China & the Lockout: Mysterious Millions

One entire president ago, I worked for the NBA–just barely. I was low-level PR, hired a month before the 2008 financial crisis briefly melted civilization. When Wall Street collapsed, the league quickly responded, firing 9% of my new/old co-workers. This served quite the ugly epiphany: It’s not all just games on TV. Much money, many lives, are tied up in this giant living corporate NBA organism–a corpus that occasionally bleeds. Why were they fired? What large, mysterious forces controlled their fates? 

As I passed Stern’s empty office on one of my few trips to the Olympic Tower (I worked mostly from home), my brain rasped “What’s he building in there?” A co-worker spotted me starting at the vacant desk and quickly explained David’s absence: “He’s in China right now.”

China. Opening, advancing, expanding, giant China. But, does anybody have a salient view of what’s going on over there? I hear broad, beaming claims of markets and profits galore. But for what grand NBA idea? It’s rather difficult to economically appropriate sports, especially if the sport occurs on the other side of the planet. Considering China’s corruption/bribery issues, and its government’s power to cull all profits, I’d hazard that extracting money from the nation is a bit harder than simply turning the knob on a golden faucet.

Stern has said, “We have 15 television deals in China.” How do you forge a TV deal under the umbrella of a state-run operator? I’m not doubting that it can be done, or can be done profitably. I’m merely pointing out that the league has more shrouded moving parts than a tandem of centipedes, mating in a dark room. Lithe centipedes.

Per China, here is what I know, burnished by some known unknowns:

• David Stern agreed to televise games in China “for free” back in 1991. It’s not clear what the current arrangement is.

• NBA China was launched in January of 2008, mere months before the American October layoffs. The expansion was massive enough for Goldman Sachs to value NBA China at 2.3 billion dollars. It is worth noting that Goldman may have had a small role in that whole housing bubble thing.

• The NBA and AEG had a large stake in building the $280-million Shanghai Mercedes-Benz arena. Did you know the NBA was in the international developer business? Perhaps that’s not such a stretch after getting into the creating a new women’s sports leagues business.

• Stern’s league also helped develop the Wukesong Arena in Beijing, and the creatively named Guangzhou International Sports Arena in Guangzhou. The initial overarching plan was to build at least 12 hoop palaces.

• Yao’s old Shanghai Sharks do not play at the Benz, but Usher once sold out the NBA’s Shanghai stadium.

• The NBA is “doing” a coaches program with the Chinese Basketball Association. They have also opened a training center in Southern China.

• Adam Silver claims that China accounts for roughly half of the NBA’s international revenue. The Sports Business Journal pegged this at 150-170 million dollars annually–based off the league’s statements. Pro basketball would not give financial specifics to SBJ.

• A discouraging result from China’s version of Twitter: “An online poll on Weibo by Monday lunchtime showed that 57 percent of respondents would stop watching the NBA after Yao’s retirement.”

• This happened.

My point is not to insinuate that American pro basketball is losing money on the China venture–I cannot speak to that, for all I know it’s a 170 million dollar juggernaut. The goal is to show that massive amounts of loose cash are swirling around the relatively fixed, predictable player salaries. If the NBA is losing money, it could mean that player salaries are too high. But it’s far from a guarantee.

A few weeks ago, the NBA laid off 11% of their workforce. Again, I can’t pretend to know what giant forces compelled this tragic decision. But, when the NBA explains the move as stemming from the “underlying issue; that is, the league’s expenses far outpace our revenues,” I can’t help but seek infrastructural causes for such hemorrhaging. Are player salaries a large expense? Of course, but this league has expanded so quickly that hidden fortunes can be gained or lost on distant continents. How can I blame one group in the face of such far-reaching opacity?