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