Globalization: NBA ChinaEddie HernandezCasey EllinChris OsterleMike Valdes
What is NBA CHINA? • NBA China, formed in 2008, is a new entity that will conduct all of the Chinese Basketball Association’s business throughout Greater China. • Started as an Idea to have an exhibition game between the CBA’s Champion and NBA Champion 20 years ago. • Now a 100 Employee Enterprise • Transitioned CBA from FIBA rules to NBA Rules • Now an official NBA affiliated league
MARKETING POWER Estimated NBA Fans 83% of people People in China between 15-24 Estimated Chinese NBA in China Basketball Players US Population 310 Million
MARKETING PROCESS ESPN and China Merchant Bank Combined $250 Million in total Investments AEG and Chinese Sports Ministry Combined to design and build 12 NBA style Arenas Throuhout China, starting with Shanghai. China is the Largest Merchandise Market Outside the US They have built 8 Offically Licenced NBA Stores which have doubled revenues since being opened. NBA is on 51 Different Networks throught China Up 31% since 2008 NBA.COM Traffic on NBA.COM has risen 60% since 2008
Promotional POWER Baron Davis & NBA Jam Take-Twos NBA NBA Partners Jose Calderon Van NBA Online Reality TV Shaq In China with Tsingtao on Li Ning Touring Game In Show in Beer Tour China China China Met fans and NBA implemented Multi-year Take Two NBA reality show Completed a played ping pong an interactive tour sponsorship with Interactice and in China called tour throughout in busy shopping for fans to get China’s Largest Tencent enter “Mengniu several major area closer to the Beer Brewer online gaming Basketball cities in China game Disciple”. The Shaolin Launched Top Rated 45 min show Davis reveals his Allows fans to show off Will fund Sport & showing ChineseTemple in Henan - NBA 2K sports plan to make a their skills on 7’, 8’, 9’ Dance Competitions Amateur birth place of franchise in China documentary and 10’ rims for NBA CHINA Basketballers Kung-Fu Shows Sino-US Chinese online gaming Animated 1 MVP Choses; basketball culture & market grew by 61% attempt to learn Gets tryout with basketball bridge last year ; now $2.75 the art of Kung billion in revenue. NBDL Team Fu between China & US
Basketball Diplomacy PROCESS STIMULUS PACKAGE China recently received Universal $585 billion with Support including funding for Sports-Related Infastructure Barack Obama On record stating he will Tim Chen work with Tim Chen to NBA China CEO who led use NBA China to 2 fortune 100 business cultivate a stronger in China relationship with China
NBA CHINA: KEY REASONS TO INVEST • Population and Interest • Disney, Mercedes Benz, AEG.. You • Tim Chen • Growth • Basketball Junkies • An Investment that will pay for itself for years to come
SWOT ANALYSIS: STRENGTHS• Young Innovative League• NBA China has backing• "Basketball Diplomacy"• NBA China has stores in place• The NBA Brand Recognition• NBA on TV• Tim Chen• CHINA has taken a lead role in the development in NBA CHINA• 17 Teams already in place.• Chinese Stimulus Package• League Revenue Sharing• Central Location in ASIA
SWOT ANALYSIS: WEAKNESSES• Unfamiliarity• Imbalanced Roster• Revenue Sharing• Lack of experience and reputation• Superior talent• International basketball previously operated under FIBA rules• Lack of history of the sport within the country• Lack of current “star” power
SWOT ANALYSIS: OPPORTUNITIES• Population• 450 Million People Interested In basketball• 300 million play basketball• Merchandise Sales• New International Market• Ticket Sales• TV Ratings• Growth of Chinese talent, coaches, and management positions.• Uniting of Chinese and American Culture
SWOT ANALYSIS: THEATS• European Basketball• Westernization of China• CBA Already in Existence• Minor League Basketball Feel• Different currency rate• American players willingness to play overseas
Salary Cap 820,000 U.S. dollars per team Allows a capitalist Monthly salary of system for its local foreign players was not players to compete and allowed to go above the most successful $60,000 (limit 2 players being rewarded heavily per team) Chinese club players League is protecting the will not exceed domestic industry from foreign domination 300,000 yuan ($44,000) Foreign player influence The total salary for is down and an players and coaches incentive to make the must be below 55 national team pushes percent of a clubs competitive level of play revenue from Chinese players The motivation to play good is making the Chinese National Team where players can make up to $146,000 for making the team
Season Length and Competition Season Ends March 14th Playoffs Playoffs 32 Game Season Begins Begin March Dec 20 End April Season 24th 25 Season is Approx 4 monthsNo competition with other leagues since it is the only pro basketball league in China. Due to the fact that you can only have 2 Non-Chinese Players, the aim is to stick to the Domestic fan base!!
INVESTMENT ONE: THE 18th TEAM Values in the USA Highest NBA Lowest NBA Team Valuation Team Valuation The most valuable The least valuable franchise was the franchise was the defending champion, Los Milwaukee Bucks with a Angeles Lakers at $607 value of $254 million. million.
INVESTMENT ONE: THE 18th TEAM Average Cost The median value of NBA franchises for the year 2009 $341 Million and 2010 was $341 million. “The average asking price for NBA franchises is about 300 Million US dollars. However, NBA franchises rarely come on the market, so when they do competition can be fierce $600 Million and Bidding wars can quickly drive prices up to $600M or higher”
INVESTMENT ONE: THE 18th TEAM Conversion into Yuan • Currently the US dollar can get you 6.65 Yuan in ] China. • If you take the median price for the value in the US and try to get a team in China it will come out to 2.3 billion Yuan. • If bidding wars ride prices up you could be looking at 3.9 billion Yuan to start a franchise.
Revenue POTENTIAL Increased Revenue Source: Sports Business Journal “…That could put the NBA China revenue at roughly between $150 million and $170 million.” 230+ 210 190 150 170 180 2010 2011 2012 2013 2014 2015
INVESTMENT TWO: THE ARENA AEG, the sports and entertainment presentation company, already has 12 arena deal in place with NBA China. Tim Chin, CEO, projects total cost for first arena by AEG to be $277 million (Shanghai). Others likely similar. Compare to Orland Magic’s Amway Center ($480 million in 2010) and Dallas Mavericks’ American Airlines Center ($420 million in 2002).
ARENAS and Tickets Average capacities 13 Basketball for the stadiums are ready arenas 15,000$15-$200USD for Newer arenaspremium seating being able to hold in new arenas around 20,000 Taipei has 1 Tickets range Qingdao has 1 from $5-$47 USD
INVESTMENT TWO: THE ARENA Company endorsement deals potentially provide hundreds of millions of dollars in additional revenue. Mercedes-Benz: 10 year $75 – 100 million naming rights deal for new arena in Shanghai Naming rights deals of this size prior to league becoming a household name indicate potential for even larger deals in the future. Investors wise to invest now before league entry and franchise fees skyrocket as popularity increases.
INVESTMENT TWO: THE ARENA Estimated arena cost of $277 million in USD converted to 1.8 billion “yuan”. Lower production costs, labor costs (compared to U.S.) result in cheaper investment yielding a greater return. Sponsorship deals and naming rights are large part of new arena construction.
THE ARENA 18,000 Seat Capacity Opened Owned by January 2008 Peoples for Beijing Beijing Republic of Olympics China (Gov’t) Wukesong Culture & Sports Center Tenants are Population in Chinese Olympic Beijing is Committee and approx 18 2008 Summer million Olympics The center is an important part of Beijings Olympic Games heritage Allows citizens in the western districts and Beijing as a whole to enjoy cultural, sports, leisure, recreational and commercial activities
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