Friday , Nov , 07 , 2008 C.Y. Ellis

Is America Losing its Grip on the Business of Basketball?

Is America Losing its Grip on the Business of Basketball?
Let’s play a little word association game to get your TV-addled brains warmed up.  Read the following in sequence and try to infer a basketball-related topic of discussion at the end.


I’d bet my webs on the fact that a good eighty percent of you immediately turned your minds to the summer-long trend of mid-level NBA players taking their game to the Euroleague, beckoned by big-money contracts and the manic, monobrowed masses that follow the game like groupies follow Bentleys.  (As a fan who fell in love with hoops amidst a sea of my fellow furry Euro hoop-nuts, I can tell you that I’ve yet to set foot in an NBA arena that can match the passion and energy of a run-down, small-town stadium in Italy, Greece or Israel.)

Here, however, we’re talking about a somewhat less publicised and, to my mind, more interesting trend.  For those of you yet to catch the story, the word on the NBA business wire is that Baron Davis has just signed a deal with Chinese athletic apparel giant Li-Ning, the company named for the gymnast and national hero you may have seen in the Opening Ceremony of this summer’s Olympics. 

The last time Li-Ning popped up in the presses was when they inked Shaq to a sponsorship deal of an undisclosed value.  While I initially overlooked the story as an offseason space-filler, I began to take it a little more seriously when Brandweek Magazine contacted me for my thoughts on the contract.  Here goes the clipping, and the relevant text below for those who’d rather not press your mug against the screen to read it:

"Li Ning’s signing of Jones and Shaq was as much an effort to establish an international presence as to exploit the fascination of Chinese youth with American, and specifically African American, culture as represented by basketball," said C.Y. Ellis… "While they’ll help bolster Li-Ning’s presence in the Chinese sporting apparel market, it’s unlikely they’ll make much of a dent in Nike and adidas sales for the simple fact that Li-Ning basketball shoes are, from an aesthetic and performance standpoint, inferior to the major international brands."… However, as Ellis pointed out, "I don’t know if they’ll be opening their own [U.S.] stores or looking to distribute shoes through Foot Locker, Finish Line and the like, but they must be planning something if they’ve established a base in Portland."

In the months since that interview, I’ve begun to reconsider much of what I said, particularly in light of the recent Baron Davis signing.  A good chunk of my family and most of my high school friends live in China, and each time I inquire about Li-Ning’s basketball line I hear things like "better quality", "more commercials" and "getting popular" where previously the only response given was "Meh" or its equivalent.  In short, they’re starting to get serious about challenging Nike (America), adidas (Germany) and Reebok (founded in Britain, owned by adidas) despite the dominance of the former two.

So why should you care that Li-Ning now has a staggering three NBA players pushing their products?  Well, mostly because we’re seeing a number of parallel situations in markets which, previously dominated by American-owned companies, have surrendered an increasing percentage of their revenue to foreign operations.  Do I think Li-Ning is going to take a significant slice of the athletic apparel pie, then?  No.  Do I think a notable proportion of the NBA’s profits could end up in China in the near future.

That’s a different matter.

While President-elect Barack Obama has spoken against outsourcing industry internationally, David Stern seems only too willing to take his business overseas for some extra coin.  Despite laying off around nine percent of its US-based workforce in 2008, the NBA has continued to expand operations in China, taking advantage of the new, increasingly wealthy fan base in the world’s biggest country.

The motives for doing so are evident even to the most insular of businessmen.  Interest in the game has grown massively since the appearance of Yao Ming et al. on the scene, with the country now estimated to have a third of a billion basketball fans.  That, incidentally, is more than the entire population of the United States of America. 

So, how important could China and the larger international market ultimately be to the NBA’s earnings?  Will the league one day rely on non-U.S. revenues?  Would a dissemination of the NBA’s interests ultimately benefit basketball?  I have my ideas, and I’m sure you have yours.  Let us know what you think of these potential developments by dropping a comment in the box below.

[Baron Davis image:]
[Yao Ming image:]