A Chinese flag will be placed on market in the NBA flagship retail store on October 9, 2019 in Beijing, China.
Kevin Frayer | Getty Images
Although the National Basketball Association finds itself back in the middle of geopolitics, there are no plans to abandon its alliances in China as tensions with the United States continue to intensify over concerns about national security.
The latest threat to the NBA’s business operations in China comes after concerns that its streaming partner Tencent was facing business disruptions following an executive order from President Donald Trump last week. The executive order claims that Tencent’s WeChat app poses a threat to the US “national security, foreign policy and US economy” and prohibits US companies from doing business with it.
It’s still unclear whether Trump’s executive mission is narrowly aligned to WeChat as the entourage of Tencent, which has various investments in U.S. video games, sports and media companies. In the case of the NBA, Tencent has a five-year, $ 1.5 billion deal to stream NBA games in China, one of the league’s most lucrative markets outside the US. The deal was signed last July. The NBA did not comment on the potential effects of Trump’s executive order.
Meanwhile, the order follows a report by NBA’s domestic media partner ESPN, which published an article on July 29 describing the league’s affairs with a Xinjiang basketball academy.
The article claims that the NBA failed to act on complaints describing the abuse of youth at the academy. After exchanging letters with officials, NBA affairs in China have caught the eye of American politicians, including Sen. Marsha Blackburn, caught. The Tennessee senator has accused the NBA of misleading officials about its relations in Xinjiang.
Mark Tatum, the NBA’s deputy commissioner who helps control the league’s international business, called the article’s allegations “disturbing.”
Tatum, who also serves as the NBA’s chief executive officer, added the league ended its partnership with the academy in Xinjiang in June 2019 following its recent event. Tatum said the league provided only three coaches to participate in the Xinjiang Academy, “none of whom have claimed to have been involved in any traffic.”
However, the credibility of the NBA was challenged in the ESPN article, because it also said that the league asked individuals not to talk to the network regarding the report.
Men walk past a poster at an NBA show in Beijing, China October 8, 2019.
Jason Lee | Reuters
Tencent concerns of NBA
But even though the NBA is trying to put out the fire caused by proven problems at the Xinjiang Basketball Academy, a more pressing concern comes from Trump’s executive order last week, which jeopardizes his streaming deal with Tencent in China. .
Tencent, which is expected to report quarterly earnings on Wednesday, has dropped its shares by about 10% since August 7, the day after Trump announced his executive order.
The NBA says it has 1.4 million followers on Tencent’s WeChat, which although that turns out compared to its 44 million followers on its Weibo, a Chinese social network similar to Twitter. With the renewal of Tencent’s streaming rights last year, it is rumored that the NBA China’s valuation has exceeded $ 5 billion.
Houston Rockets GM Daryl Morey damaged that rating when he sent his October for sending to Hong Kong protesters via Twitter. That put the NBA first in the midst of a geopolitical firestorm with China and resulted in close partnerships and the government’s CCTV playing its games.
Tencent stopped streaming games at the time, but returned to show selected games that did not include the Rockets. At the NBA’s All-Star Weekend in Chicago, league commissioner Adam Silver said the conflict could cost the NBA up to $ 400 million.
However, the NBA has no plans to leave its business in China, and Silver has repeated that message in recent months. But if the NBA is forced to decide between companies at home and in China, it could be detrimental to its turnover in the world’s fastest growing market.
Tatum told Forbes in 2018 the league’s China operations, which are owned by NBA team owners, were then valued at roughly $ 4.3 billion. More than 500 million people watched NBA programming in China for the 2018-2019 season of the league, allowing team owners to raise revenue through NBA China’s distribution of league content, sales and even the NBA’s Playzone, an interactive space for youth.
Suppose tensions between the US and China continue after the US presidential election. In that case, the NBA’s company in China could continue to suffer, causing even more pain to its payroll, which is already expected to take a heavy hit because of Covid-19.
The NBA has gained traction in other global markets, including India, which Tatum said would “outpace China in the next five or six years.” Mexico is another country in which the NBA will continue to invest in along with Brazil, but none of these markets currently has the established infrastructure as paying customers equal to China’s market.
Silver suggested in February the NBA’s business in China is not permanently damaged, and he added the league accepts “the consequences of our system and our values.”
The NBA recently resumed its season in Orlando after games ended on March 11 due to the pandemic. The regular season-like games will end this week, and the NBA will move on to its postseason, which is scheduled to close in October, before the November 3 U.S. presidential election.
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