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Professional leagues from West make play for Chinese market

Basketball may be drawing the most interest, but tennis, car racing and even hockey are muscling in too

Globe and Mail Update

BEIJING — It's been a splashy press conference so far, with dry ice, pretty girls in curve-enhancing workout gear and a set modelled after a basketball court, complete with floor markings.

The music starts thumping - the Black-Eyed Peas' Let's Get it Started - and four teens decked out in throwback jerseys, baggy shorts and gleaming sneakers take the stage, basketballs in hand, to knock out a well-polished dribbling routine that finishes the afternoon in style.

It's a lot of hoopla for what is, in the end, an announcement by the National Basketball Association that it has extended its agreement with Sohu.com, an Internet portal that hosts the league's Chinese web site. But in China, the NBA is a hot property, and more than a dozen television cameras are on hand to take it all in.

"It would be a press release back home," shrugs Michael Denzel, the managing director for NBA Asia. "But this is a big deal here."

Major Western sports are increasingly a big deal among Chinese fans, and the interest is mutual.

In a one-month period this fall, China played host to a pair of NBA exhibition games featuring Houston Rockets star and Shanghai resident Yao Ming; the China Open, which instantly became one of the most lucrative events on the professional tennis circuit; and the first Formula One race in China, held in Shanghai on a new track built for the occasion for the equivalent of $1-billion Canadian.

The sports industry, like virtually every business category, has long considered the Chinese market one of endless commercial promise, if only it could be successfully cultivated. As far back as 1979, under Deng Xiaoping's open-door policy, the NBA champion Washington Wizards played a pair of exhibition games in China, and the Cleveland-based International Management Group, the world's leading sports marketing firm, began doing business in China not long after.

That was around the time former New York Yankee great Reggie Jackson waved off a bad game by joking: "When we lose and I strike out, a billion people in China don't care." More and more, that's not true. Major-league baseball has been trying to cultivate China as both a market and a well of talent in recent years, helping start the fledging Chinese Baseball League, and hoping for its own version of Yao - a player with star potential who can help drive interest in the sport.

The English Premier League has enough of a presence in China that soccer games featuring lower-profile entries like Chelsea and Birmingham draw television ratings only a fraction below long-time favourites like Manchester United, Arsenal and Liverpool, and teams are combing China for stars to appeal to the growing fan base.

The National Football League is financing flag football programs, and the International Ice Hockey Federation is launching the Asian Hockey League this season, with two teams in China and two each in Russia, South Korea and Japan.

Leading the way is the NBA, which has watched TV ratings of its games grow by nearly 200 per cent in China in the past two years and basketball overtake soccer as the favourite sport among Chinese teenagers.

While the league has been seeding interest for more than two decades, it wasn't long ago that NBA communications staff in Hong Kong were being asked by local media to stop sending releases as they were wasting valuable fax paper. Now there's a recognition that the league is the beneficiary of being in the right place at the right time.

"We just happen to have a 7-foot-5 guy come along who's a once-in-a-generation player coming out of China at the same time as China has joined the WTO [World Trade Organization] and is opening itself up for business," says Denzel. "The Internet has taken off and you have homegrown web portals like Sohu.com that provide an immediate way to tap into the billion consumers in China directly and with less, I'll say, state-controlled interference."

In a way, the major players in the sports industry - the leagues, marketing concerns like IMG and even star players like Wimbledon champion and China Open headliner Maria Sharapova - are simply following the same path as the cellular-phone manufacturers and major auto makers who have been investing so heavily in cracking the Chinese market in recent years.

But there's one major difference: While companies like Motorola and Volkswagen have to contend with intense local and international competition and the accompanying pressure on prices and profits, sports enjoys a kind of immunity.

"Sport crosses markets and cultures better than any other product," says John Cappo, managing director for IMG in China. "And there are barriers to entry. It takes time to develop properties. You can't just start another league. There are only so many athletes that play at that level."

The best news for those involved? The real potential for the sports industry in China is still ahead.

"The sports boom we had in North America in the 1970s and 1980s hasn't come here yet," says Terry Rhoads, a former Nike executive in China who now runs Shanghai-based Zou Marketing, acting as a bridge between Chinese and Western sports interests.

"Outside the elite system, there's no real competition or leagues for kids right now. But it's coming. I think the real boom is 10 or 20 years away, as more and more kids get a chance to participate and become consumers."

The lure of connecting with those consumers is driving the rush to China by leagues and major brand manufacturers alike. "That's the Holy Grail," says Rhoads. "Kids in America have what, 10 pairs of shoes in their closets? In China it's one or two. For Nike or adidas that's eight more pairs of shoes."

It's expected Nike's sales in China will be in the range of $370-million for 2004, but analysts expect them to be doing $1.2-billion by 2010, with adidas and Reebok following behind.

It's not all clear sailing. One of the NBA's leading sources of revenues is licensed product - everything from basketballs to clothing to video games. And while there's an appetite for it - there's no shortage of kids in Beijing wearing oversized NBA jerseys as part of their hip-hop inspired uniform - it's a good bet most of the gear is counterfeit, given China's record for knocking off manufactured items ranging from designer clothes to golf clubs.

"It's a long-term problem that everyone is facing," says the NBA's Denzel.

"Every year, we hack away at it a little bit more, and now with the WTO and the Olympics coming, there's a lot more external pressure to crack down, but there's some major changes needed, and like everything in this country, it takes time."

Another major hurdle is the lack of a competitive television market, which traditionally gives sports leagues and events their greatest source of revenue. There is one major national, state-run sports channel in China, as well as a dozen provincial channels that carry sports, but they operate mostly as a monopoly and pay only nominal rights fees.

For the Chinese, there is concern that as sports supporters become fans of international leagues and events, the domestic product will suffer. Television ratings are generally three times better for NBA games than for those played by the Chinese league. And while Chinese soccer fans swamped stadiums for a tour by Real Madrid and David Beckham last year, interest in the Chinese Football Association has slumped in recent years, in part because of a series of sordid gambling scandals recently, but also because of an increased interest in European soccer.

Will China's athletes start aspiring to stardom beyond their borders, leaving Chinese leagues to face the future without star players?

"We might have a lot of basketball players in China, but not that may of top calibre, and when a top player leaves a CBA team for the NBA, the CBA team suffers," says Xia Song, a player agent for some of China's top basketball players.

China's sports federations have the power to stem any tide - they have to grant permission for top players to play overseas - but it's unlikely they'll use it, in part because they receive hefty compensation from foreign clubs for releasing their players.

Their challenge instead is to find a way to keep made-in-China athletes and leagues relevant even as the Western leagues come looking for talent and fans, and Chinese consumers and athletes look increasingly outside their own borders for entertainment and opportunities.

It's the new game within the game.

"The growth in popularity in Western sports in China is a two-edged sword," says Rhoads, the Shanghai-based sports marketer who counts both the National Football League and the Chinese Basketball Association as clients. "Having the NBA on TV allows people to fall in love with basketball, but does that mean they'll stop paying attention to the CBA? Are they creating basketball fans or NBA fans? Is the CBA doomed to being minor league forever?

"That's not the NBA's problem, that's the CBA's problem, and Chinese sports officials have to figure it out. It's fascinating to watch."

Rising stars in East

The National Basketball Association has been able to ride the wave of popularity created by Houston Rockets star Yao Ming to become the most popular sports brand among young people in China. Here are some other young Chinese stars who may be making their name in the West.

Basketball

Yi Jianlian, 16, is a 6-foot-11 forward with the Chinese Basketball Association's Guangdong Tigers and may be the first player selected in the 2006 NBA draft.

Soccer

Dong Fangzhou, a 19-year-old striker on China's under-23 team, was signed by soccer superpower Manchester United for $7-million (U.S.).

Baseball

Wang Chao is a 6-foot-4 power pitcher signed as a 16-year-old by the Seattle Mariners in 2002. He is expected to be the centrepiece of China's effort to earn a baseball medal at the 2008 Olympics.

Formula One

Ho-pin Tung, a 22-year-old, Dutch-born ethnic Chinese, dominated the 2003 Asian Formula BMW championship, earning him an F1 test with BMW-Williams and a job racing on the highly competitive European F3 circuit in 2004.

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