop, the former media executive. "From a business perspective, that makes sense, but from a reputational perspective, that's trouble.
"You have political systems that diverge, and the players are stuck in that divergence. Obviously they want to keep China's money and the Chinese market, but they can't do both and not look hypocritical."
With the NBA regular season set to start Tuesday and no word yet on whether games will be streamed by Tencent or aired by CCTV -- or whether any of the sponsors will return -- the NBA's status in China is uncertain. There's one school of thought that says basketball is simply too popular and important to China for the government to punish the league further. In the past couple of days, Tencent has returned to streaming at least two preseason games.
"Look, this is bad for the Chinese government right now," said McGregor, the marketing expert who has written two books on doing business in China. "The NBA is nothing but good; it provides entertainment, keeps people busy, gives them something to talk and be passionate about, and if they're doing all that, they're not on the streets complaining about the government."
At the same time, it's unclear what, if anything, the league could or would do at this point if asked to mollify the Chinese.
Said Bishop, referencing the pingpong diplomacy that initiated a warming of relations between the countries back in the early 1970s: "One of the jokes going around is U.S.-China engagement started with pingpong and ended with basketball."
Producer William Weinbaum and researcher John Mastroberardino of ESPN's Investigative and News Enterprise Unit contributed to this report.
For NBA and other sports leagues, a difficult tightrope to business in China
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