The Unfinished Dream of NBA China

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For the exclusive use of A. Feda, 2017. W14018 THE UNFINISHED DREAM OF NBA CHINA Professor Yin Chen and Xiaohang Guo wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Copyright © 2014, Richard Ivey School of Business Foundation Version: 2014-03-12 “The sky is the limit for the NBA in China.”1 David Stern, Commissioner of the National Basketball Association, 2007 On June 1, 2012, David Shoemaker took office as the new CEO of NBA China, overseeing the league’s business and basketball development in Greater China. NBA China had been established in 2008 and had enjoyed a great beginning, capitalizing on the immense popularity of basketball in the nation. However, since 2010, some problems had started emerging, and the sustainability of the organization’s long-term growth was in question. Social networking services had developed quickly, redefining how fans watched games and interacted with each other; the traditional merchandise strategy based on franchised stores was being challenged by booming online businesses; the annual NBA China Games were no longer able to satiate Chinese fans’ growing appetite for games; the plan to set up a local league had been shelved; and no Chinese had played in the league since Yao Ming’s retirement. Facing all these challenges in a nation with an entirely foreign system and culture, what should Shoemaker do? PROLOGUE: THE SPORTS INDUSTRY IN CHINA Over the past few decades, sports affairs and operations in China had been funded and administrated by the Chinese government under the planned economic system. The national performance in world-class events had greatly improved under this system. However, the government’s heavy involvement in running sports also made it impossible for a free sports industry to emerge and grow. China adopted the “Reform and Opening-Up Policy” in the 1980s, after Deng Xiaoping took office as the nation’s leader. Since then, China had started to shift from central planning to a market-oriented economic system, and had decided to open its door to foreign investment. In 2001, the country joined the World Trade Organization, maintaining the rapid economic growth it had enjoyed for three decades. Since the 1980s, China had begun to embrace marketization and globalization in many of its industries, although the door to the sports industry had remained largely closed. According to statistics from the General Administration of Sport in China, “China’s sports industry accounts for only 0.52 per cent of China’s GDP in 2008, while in some developed countries, the number often exceeds 1 per cent.”2 This document is authorized for use only by Abdulaziz Feda in SportsMarketing2017 taught by Ricard Jensen, Montclair State University from July 2017 to August 2017. For the exclusive use of A. Feda, 2017. Page 2 9B14M003 In spite of its humble position in the national economy, the Chinese sports industry had been growing at a stunning speed. This had coincided with the rise of the Chinese middle class, who now enjoyed a better living standard and more disposable income than ever before. In particular, the booming economy had given rise to a more affluent generation of young Chinese sports fans, the majority of whom lived in metropolitan areas like Beijing, Shanghai and Guangzhou. In 2010, China’s State Council issued the first-ever document designed to promote the country’s sports industry. The release of “Guiding Opinion on Accelerating the Development of Sports Industry in China” was a clear sign that the Chinese government had elevated the sports industry in China to an unprecedented level of strategic importance. As the document pointed out, “Both domestic and foreign private investment in China’s sports industry is actively encouraged, and market exploration of sports performance and recreational sports should be put into action to a greater extent.”3 EPISODE I: THE NBA’S GLOBALIZATION IN ASIA — FROM JAPAN TO CHINA Although Europe had had longstanding cooperation with the National Basketball Association (NBA), most European cities showed an overwhelming preference for soccer. In addition, European cities were “not financially prepared”4 to build NBA-standard arenas. Although the NBA wanted to have a new team from Europe (like the Toronto Raptors from Canada), the best it could achieve was the lone exhibition games held every summer.5 “There aren’t enough buildings, there aren’t adequate TV arrangements, we don’t have owners, and I’m not sure we could charge the prices that would be necessary,” David Stern, said talking about possible team existence in Europe.6 The circumstances were the same in other regions like Latin America. In Asia, the NBA’s first stop was not China. Due to close political ties between the United States and Japan, the first-ever regular-season games overseas were held in Tokyo in 1990, featuring the Phoenix Suns and Utah Jazz. Japanese audiences were amazed by the slam-dunk made by Kevin Johnson, a 6’1” point guard (PG). Since then, Johnson had been the role model for a generation of Japanese players and PG was the only position on court considered to be promising in Japan. Coincidentally, in 2005, it was the Suns, Johnson’s team, that selected Yuta Tabuse, the first Asian guard, to play in the NBA. The very positive reaction was beyond expectations, compelling the NBA to launch six more regular-season games in Japan in the following years.7 In 1996, the popularity of the NBA among Japanese fans reached its summit with the frequent visits from superstars including Michael Jordan, Charles Barkley and the fantastic PG Jason Kidd. Meanwhile, the limited size of the Japanese market began to take its toll; the NBA found itself unable to continue its expansion, so it started searching for a bigger platform. Another important factor was that the NBA scout agents could not find a basketball icon for Japan, like Yao was for China, to boost the popularity and development of the business.8 That was when China began to show up on the NBA’s radar with its booming economy, rapidly growing middle-class population, and national basketball craze. Besides, the possibility of finding a superstar was much greater if the country was home to 20 per cent of the world’s inhabitants. When David “Admiral” Robinson,9 a superstar with the San Antonio Spurs, went to observe Chinese player Wang Zhizhi — he had performed an astounding block playing against Team U.S.A. in the 1996 Atlanta Olympics — the whole Japanese nation felt “betrayed and lost in anguish.”10 This document is authorized for use only by Abdulaziz Feda in SportsMarketing2017 taught by Ricard Jensen, Montclair State University from July 2017 to August 2017. For the exclusive use of A. Feda, 2017. Page 3 9B14M003 EPISODE II: WELCOME TO CHINA Broadcasting in China — “Everything is Free” Unlike the United States, China was a relatively “free” country in regards to broadcasting. Many digital products were traditionally free (or very inexpensive) and conceived as public. Television programming, as a long-conceived free service, was where NBA China got involved. NBA China forged a partnership with Shanghai Media Group (SMG) and brought NBA League Pass11 into China. In March 2005, SMG was issued the first national IPTV (Internet Protocol Television)12 operation license, ahead of other competitors. SMG’s service covered more than 70 per cent of mainland China with a large number of subscribers. High-definition games were presented on BesTV, the IPTV platform of SMG, in pay-per-view or in packages of different terms, which were much cheaper compared to the standard costs in the United States13 (see Exhibit 1). However, most Chinese fans just wanted to watch some popular games for free instead of paying for the whole pack. Knowing this, NBA China tried to work with local companies on free online streaming. Some new trends emerging in Chinese society accommodated this change: 1. Broadband access was widespread in China, providing a solid infrastructure for online watching. Because most people could hardly find a chance to enjoy a two-and-a-half-hour NBA game, watching time and location were now much more flexible — e.g., at resting time in the office, between intervals in the classroom, and even while sitting on a moving bus. Unlike soccer games, fast-paced basketball games seemed to fit better with short amounts of free time. 2. Games broadcasted online could be a good supplement to TV programs, as people might have different preferences as to the choice of games to view. 3. People who took the initiative to search for games online were, generally, more sophisticated than those who merely came across a game on a TV sports channel. As such, the company could easily find its target group on the Internet. Chinese Players — Post-Y&Y (Yao Ming and Yi Jianlian) Era The globalization of the league had been aided by the influx of international talent, like Dirk Nowitzki from Germany, Pau Gasol from Spain and Tony Parker from France. The NBA’s popularity in China increased significantly after the Houston Rockets selected 7’5” Chinese center Yao Ming as the first pick in the 2002 NBA Draft. Soon after, Yao became an immediate and phenomenal icon, earning votes as the Starter of the NBA All-Star Game during his first seven seasons. In Yao’s first season in 2002, the NBA signed broadcasting contracts with twelve local TV stations to distribute 170 games, doubling the number broadcasted the previous year.14 In 2007, another Chinese player, Yi Jianlian, was drafted as the sixth pick by the Milwaukee Bucks, following in Yao’s footsteps. The first-ever meeting of the two Chinese players drew massive ratings — an estimated 250 million people in China watched the game on TV. In 2008, according to NBA officials, an estimated 300 million Chinese citizens were fans of the NBA, nearly amounting to the entire U.S. population.15 However, with Yao’s retirement in 2011 and Yi’s return to the CBA (Chinese Basketball Association) in 2012, there were literally no Chinese players in the league for the first time in twelve years. In 2012, the rise of Jeremy Lin, an American of Taiwanese descent, gave the Chinese a new star to feel attached to. The talented Harvard-educated PG aroused “Linsanity” with astonishing match-winning performances — This document is authorized for use only by Abdulaziz Feda in SportsMarketing2017 taught by Ricard Jensen, Montclair State University from July 2017 to August 2017. For the exclusive use of A. Feda, 2017. Page 4 9B14M003 a zero-to-hero story. Once a walk-on player, but now the inspiration for “Linsanity,” Jeremy Lin also impressed U.S. President Barack Obama. “And it’s a terrific story. He seems like a wonderful young man,” said President Obama. “And, look, it elevates this great sport all around the world. It can’t hurt ratings for basketball in China.”16 As Lin became dramatically popular worldwide, so did “Linsanity” products. But neither Yi nor Lin was able to replicate Yao’s popularity among Chinese fans. Yao was a legend, but now a retired one. Although China was widely considered the best Asian nation in sports, the Chinese were not always confident about their athleticism. According to Brook Larmer of The Washington Post, “This is one reason Chinese fans took such pride in Yao: He showed that a Chinese man could stand up to (and loom over) some of the world’s biggest and toughest athletes.”17 Talent in China was scouted early but not wisely. Government scouts only looked for tall kids and examined them with X-rays. “From the length of their bones, we can predict how tall they will grow to be,”18 said a former scout. Once selected, the children would be trained in after-school programs and camps, and if any potential was shown and appreciated, those kids would be invited to attend a full-time sports academy. Meanwhile, NBA China was also trying to cultivate more “sophisticated” fans who loved the sport itself, rather than just Chinese players. “Chinese fans love the NBA by watching games broadcast and browsing website news. They care more about superstars like Yao Ming and Kobe Bryant than about the game itself,” (translated) said Yu Jia, CCTV commentator of the NBA.19 “I don’t believe Yao Ming is going to be the last great Chinese basketball player. I believe he will only be the first,” remarked David Stern, talking about Chinese basketball players in the future.20 “I think it is no longer necessary for us to have a Chinese star for the NBA China Games because Chinese fans are so sophisticated. They just appreciate the games and not just the Chinese stars,” Stern said.21 Chinese Leagues — The Thriving CBA A successful league was vital in order to provide a platform for potential talent. China had a complete system consisting of six leagues of different levels.22 All of these leagues had progressed well, especially the CBA (Chinese Basketball Association) — during the 2011 lockout, many preeminent NBA players came to the CBA, including Yao’s teammate and former NBA All-Star Tracy McGrady, who had millions of fans in China. Although a strong domestic league meant that the NBA would face obstacles in setting up a league of its own, the surging popularity of a local league also presented an opportunity. According to Shoemaker, who did not think the NBA would bow out as a result of the success of a local league, “From my perspective, as long as fans are watching basketball, whether it’s CBA or NBA, that will automatically be good for the NBA. I commend the season they had last year and I really hope the momentum continues, because it will be good for them, be good for us, be good for the fans and be good for basketball in China.”23 EPISODE III: GREAT BEGINNINGS Together with the NBA, five strategic partners24 invested $253 million in 2008 to acquire 11 per cent equity of NBA China. This strategic alliance might have been the best mode of entry for the NBA; the This document is authorized for use only by Abdulaziz Feda in SportsMarketing2017 taught by Ricard Jensen, Montclair State University from July 2017 to August 2017. For the exclusive use of A. Feda, 2017. Page 5 9B14M003 local partners’ expertise and experience would be very beneficial when dealing with the Chinese sports bureaus in charge. David Stern said: The opportunity for basketball and the NBA in China is simply extraordinary. The expertise, resources and shared vision of these immensely successful companies will help us to achieve the potential we see in the region. The strategic investment from these companies will allow us to continue working with the General Administration of Sports and the Chinese Basketball Association25 to grow our sport and emphasize, in both rural and urban Chinese communities, its contributions to fitness, healthy lifestyle and an appreciation of teamwork.26 With more people interested in the NBA, media cooperation and sponsorship deals proliferated. NBA China had partnerships with 51 Chinese telecasters and 16 marketing partners27 (see Exhibit 2), including domestic enterprises and U.S.-based multinational firms. In addition, as Chinese fans began to show a consistent viewing pattern of NBA games, the surge in web traffic was surprising — “since the creation of NBA China, the number of page views on NBA.com/China has grown by 60 per cent and video usage on the website has increased 385 per cent compared with the 2007—08 season.”28 Additionally, NBA China organized numerous grassroots basketball events29 to promote itself as a socially responsible entity. As is shown below, the initial success of NBA China was guaranteed by the NBA’s premier professional basketball league. In addition, great care was given to maintain the authenticity of the NBA overseas, while adding elements of Chinese culture. 1. The league kept its competition level high by retaining the most extraordinary players from around the world. In terms of average salary, NBA players were the best-paid sportsmen among major U.S. leagues (see Exhibit 3). 2. The league continued to make amendments to the rules and officials’ implementations by publishing “The NBA Case Book” 30 annually. For example, a recent amendment shortened time-outs 31 to increase suspense in the final minutes, especially during close games. 3. To encourage a thrilling and entertaining atmosphere for Chinese audiences, NBA China specially arranged entertainment activities featuring Chinese characters such as the dancing dragon and lion in the half-time break of games during the Chinese Spring Festival. 4. To create a thoroughly authentic environment, NBA China made sure everything inside its arena was made of original American materials during the NBA China Games — even the wooden floor was airlifted from the United States. American NBA legends,32 cheerleaders, mascots and dunkers were also flown in. EPISODE IV: ROOKIE WALL — THE DEMISE OF FRANCHISE STORES Although the NBA was phenomenally successful in the Chinese market, there were many obstacles to 33 overcome. As NBA China rejoiced at its rapid growth, it hit a “Rookie Wall” of its own. China was the league’s largest merchandise market overseas. Tim Chen, during his tenure in office, was determined to launch a thousand stores in mainland China, dubbed “1000 Plan.” The retailing model of NBA China, like that of other large international corporations like Disney, lay in franchising the brand’s intellectual property rights (IPR), including mascots, NBA logos, and team logos to manufacturers in different industries, without having to manufacture any of its own merchandise products itself. As a result, NBA China was eager to partner with companies34 that had strong research and design capabilities to create its own product lines. This document is authorized for use only by Abdulaziz Feda in SportsMarketing2017 taught by Ricard Jensen, Montclair State University from July 2017 to August 2017. For the exclusive use of A. Feda, 2017. Page 6 9B14M003 The lack of a united identity and solid management took its toll on the new outlets. The goods sold in China were sometimes considered monotonous and outmoded. For example, products sold at the original price in one store might be largely discounted in another, and Yi’s Milwaukee Bucks jersey was still on the counter long after he had been transferred away. Meanwhile, the online market had gained the attention of NBA senior officials. Tmall.com, the dominant business-to-consumer website run by Alibaba Group, set a record by selling RMB 19.1 billion (around US$2.94 billion35) of goods on November 11, 2012 alone (dubbed Double Eleven, or the Bachelor’s Day, in China). EPISODE V: REACHING FROM AFAR — LACK OF LOCAL EXISTENCE For many years, the only way the NBA could reach its overseas fans had been by live broadcasting. To prevent its fans from feeling distant and disconnected, NBA China tried various methods to get them involved. NBA China Games NBA global games had been vital in expanding and sustaining the overseas market of the league. On invitation from Deng Xiaoping, the Washington Bullets were the first NBA team to visit China. In 2004, NBA preseason games were introduced to China, and then returned in 2007, named NBA China Games. Since then, the NBA China Games had become an annual event for Chinese fans (see Exhibit 4). The most recent one in 2012 featured two games between the reigning NBA Champions, the Miami Heat, and the wildly popular Los Angeles Clippers. The game featured 10 NBA All-Stars, three NBA FMVPs (Finals Most Valuable Players),36 and five Olympic gold medalists. Tickets sold out in just two hours. Although many Chinese fans hoped the NBA could introduce regular-season games to China, logistical costs remained a big concern. “Bringing regular-season games to China would be very costly. You must pay a lot for the travel and players. There are some difficulties to achieve this,”37 said David Stern. NBA Center NBA China and Yatai Lanhai Investment Group had made an agreement to collaborate on the design, development and construction of an NBA Center (NBA-featured theme park) in the Tianjin Wuqing district. Having the capacity to host professional games, basketball carnivals, fitness programs and daily recreation, the facility would be an unprecedented creation that integrated all of the NBA-related resources in the country. This program was expected to be completed by 2015.38 As noted by David Barboza, who had been a correspondent for The New York Times, “The league is trying to capitalize on the popularity of basketball in China.”39 The project was a signal that NBA China was committed to the Chinese market and had switched its merchandise strategy from selling products to selling a unique experience. The NBA “declined to say how much it was investing in the Center but said it would be the first of several it planned to set up throughout the country.”40 This document is authorized for use only by Abdulaziz Feda in SportsMarketing2017 taught by Ricard Jensen, Montclair State University from July 2017 to August 2017. For the exclusive use of A. Feda, 2017. Page 7 9B14M003 NBA Affiliated League in China The ultimate solution to establish a local presence was a league owned and operated by the NBA itself. Although NBA China’s current profitability was beyond doubt and preseason games were held annually in the country, having a league of its own was still critical for NBA China’s future development. According to Terry Rhoads, director of Zou Marketing,41 the exhibition games just whet the appetite of audiences. When talking about how sponsoring a local league rather than the NBA was sometimes preferred, Terry said, “(the sponsor) is looking for hospitality to bring its customers and employees together to have a great experience at a game, and the CBA deal provides that… (The sponsor) also gets a uniform patch, signs on the court and boards. With the NBA, other than a few nights of exhibition basketball, there just isn’t enough inventory.”42 An affiliated league would promise significant and immediate business advantages. The league could draw many quality sponsors and there would be enough games to fill venues’ schedules. Thus, the league could potentially integrate much of its current business in China, such as broadcasting, marketing, venue operation, merchandising, etc. Meanwhile, the NBA had established a joint venture with Anschutz Entertainment Group,43 planning to construct twelve NBA-standard “multi-purpose, NBA-style sports and entertainment” 44 arenas nationwide in the next few years, which could lay a solid infrastructure foundation for the possible new league. The CBA had a full-fledged system with six leagues. Many questioned the necessity of having additional leagues in China. Although admitting some nervousness about it, Li Yuanwei, the CBA secretary general, who was a former college professor at Beijing Sport University and generally considered a reformist who favored the NBA’s business model, said in support of this new venture (translated): “McDonald’s has been in China for quite a long time, but there are still a lot people who love Shanghai cuisine.” 45 Tim Chen, CEO of NBA China (from 2008 to 2010), also had excellent government contacts. With consent from top officials from both the CBA and NBA, it seemed that having an NBA affiliated league was not an unlikely dream. However, negotiating with the CBA proved especially challenging. The CBA was both a league and the governing body of basketball in China. According to Marc Ganis, president of SportsCorp Ltd, “the role of the government is something we in the U.S. historically have looked at as an anathema or as an obstacle, whereas in China it is a way of life. The expectation of walking in with a great business card and a battery of attorneys may work in the U.S., but it doesn’t work in China.”46 The NBA bid for the operating rights of the CBA and for those of the national team. It lost both. According to Xinlie Yu from GE (Global Entrepreneur Magazine), the NBA was considered by some Chinese governors as “bossy, aggressive and unmanageable” 47 compared to its competitor, Infront China.48 The management team of NBA China had not even had a chance to change its “old and arrogant image.”49 “What the NBA is facing is not another PEAK50 but the system of a nation,” (translated) Yu Jia remarked, when talking about the NBA-affiliated league.51 The offers to set up the new league were also criticized as unpractical and “typical American thinking”52 as China did not have enough players and clubs to bolster another high-level league, which, even if successful, might damage the local ones. This document is authorized for use only by Abdulaziz Feda in SportsMarketing2017 taught by Ricard Jensen, Montclair State University from July 2017 to August 2017. For the exclusive use of A. Feda, 2017. Page 8 9B14M003 EPILOGUE — AN UNFINISHED DREAM The story of the NBA and China started in the early 1990s when David Stern “successfully brought NBA games to a Chinese audience by providing CCTV 53 a free broadcasting deal during his first visit to China.”54 In the twenty years since, the NBA’s business in China had witnessed many strategic changes under different leaders (see Exhibit 5). Tim Chen had laid a solid foundation, but some of his ambitious plans had not come to fruition. David Shoemaker, as former president of the Women’s Tennis Association, was a worthy successor. “David Shoemaker has the right combination of experience, talent and leadership ability, making him an ideal choice to serve as CEO of NBA China,”55 said Stern. During his visit to Guangdong, Shoemaker compared this southeast province of China to Texas,56 as the province also housed three basketball teams.57 Realizing that a vast pool of talent is the foundation for a successful local league, NBA China collaborated with the Dongguan New Century Club to open a professional basketball academy called the CBA Dongguan Basketball School: An NBA Training Center.58 The school planned to recruit 300 teenagers aged 13 to 17 in three years. Among these young faces would be the future of Chinese basketball and of NBA China. The dream was unfinished, and the play only just staged. This document is authorized for use only by Abdulaziz Feda in SportsMarketing2017 taught by Ricard Jensen, Montclair State University from July 2017 to August 2017. For the exclusive use of A. Feda, 2017. Page 9 9B14M003 EXHIBIT 1: PRICES OF BESTV PACKAGES IN RENMINBI Area Shanghai Jiangsu Guangdong Fujian Heilongjiang Anhui Yearly 299 299 288 288 Monthly 60 30 30 30 Pricing Daily 10 5 5 - Hubei 288 30 5 Chongqing Zhejiang 280 30 - US$1=RMB 6.5 Source: “NBA League Pass,” BesTV, www.bestv.com.cn/nba, accessed March 21, 2013. EXHIBIT 2: NBA CHINA MARKETING PARTNERS59 PARTNER Adidas Amway Cisco Coca-Cola EA Gatorade Lenovo Mengniu Nike Oppo Peak Spalding Toyota Tsingtao Visa CATEGORY Apparel/footwear Non-liquid vitamin and dietary supplements Technology solutions Soft drink/juice/flavored Video game software Sports and energy drink Personal computer Dairy product Footwear Mobile handsets Athletic footwear Basketball Automotive Alcohol malt beverage Payment products and services Source: John Lombardo, “After Two Years, NBA China on Steady Course,” SportsBusiness Daily, May 24, 2010, www.sportsbusinessdaily.com/Journal/Issues/2010/05/20100524/This-Weeks-Issue/After-Two-Years-NBA-China-OnSteady-Course.aspx, accessed March 21, 2013. EXHIBIT 3: AVERAGE PLAYER SALARY IN MAJOR U.S. LEAGUES (2010—2011) NBA MLB (Major League Baseball) NHL (National Hockey League) NFL (National Football League) $5.15 million $3.34 million $2.4 million $1.9 million Source: Monte Burke, “Average Player Salaries in the Four Major American Sports Leagues,” Forbes, December 7, 2012, www.forbes.com/sites/monteburke/2012/12/07/average-player-salaries-in-the-four-major-american-sports-leagues, accessed March 21, 2013. This document is authorized for use only by Abdulaziz Feda in SportsMarketing2017 taught by Ricard Jensen, Montclair State University from July 2017 to August 2017. For the exclusive use of A. Feda, 2017. Page 10 9B14M003 EXHIBIT 4: NBA CHINA GAMES CHRONOLOGY Date Host City 08-24-1979 Beijing 08-29-1979 Shanghai 10-14-2004 Shanghai 10-17-2004 Beijing 10-17-2007 Shanghai 10-18-2007 Macao 10-20-2007 Macao 10-15-2008 Guangzhou 10-18-2008 Beijing 10-07-2009 Taipei 10-11-2009 Beijing 10-13-2010 Beijing 10-16-2010 Guangzhou 10-11-2012 Beijing 10-14-2012 Shanghai Content 60 Washington Bullets VS August 1 Army Team61 Washington Bullets VS Shanghai NBA China Games Initiated Houston Rockets VS Sacramento Kings Sacramento Kings VS Houston Rockets Cleveland Chevaliers VS Orlando Magic Orlando Magic VS CBA All-Star Team Orlando Magic VS Cleveland Chevaliers Milwaukee Bucks VS Golden State Warriors Golden State Warriors VS Milwaukee Bucks Indiana Pacers VS Denver Nuggets Denver Nuggets VS Indiana Pacers Houston Rockets VS New Jersey Nets New Jersey Nets VS Houston Rockets Lockout64 Miami Heat VS Los Angeles Clippers Los Angeles Clippers VS Miami Heat Scoring 96—85 113-80 88—86 Highlights Westley Unseld Yao Zhiyuan62 Yao Ming, Liu Wei63 91—89 86—90 116—92 Dwight Howard, Lebron James 100—84 98—94 Michael Redd, Stephen Jackson 109—108 126—104 Carmelo Anthony Danny Granger 128—112 91—81 Yao Ming, Brook Lopez 85—95 94—80 Dwyane Wade, Blake Griffin 99—89 Source: www.nba.com/global/games2013/all-time-international-game-list.html, accessed April 5, 2013. EXHIBIT 5: NBA CHINA LEADERSHIP Name Term 65 Mark Fischer Tim Chen (Chen Yongzheng) Steve Richard (transitory) David Shoemaker 2002—2007 Record Established NBA Taiwan, Ltd in 1997; prepared for NBA China’s birth 2008—2010 Former CEO of Microsoft Greater China 2010—2011 2011— Former CFO of NBA China Former President of the Women’s Tennis Association (WTA) Source: http://cn.linkedin.com/pub/mark-fischer/10/247/30b; www.nba.com/news/chen_named_ceo.html; www.nba.com/careers/executives/richard.html; www.nba.com/careers/executives/shoemaker.html, accessed April 5, 2013. This document is authorized for use only by Abdulaziz Feda in SportsMarketing2017 taught by Ricard Jensen, Montclair State University from July 2017 to August 2017. For the exclusive use of A. Feda, 2017. Page 11 9B14M003 ENDNOTES 1 “Sky Is the Limit for NBA in China: Stern,” China Daily, July 5, 2007, www.china.org.cn/english/sports/216106.htm, accessed March 14, 2013. 2 “The Sports Industry Report for 2006-2008,” General Administration of Sport of China, www.sport.gov.cn/n16/n1077/n1467/n1513017/n1514290/1517921.html, accessed August 12, 2013. 3 Zhenyu Li, “Sports Industry in China: Tapping the Goldmine,” Digital Journal, April 8, 2011, www.digitaljournal.com/article/305481, accessed August 12, 2013. 4 “Could Sports Adopt the Polarizing Political Talk-show Model?” SportsBusiness Daily, October 22, 2012, www.sportsbusinessdaily.com/Journal/Issues/2012/10/22/Opinion/From-the-Executive-Editor.aspx, accessed March 14, 2013. 5 Exhibition Games in Europe Included the McDonald’s Championship and NBA Europe Live Tour. The McDonald’s Championship (or McDonald’s Open) was an international basketball cup competition between the champions of the continental club competitions and an NBA invitee. The competition was discontinued after 1999. 6 “Could Sports Adopt the Polarizing Political Talk-show Model?” SportsBusiness Daily, October 22, 2012, www.sportsbusinessdaily.com/Journal/Issues/2012/10/22/Opinion/From-the-Executive-Editor.aspx, accessed March 14, 2013. 7 Because the NBA had stopped hosting regular-season games overseas from 2003 to 2012, Japan was the country where the NBA had held most regular-season games overseas. 8 Although he was a good player, Yuta Tabuse certainly could not be considered an icon. 9 David Robinson was an officer in the U.S. Navy before he entered the NBA. 10 “Japan: The Lost Bridgehead of the NBA” (in Chinese), Sports.163.com, September 26, 2012, http://sports.163.com/photoview/0AI90005/87891.html#p=8BPVO4RM0AI90005, accessed March 14, 2013. 11 The NBA League Pass was a subscription service that provided comprehensive NBA coverage during the season — including 1230 regular-season games and 60 to 105 playoff games. 12 IPTV, or Internet Protocol Television, was a system in which a digital television service was delivered using Internet Protocol. 13 A season pack cost $199 in the United States. www.nba.com/leaguepass, accessed March 14, 2013. 14 Edward M. Kian, “The NBA: Not Yet a Global Sport League in Newspaper Coverage,” The Smart Journal, 5:1, 2009, www.thesmartjournal.com/SMART%20JOURNAL%201.23.09%20A.pdf, accessed March 14, 2013. 15 Brian Martin, “Big Things are Happening in China,” NBA.com, February 3, 2012, www.nba.com/global/news/big_things_china_2012_02_03.html, accessed March 14, 2013. 16 Rachel Shuster, “President Obama Shows, Again, He Knows the NBA,” USA Today, March 1, 2012, www.usatoday.com/sports/basketball/nba/story/2012-03-01/President-Obama-shows-again-he-knows-the-NBA/53323978/1, accessed March 14, 2013. 17 “From Ping-Pong Diplomacy to Basket-Brawl: What the Chinese-Georgetown Fight Reveals,” The Washington Post, http://www.washingtonpost.com/opinions/from-ping-pong-diplomacy-to-basket-brawl-why-the-chinese-and-georgetownfought/2011/08/19/gIQAR9LQQJ_story.html, accessed March 14, 2013. 18 “Yao Ming: His Life, NBA Career and Injuries,” http://factsanddetails.com/china/cat12/sub78/item276.html, accessed February 12, 2014. 19 “NBA - Air Ball in China” (in Chinese), YICAI.COM, November 2, 2010, www.yicai.com/news/2010/11/586741.html, accessed March 14, 2013. 20 “Chinese Players Will Learn from Lin, Says Stern,” REUTERS, October 17, 2012, www.reuters.com/article/2012/10/17/usnba-china-stern-idUSBRE89G0G320121017, accessed March 14, 2013. 21 Chen Xiangfeng, “Stern: We are Committed to the Chinese Market,” China Daily, October 15, 2010, www.chinadaily.com.cn/cndy/2010-10/15/content_11412974.htm, accessed March 21, 2013. 22 The six leagues included the CBA (Chinese Basketball Association), NBL (National Basketball League), WCBA (Women Chinese Basketball Association), CUBA (Chinese University Basketball Association), CUBS (Chinese University Basketball Super League) and CHSBL (Chinese High School Basketball League). 23 “NBA Thriving in China Now,” China Daily, September 12, 2012, www.english.cri.cn/8046/2012/09/12/2724s721980.htm, accessed March 21, 2013. 24 The five strategic investors were ESPN, Bank of China Group Investment, Legend Holdings Limited, the Li Ka Shing Foundation and China Merchants Investments. 25 The Chinese Basketball Association (CBA) was the organizing entity for basketball in China, as well as the name of its own professional league. 26 “NBA Announces Formation of NBA China,” NBA.COM, January 14, 2008, www.nba.com/news/nba_china_080114.html, accessed March 21, 2013. 27 Ibid. 28 John Lombardo, “After Two Years, NBA China on Steady Course,” SportsBusiness Daily, May 24, 2010, www.sportsbusinessdaily.com/Journal/Issues/2010/05/20100524/This-Weeks-Issue/After-Two-Years-NBA-China-OnSteady-Course.aspx, accessed March 21, 2013. This document is authorized for use only by Abdulaziz Feda in SportsMarketing2017 taught by Ricard Jensen, Montclair State University from July 2017 to August 2017. For the exclusive use of A. Feda, 2017. Page 12 9B14M003 29 Such events included a basketball academy, coaching clinics and community services (NBA Cares, NBA Green and Basketball without Borders). 30 The NBA Case Book was the official supplement to the league’s rulebook. It detailed the rules and interpretations of the rules in actual game situations. 31 If a team had two 60-second full timeouts left in the last two minutes of regulation or in overtime, one of the two timeouts would be shortened to a 20-second timeout. 32 NBA legends were those “legendary” players who had retired from the league. 33 The “Rookie Wall” was the NBA’s mythical concept that a rookie with a tremendous beginning always slowed down after around thirty games. “A promising November and December inevitably lead (sic) to a petering-out in January to be followed by the invariable crash and burn by All-Star weekend,” according to John Cregan of ESPN in his commentary “Debunking Rookie Wall Myth,” ESPN, February 4, 2010, http://sports.espn.go.com/fantasy/basketball/fba/story?page=hardcorenba100204, accessed March 21, 2013. 34 The NBA had franchised its IPR to June Yao Group in stationery and toys, and to Boshiwa (meaning Doctor Frog) in kids’ apparel. 35 Exchange rate used: US$1 = RMB 6.5. 36 Finals Most Valuable Player (FMVP) was one of the most important honors for NBA players. 37 Chen Xiangfeng, “Stern: We are Committed to the Chinese Market,” China Daily, October 15, 2010, www.chinadaily.com.cn/cndy/2010-10/15/content_11412974.htm, accessed April 5, 2013. 38 “China Will Become Home to the First NBA Center, Just Outside of Beijing,” SportsBusiness Daily, October 12, 2012, www.sportsbusinessdaily.com/Global/Issues/2012/10/12/Facilities/NBA-China.aspx, accessed April 5, 2013. 39 Ibid. 40 Ibid. 41 Zou Marketing was a strategic sports branding corporation that possessed more than 25 years of China sports industry working experience and focused on boasting strong relationships with China’s most important sports governing bodies. 42 John Lombardo, “After Two Years, NBA China on Steady Course,” SportsBusiness Daily, May 24, 2010, www.sportsbusinessdaily.com/Journal/Issues/2010/05/20100524/This-Weeks-Issue/After-Two-Years-NBA-China-OnSteady-Course.aspx, accessed April 5, 2013. 43 AEG, a subsidiary of The Anschutz Group, was a sporting and music entertainment presenter. 44 “NBA China to Build World-class Stadium,” China Daily, July 22, 2012, www.chinadaily.com.cn/sports/201207/22/content_15606093.htm, accessed April 5, 2013. 45 “Li Yuanwei: Shang Cuisine Will Not be Replaced by McDonalds,” (in Chinese), China Sports Daily, October 19, 2007, http://read.sportpaper.cn/zgtyb/html/2007-10/19/content_19463.htm, accessed April 13, 2013. 46 John Lombardo, “After Two Years, NBA China on Steady Course,” SportsBusiness Daily, May 24, 2010, www.sportsbusinessdaily.com/Journal/Issues/2010/05/20100524/This-Weeks-Issue/After-Two-Years-NBA-China-OnSteady-Course.aspx, accessed March 21, 2013. 47 “A Big Test for NBA China” (in Chinese), Gemag, November 20, 2010, www.gemag.com.cn/18/22512_1.html, accessed April 12, 2013. 48 Infront China was a subsidiary of Infront Sports and Media, which was a top sports marketing company based in Zug, Switzerland. The company handled media and marketing rights for many large, international sports events and federations, and provided sports services such as advertising, sponsorship and hospitality. www.infrontsports.com/, accessed April 5, 2013. 49 Regrettably for the NBA, in 2011, because the cooperation between the CBA and Infront China had been dramatically successful for the past six years, the period of the agreement was extended for another six years. “The Deal Between Infront China and CBA is Extended to 2017” (in Chinese), www.people.com.cn, September 6, 2012, http://sports.people.com.cn/n/2012/0906/c22149-18932951.html, accessed April 13, 2013. 50 PEAK was a Chinese sportswear and sports equipment company founded in 1989. With basketball as the strongest business, PEAK was one of the first NBA marketing partners in China. 51 “NBA - Air Ball in China” (in Chinese), YICAI.COM, November 2, 2010, www.yicai.com/news/2010/11/586741.html, accessed March 14, 2013. 52 “Getting Tired in NBA China, Tim Chen Wants a New Life,” (in Chinese), Sina.com, November 13, 2010, http://tech.sina.com.cn/i/2010-11-13/00204861003.shtml, accessed April 13, 2013. 53 China Central Television. 54 Chen Xiangfeng, “Stern: We are Committed to the Chinese Market,” China Daily, October 15, 2010, www.chinadaily.com.cn/sports/2010-10/15/content_11413841.htm, accessed March 14, 2013. 55 “NBA Names Shoemaker CEO of NBA China,” China Daily, March 17, 2011, www.chinadaily.com.cn/cndy/201103/17/content_12183852.htm, accessed April 13, 2013. 56 Texas, an American state with lots of basketball passion, housed three NBA teams — the Houston Rockets, San Antonio Spurs, and Dallas Mavericks. 57 The three teams included the Guangdong Southern Tigers, Dongguan New Century Leopards, and Foshan Dralions. 58 “The CBA Dongguan Basketball School - An NBA Training Center” was completed in June 2011. The school housed an eight-court training hall and other facilities. The New Century Club was responsible for daily operations and the NBA was This document is authorized for use only by Abdulaziz Feda in SportsMarketing2017 taught by Ricard Jensen, Montclair State University from July 2017 to August 2017. For the exclusive use of A. Feda, 2017. Page 13 9B14M003 responsible for developing training courses and providing world-class trainers. The graduates from the school had a great chance to play for professional teams in the CBA and NBL. 59 As a result of the limited source of information about undisclosed deals, the data is not as complete and up to date as possible. For example, the listed companies might already have been replaced by others, as Tsingtao was replaced by Harbin. However, it can still provide a clue as to NBA China’s partners and their qualities. 60 The team in bold is the winning one. 61 Bayi was an army team, with players who were all members of the People’s Liberation Army (PLA). The name of the team (8-1) signified the date August 1, or PLA Day. It had been known as the best professional team in China for a long period of time. 62 Yao Zhiyuan, Yao Ming’s father, represented the Shanghai Team in that game. 63 Liu Wei, Yao’s best friend and teammate on the Shanghai Sharks and Team China basketball team, played for the Sacramento Kings at that time. 64 As a result of the 161-day lockout, the annual NBA China Games were suspended in 2011. 65 Mark Fischer was a senior director of NBA Asia who had led the NBA’s explosive growth in China before NBA China was set up. Later, he was named senior vice president and managing director of NBA Asia, managing the development of the NBA’s businesses in the Asia-Pacific region, with the exception of China. This document is authorized for use only by Abdulaziz Feda in SportsMarketing2017 taught by Ricard Jensen, Montclair State University from July 2017 to August 2017. “The Unfinished Dream of NBA China” Answer these questions comprehensively and thoroughly. write about each point individually • • • • • From the section titled Episode I, describe and discuss why the NBA first chose to expand in Asia in Japan, rather than China. Discuss the reasons the NBA in Japan succeeded or failed. From the section titled Episode 2, describe and discuss the dilemma the NBA faced because the people of China had been accustomed to thinking that all televised sports content should be free (they didn’t pay for cable TV). Describe how the NBA overcame this issue and their success (or not) in dealing with this issue. From the section titled Chinese Players, describe and discuss the extent to which the emergence of Chinese superstar players in making basketball more popular in China. Explain what the league can or should do to promote basketball in China if there is a lack of star players from China. From the section titled Episode 5, describe and discuss the success (or lack of success) of The NBA China Games, The NBA Center, and The NBA Affiliated League in China. Read these articles that are not in the Case and find articles on your own. Discuss the extent to which the NBA is succeeding in China (or not) and the role of marketing in helping the NBA succeed. o http://www.realclearworld.com/articles/2017/05/12/the_nba_outsize_impact_o n_china.html o http://www.nba.com/article/2016/10/07/nba-and-china-growing-relationship o http://www.espn.com/nba/story/_/id/19782780/why-china-nba-waiting-zhou-qihouston-rockets o http://nypost.com/2016/12/15/in-china-nba-games-are-live-texted-for-peoplewho-cant-watch/ o https://www.forbes.com/sites/roberttuchman/2016/07/07/how-china-and-thenba-are-bridging-together-the-global-sports-community/#7dbb1b397f21 o https://www.wired.com/2016/06/nba-knows-china-silicon-valley-doesnt/ o o Why are sponsors so willing to invest so much in the NFL (sponsoring stadiums, buying ads, developing promotions and contests) ▪ ▪ ▪ ▪ ▪ The NFL brand is worth $25 billion and growing The league and its partners are growing brand value Fans are passionate People are paying attention It says something positive when your brand is linked to the NFL o Describe in detail the factors that contribute to the brand equity of the NFL. Describe and discuss recent trends associated with the NFL. ▪ ▪ ▪ ▪ Trends in Revenues---$12 Billion in 2014, up from $6 billion in 2004 Trends in Royalties from licensing deals—not mentioned specifically in the case Trends in Cash Flows—Estimated at growing at 3% per year Estimates of the Annual Growth Rate for the next decade---Estimates are that the value of the brand grew from $12 B in 2004 to $16 B in 2008 to $24 B in 2014. o Discuss the concept of brand equity, how brand equity is created, and the ways in which brand equity benefits a company. ▪ ▪ ▪ The case suggests brand equity is intangible (hard to define). We define brand equity as having these components: Awareness, A Product that has a Difference, it has Value, It is convenient, it connects with people’s emotions. Choose any other company (not necessarily in sports) and describe recent changes in their brand equity, based on the factors identified above) o From the list of Recent Scandals associated with the NFL, select 2 recent scandals that affect in some way your perception of the NFL. ▪ Describe the extent to which the scandals you chose are likely to make you or your friends less likely to view the NFL favorably. o Discuss the scandal that recently affected Volkswagen dealing with their falsifying emissions reporting. Discuss how that scandal damaged the brand’s sales, stock prices and brand value ▪ ▪ ▪ ▪ In 2014, VW was worth $8 B After the company was alleged to fake reports about the pollution emissions from its cars, sales fell by 3% globally The value of the stock fell by half The value of the brand fell by $3 B in 2015. o Discuss why the NFL seems to not suffer brand damage from its scandals while other brands are hit so hard. ▪ ▪ The case suggests the NFL has “Brand Buoyancy” In spite of scandals, the NFL brand value continues to grow o Discuss how the public’s fascination with and involvement in sports betting may be fueling the NFL’s growth and potential dangers the league could suffer from a potential sports betting scandal. • You might want to search for the Chicago Black Sox Scandal. The Black Sox players colluded with gamblers to fix the World Series. Sports leaders were concerned that the public might lose faith that the games were fairly played. They feared that a loss of public trust would kill fandom. o Discuss whether you believe it is a good strategy for the NFL to embrace or tolerate sports betting, given the potential risks.
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