Market Overview

What Are The Long-Term Implications Of The NBA's China Dilemma?

What Are The Long-Term Implications Of The NBA's China Dilemma?

The fallout in China from Houston Rockets General Manager's Daryl Morey’s now-deleted tweet in support of Hong Kong protesters is ongoing. 

Companies Cut Ties 

Tencent Holding/ADR (OTC: TCEHY), Vivo and CCTV have all suspending ties with the NBA following the tweet, and the backlash is unlikely to stop there. 

CCTV has announced it is canceling two NBA preseason games for broadcast as the NBA commissioner tries to carefully straddle the situation. 

The NBA prides itself as being the most progressive sports league, but the association is facing its toughest situation yet — and it has been accused of kowtowing to an oppressive government in order to keep its massive fan base.

The NBA said it will not censor the speech of its players or teams, a decision that could ultimately hurt the league if players stage protests or demonstrate further support for Hong Kong.

"It is inevitable that people around the world — including from America and China — will have different viewpoints over different issues," NBA Commissioner Adam Silver said in a statement. "It is not the role of the NBA to adjudicate those differences."

Politics And Sports Intersect

After announcing the cancellation of this week’s games, CCTV said it would “immediately investigate all cooperation and exchanges involving the NBA.”

China’s Foreign Ministry spokesman Geng Shuang said "these foreign teams should know the opinions of China’s citizens, or it will not work," according to The Hollywood Reporter

He also said the NBA "knows what it needs to do," likely hinting at a punishment for Morey or a wider apology, according to the Reporter. 

The dilemma the NBA likely faces is that if Daryl Morey does face a punishment or loses his job over the tweet, it would likely make the situation an even bigger political one, akin to a Colin Kaepernick-and-NFL scenario that continues for years. 

Footwear Companies Brace For Impact

As the official jersey sponsor of the NBA, Nike Inc (NYSE: NKE) could also possibly see some impact from this scenario, as basketball fans in China are now becoming apprehensive about showing their support for the league. 

The company generated $6.2 billion in sales in Greater China in fiscal 2019.

In Nike's first-quarter earnings report, Nike posted 22% growth across the board in apparel, footwear and equipment in Greater China.

This figure will likely be one of the most closely followed metrics in Nike's next earnings report to gauge any impact from the NBA incident.

Under Armour Inc (NYSE: UAA)'s star influencer Steph Curry travels to China every year to showcase the brand and draws massive crowds. 

Golden State Warriors COO and President Rick Welts told CNBC he believes the situation will blow over.

“What I can tell you for sure that it is not going to erase the decades of work that the NBA has done in building a tremendous base for basketball in China, and I think this will pass and I do think our future in China is pretty remarkable.”

Related Links:

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