The NBA’s China Debacle: How Corporations Learned to Stop Worrying and Love the Chinese Market

By Max Hubscher, Associate Editor

On October 4, 2019, one tweet, and its subsequent fallout showed the influence that a foreign government can have over an American company.  On that day, Daryl Morey, the General Manager of the Houston Rockets NBA team tweeted a picture that read “fight for freedom stand with Hong Kong”.  The since deleted tweet was posted in support of the ongoing protests in Hong Kong against increased Chinese governmental control over Hong Kong. 

The tweet had almost instant ramifications for the Rockets.  The day after the tweet was posted Tencent, an official broadcasting partner of the NBA in China and China Central Television (CCTV) announced that they were suspending all Houston Rockets broadcasts.  Additionally, other Chinese sponsors issued statements that they were no longer willing to work with the Rockets.  These sponsorship losses could potentially amount to $25 million. Further confounding the issue for Morey and the Rockets, the tweet may have permanently alienated support for the Rockets among the Chinese population. This is significant because the Rockets were widely considered to be “China’s team” because of the popularity of Yao Ming who played for the Rockets from 2002-2011. 

Aside from having a negative financial impact on the Rockets, the tweet will almost certainly damage the NBA’s bottom line for years to come.  China is the second largest market for the NBA behind the United States and is home to millions of basketball fans.  The NBA routinely plays exhibition games in China and has a five-year streaming deal with Tencent worth $1.5 billion.  Further, China is estimated to be worth more the $4 billion for the NBA.  Some in the NBA are projecting a 10-15% drop in the league’s salary cap for the 2020-2021 season due to the situation.  This is significant because the salary cap is determined based on NBA revenue.

On October 6, Morey tweeted a retraction, iterating that that his tweets do not represent the NBA or the Houston Rockets and that he did not intend to offend any of the NBA’s Chinese fans.  The commissioner of the NBA, Adam Silver released a statement that indicated that the NBA would not regulate what its employees say.  CCTV was not satisfied with Adam Silver’s statement and released a statement of its own: “We believe any remarks that challenge national sovereignty and social stability do not belong to the category of free speech.” Silver also stated that the Chinese government asked him to fire Morey, but he refused to even consider it.

The NBA is known for letting its players protest against injustice in the United States. In 2014 LeBron James and others wore “I can’t breathe” shirts while warming up for a game to protest police brutality.  LeBron, who is widely regarded to be the face of the NBA, made a statement on October 14, stating that he believed that Morey was not educated on the situation in Hong Kong when he spoke.  Others in the NBA, such as Brooklyn Nets owner Joe Tsai also had an issue with Morey’s tweet, referencing how it damaged the NBA’s relationship with China.

Going forward it is clear that China can exert massive financial pressure on American businesses that do not adhere to Chinese state policy.  Public backlash and the popularity of the NBA may have had an influence allowing Morey to express his opinion with support of commissioner of the company.  However, those who work for companies away from the public eye that nonetheless have large dealings with China may have to essentially censor themselves lest they upset the Chinese Communist Party.  Americans and American companies have to balance fundamental American values such as freedom of speech against financial gain when dealing with China.  For someone like LeBron James who has a reported $1 billion contract with Nike, it is clear the choice has already been made.

References:

Aaron Mansfield, A Timeline of the Complicated Controversy Between the NBA and China, Complex (Oct. 14, 2019) available at https://www.complex.com/sports/2019/10/nba-complicated-history-in-china/whats-ahead

Colin Ward-Henninger NBA Commissioner Adam Silver Says Chinese Government Asked him to Fire Rockets GM Daryl Morey After TweetCBS (Oct. 17, 2019) available at https://www.cbssports.com/nba/news/nba-commissioner-adam-silver-says-chinese-government-asked-him-to-fire-rockets-gm-daryl-morey-after-tweet/

David Kirton Chinese Fans Miffed at NBA, but not Enough to Skip a Game, Reuters (Oct. 12, 2019) available at https://www.reuters.com/article/us-china-basketball-nba/chinese-fans-miffed-at-nba-but-not-enough-to-skip-a-game-idUSKBN1WR0GC

Jasmyn Wimbish and Colin Ward-HenningerNBA-China issue: Latest News Resulting From Daryl Morey’s Hong Kong Tweet, what it Means for the League,CBS (Oct. 14, 2019) available athttps://www.cbssports.com/nba/news/nba-china-issue-latest-news-resulting-from-daryl-moreys-hong-kong-tweet-what-it-means-for-the-league/

Mark Dreyer China NBA: How One Tweet Derailed the NBA’s China Game, PlanBBC (Oct. 10, 2019) available at https://www.bbc.com/news/world-asia-china-49995985

The Hong Kong protests explained in 100 and 500 words, BBC (Oct. 14, 2019) available at https://www.bbc.com/news/world-asia-china-49317695