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On the evening of October 4 US time, Houston Rockets general manager Daryl Morey posted inappropriate remarks about Hong Kong on social media, echoing a slogan used by Hong Kong rioters in recent months.
NBA Commissioner Adam Silver responded to the incident, expressing support for Morey's so-called 'freedom of speech'. His remarks provoked opposition from countless Chinese fans. Subsequently, various parties spoke out, and the incident continued to escalate, sparking heated debate. NBA Earns $1.2 Billion from China Annually Thirty years ago, former NBA Commissioner David Stern brought NBA tapes to China, waiting over an hour outside CCTV's transmission room, and introduced the NBA league to the Chinese market. Under the influence of current Basketball Association Chairman Yao Ming, the NBA became a household name in China. In addition to Tencent, which acquired exclusive online broadcast rights for an average of $300 million per year, CCTV currently holds exclusive TV broadcast rights in China, costing approximately $70 million annually. That means annual revenue from broadcast rights alone in China reaches $370 million. Beyond full broadcast rights, the NBA also sold short video rights to Chinese digital media companies last year, with prices in the tens of millions of dollars. Combined with 25 strategic partners in the Chinese market, the annual China Cup events, and revenue sharing from merchandise sales, the total reaches a staggering $1.2 billion. 2019 NBA Official Partners Currently, the NBA takes $1.2 billion from China annually, accounting for 15% of its total revenue—a significant proportion. But everything changed within just a few days. Capital Market Shudders As the storm broke, Tencent immediately found itself at the center. Even after suspending broadcasts of Rockets and NBA preseason games, it was criticized for being 'too slow to respond'. At the end of July this year, Tencent had just renewed its contract with the NBA, purchasing exclusive digital media rights from 2020 to 2025 for $1.5 billion, essentially monopolizing most of the NBA's market resources in China. Now, before the regular season even starts, it seems likely to 'cool down'. Of course, for a giant like Tencent, this may just be a storm, but for industry unicorns, it's a real survival crisis. The most anxious is Hupu, valued at 4.2 billion RMB and about to launch its IPO, whose main user base is NBA fans. It has already closed its Rockets section and stopped updating related news, with unclear next steps. Also affected is the recently booming 'sneaker circle'. Some sneaker resellers told Financial Street that prices of some NBA co-branded sneakers have indeed fluctuated due to the incident. It's reported that on the sneaker trading unicorn 'Dewu' (valued at $1 billion), NBA-related sneaker products account for a large proportion of transactions. The ripple effect also extends to the NBA's upstream and downstream industry chain. Shopping apps like Taobao, JD.com, and Pinduoduo have all removed Rockets-related merchandise. Which FMCG Companies Are Involved? The editor observed that among the 25 official NBA sponsors, there are 4 FMCG companies: Master Kong, Mengniu, Gatorade, and Clear. How have they responded? 1. Master Kong Beverage brands like Coca-Cola, Wahaha, and Master Kong have all been striving to associate with sports events. After Coca-Cola's cooperation agreement with the NBA in China expired in 2005, Master Kong took over as the NBA's official marketing partner in China. On October 8 (last night at 16:50), Master Kong issued a statement on Weibo terminating its cooperation with the NBA. 2. Mengniu Mengniu has cooperated with the NBA for 12 years. On March 16, 2015, Mengniu Dairy and NBA China jointly announced the renewal of their marketing partnership agreement, continuing cooperation that began in 2007. In addition to continuing cooperation in media, events, and marketing, NBA China also authorized Mengniu to use the NBA logo in product packaging design for the first time, launching customized milk products with NBA elements in the Chinese market. On October 8 (last night at 21:39), Mengniu issued a statement on Weibo terminating its cooperation with the NBA. 3. Gatorade (PepsiCo's sports drink brand) Gatorade became a long-term global partner of the NBA in 1984 and became an NBA China partner in 2007. Gatorade has always been the NBA's official beverage sponsor, and with top endorsers like Michael Jordan, it became a giant in the functional beverage industry. On the NBA court, Gatorade has always played the role of 'official sports drink'. Gatorade has been deeply rooted in the NBA for many years, becoming the longest-standing sponsor of the NBA. Jordan drinking Gatorade during a break. Image source: Internet According to regulations, players must drink beverages provided by Gatorade during games. Even relatively famous stars can drink their own endorsed brands or drinks prepared by their nutritionists, but they must use Gatorade bottles. As of press time, Gatorade has not yet made an official statement regarding this incident. 4. Clear Brand (under Unilever) Clear Men's Shampoo, in order to enter the young Chinese market, also became a consumer of the NBA brand. Since the summer of 2014, they have printed NBA team logos on their products. As of press time, Clear has not yet made an official statement regarding this incident. How Much Money Will These Sponsors' Withdrawal Cost the Rockets? Specific contract details are not publicly available, but based on figures from 17 years ago, each company's investment would be in the millions. In 2002, after Yao Ming joined the Rockets, Yanjing Beer was the first to sign a sponsorship contract with the Rockets, worth $6 million over six years. Before 2017, the Rockets had 4-8 Chinese sponsors annually. Domestic brands such as Peak, Founder Group, Anta, and Kunlun Lubricants had sponsored the Rockets, with Chinese brand sponsorship accounting for 8%-10% of the Rockets' total sponsorship revenue. After 2017, the Rockets accelerated development of the Chinese market, hoping to increase the number of Chinese sponsors to 12, raising the proportion to 20%. The Houston Rockets are the team that benefits most from the Chinese market. Foreign media statistics show that during Yao Ming's tenure, the Rockets' team value growth rate exceeded 100%. Data shows that the Rockets' value soared from 12th in the league in 2003 to $2.3 billion in 2019, ranking 7th. According to Forbes, as of February 2018, NBA China's market value exceeded $4 billion (28.6 billion RMB). Because of one tweet, the NBA may face the costly consequence of losing the 300 million Chinese fan market and the billions of dollars behind it. Its multiple domestic partners are also affected. NBA China, with its 11-year history, may also face a complete ban and 'cool down'. Commentator Yang Yi said: "The words are rough but the truth is clear: you can't eat China's food and then curse China." Source: Compiled and edited by Tips will be paid 400-2000 RMB for adopted reports. China FMCG + Internet Professional New Media Dedicated to FMCG manufacturers' transformation and channel digitalization solutions