Cablegate: Nba Full Court Press in Shanghai

VZCZCXRO6945
RR RUEHCN RUEHGH
DE RUEHGH #0549/01 3510118
ZNR UUUUU ZZH
R 160118Z DEC 08
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7433
INFO RUEHBJ/AMEMBASSY BEIJING 2357
RUEHCN/AMCONSUL CHENGDU 1609
RUEHGZ/AMCONSUL GUANGZHOU 0068
RUEHHK/AMCONSUL HONG KONG 1776
RUEHSH/AMCONSUL SHENYANG 1601
RUEHIN/AIT TAIPEI 1402
RUEHBY/AMEMBASSY CANBERRA 0023
RUEHML/AMEMBASSY MANILA 0042
RUEHUL/AMEMBASSY SEOUL 0299
RUEHKO/AMEMBASSY TOKYO 0458
RUCPDOC/USDOC WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 8039

UNCLAS SECTION 01 OF 03 SHANGHAI 000549

SENSITIVE
SIPDIS

STATE FOR EAP/CM
USDOC FOR ITA/MAC DAS KASOFF AND OCEA - SZYMANSKI

E.O. 12958: N/A
TAGS: ECON EFIN EINV SCUL CH
SUBJECT: NBA FULL COURT PRESS IN SHANGHAI

REF: A. (A) SHANGHAI 498
B. (B) SHANGHAI 513

Summary

-------

1. (SBU) The National Basketball Association (NBA) continues its
rapid expansion in China. The NBA is attempting to transform
itself from a marketing giant in the Chinese market into a
financial partner dedicated to running arenas and domestic
basketball leagues. Executing this game plan has led to growing
pains similar to those facing other businesses investing in
China, as many of the NBA's local Chinese partners are not
performing up to the league's expected standards. End Summary.

Fast Paced Expansion

--------------------

2. (SBU) NBA China continues to rapidly expand. The global
economic slowdown has apparently not dampened hiring, as the
Shanghai office has doubled its staff in the last eighteen
months to over fifty positions. NBA China's expansion is in
stark contrast to the recent press reports announcing layoffs of
eighty NBA employees in the United States.

NBA Arena Experience Comes To China

-----------------------------------

3. (SBU) The NBA has partnered with AEG, a subsidiary of
Anschutz Company, to run 12 planned arenas across China. This
includes an arena being built for the Shanghai World Expo in
2010. Colin Pine, a manager at NBA China, said that the NBA
will provide marketing and management expertise to ensure that
these new venues provide entertainment on a world class level.

A Socially Responsible Presence

-------------------------------

4. (SBU) In addition to running new sports arenas, NBA China is
partnering with local governments to help build 800,000 new
basketball courts across China. Prior to the 2008 Beijing
Summer Olympics, the NBA hosted a Team USA charity auction in
Shanghai to raise money for victims of the May 2008 Sichuan
earthquake. In addition to the proceeds from items auctioned,
basketball star Dwayne Wade announced a personal donation at the
event.

Extra Courts For A Growing Fan Base

-----------------------------------

5. (SBU) Building new courts helps the NBA expand its fan base
by making it easier to play basketball in China. Local
governments are supportive because it increases the number of
public facilities at minimal costs to their budget. Public
sporting facilities are in short supply and basketball courts in

SHANGHAI 00000549 002 OF 003

Shanghai are frequently crowded with dozens of teenagers waiting
for a single basket. Media sources estimate that over 300
million Chinese play basketball on a monthly basis, and the NBA
estimates that it has over 450 million fans in China.

6. (SBU) On a visit to a recently opened public court in
Shanghai Congenoff spoke to a number of teenagers who said
finding a place to play is their biggest frustration. They
spent their time waiting for their turn to play discussing
basketball shoes including if the extra money for Adidas and
Nike was worth the cost compared to improving local brands such
as Peak and Li Ning. There are indications that interest in the
NBA in Shanghai has intensified. HoopChina.com, an independent
message board website dedicated to following the NBA, has 2.5
million users that login to the site at least twice a week,
according to web interviews of founder Shawn Cheng. Taxi drivers
in Shanghai often listen to NBA score reports. They enjoy
discussing their favorite players and particularly which team
Lebron James will play for in 2010 when he is a free agent.

A League Of Their Own

---------------------

7. (SBU/PROPRIETARY INFO) Pine said that NBA China is in
negotiations to form a partnership enterprise with the Chinese
Basketball Association (CBA) to develop the CBA into a more
profitable and sustainable enterprise. Involvement with the CBA
is seen as a way to improve the quality of Chinese teams while
reducing their dependence of government financing. These
negotiations are considered highly sensitive by NBA China and
the proposal has not yet been made public.

Chinese Brand Basketball Shoes Coming To A Store Near You

--------------------------------------------- ------------

8. (SBU) Locally developed athletic apparel brands Li Ning,
Peak, and 361 Degrees, appear poised to capture an increased
market share of the Chinese youth market. In 2008 Peak signed
US Olympian Jason Kidd and Li Ning signed Los Angeles Clippers'
guard Barron Davis for Chinese advertising purposes. While both
companies are currently using U.S. players to promote their
brands in China, press reports indicate that they are looking to
break into the U.S. market as more NBA players use their
apparel.

Not Just Sportswear, NBA Kleenex And Chewing Gum

--------------------------------------------- ---

9. (SBU) Pine said that merchandising partnerships with Vinda (a
Chinese paper tissue company) have been going well. Additional
NBA labeled merchandise such as an NBA chewing gum with another
company will be launched soon. The national broadcaster CCTV
carries five live NBA games per week. The NBA China website
provides free streaming video of games. As stateside games take
place during the morning in China, streaming video allows the
rising number of white collar fans to watch the games at work.
The NBA also has sponsorship agreements with Juneyao Airlines
and many of China's most famous brands advertise during the
games. The large audience was used by a local milk company to
try to reassure customers in light of the recent melamine
scandal. In one commercial they said the word "safety" 19

SHANGHAI 00000549 003 OF 003

times. (See also Refs A and B.)

Not All Slam Dunks, Difficulties With Local Partners

--------------------------------------------- -------

10. (SBU/proprietary information) A senior manager at NBA China,
informed Congenoff that NBA China is having serious problems
with its domestic merchandise distributor Juneyao. He said that
Juneyao frequently chooses retail store locations based on their
relationship with local landlords rather than the market
potential for selling NBA merchandise. This fall, Juneyao made
a presentation to senior NBA management saying NBA stores would
open in early 2009 in Shanghai. The manager expressed
frustration when in early December Juneyao said they wanted to
open two stores in less than a week, without giving the NBA any
notice of the change of schedule. He said the launch of these
flagship stores are important events to the NBA. The change in
schedule is making it difficult for NBA China to carryout the
launch in accordance with their standards. Another NBA China
senior manager said that he felt the only reason that Juneyao
partnered with the NBA was to lend an appearance of
professionalism to the company in preparation for its IPO. They
said that NBA China is not happy with the level of merchandise
sales and is considering other options for handling merchandise.

11. (SBU) Note: Juneyao is a company of growing importance in
the Shanghai Consular district. Founded in Wenzhou, Zhejiang
Province, the ambitious airline subsidiary has announced in
local press the goal of being an international carrier by 2010,
including future service to the United States. The company's
retail arm has been preparing for an IPO that is currently on
hold because of the global economic credit shortage. Juneyao is
well connected having received the right to run the Beijing
Summer Olympics and Shanghai Expo merchandising stores. End
Note.

Comment

-------

12. (SBU/proprietary information) China is the NBA's largest
market in terms of the number of fans. NBA China's expansion
has encountered difficulty as they try to protect their brand
value. Providing full length games free via streaming video has
helped bring traffic to their website, has increased their
advertising revenue and allows them to direct fans to other NBA
generated content. Managers at NBA China consider their
merchandising division to be underperforming in large part
because of difficulties with Juneyao.
CAMP

© Scoop Media