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Will they miss half a season and overvalue themselves???
October 12, 2008
N.B.A. and Partner to Help Build 12 Arenas in China
By RICHARD SANDOMIR
The N.B.A. and AEG will announce on Sunday plans to design and operate at least a dozen arenas in China, extending the league’s presence in its largest foreign market. The arenas could form the infrastructure of an N.B.A.-branded league in China.
Under their plan, the league and AEG will make modest cash investments in the arenas, but their expertise will give them substantial ownership stakes in the buildings.
The arenas are to be financed largely by local and provincial governments.
“We won’t do this without an economic return over time for AEG and the N.B.A.,” said Timothy J. Leiweke, the president and chief executive of AEG.
He and David Stern, the N.B.A. commissioner, will announce the joint venture before the Nets-Heat exhibition game at the O2 arena in London.
Stern said the league was looking to capitalize on a growing urban Chinese middle class with increasing disposal income.
“China is an enormous market with enormous potential, not only for basketball but for entertainment venues,” he said in an interview.
The league and AEG are partners in the Beijing arena where basketball was played at the Summer Olympics in August. They are looking at building arenas in major cities like Shanghai, Guangzhou and Shenzhen. The arenas will be designed to accommodate a broad range of uses beyond basketball.
“We see these venues as homes for basketball teams, hopefully, in a league that is a partnership between the N.B.A. and the China Basketball Association,” Stern said.
The arenas are envisioned as 19,000-seat facilities, some extravagant and some modest, that would be part of entertainment districts in some of the largest Chinese cities.
“Our issue is which 12 do we choose?” Leiweke said in an interview last week from Dubai. “I think we’ll have 30 or 40 of these opportunities, and 15 will make sense. Within a week, you’ll hear of some of the markets we’ll jump into.”
AEG, a subsidiary of the Anschutz Company, runs or owns more than 90 arenas and other facilities around the world, including Staples Center in Los Angeles, the O2 in London, the O2 World arena in Berlin and the Prudential Center in Newark.
Stern and Leiweke acknowledged the global credit crunch pushing world economies into a recession but said their arena-building goals were long-term.
“Projects like these are marathons, and whatever cycle we’re in, we’ll come out of it,” Leiweke said.
Stern said that Chinese officials had not yet shown skittishness at financing arenas in the face of the drastically altered world economy. Adam Silver, the N.B.A.’s deputy commissioner, said, “Hard assets like these in China might be good places for global investment.”
Although China has not been immune to the recession, “it has been one of the growth spots in the world economy,” said John Frisbie, the president of the United States-China Business Council, a nonprofit group that represents American companies doing business in China.
“The fundamentals of the Chinese economy seem good for U.S. companies,” he said.
Although the league expects slight growth in the United States this year, Silver said that it was looking for a 30 percent increase in revenue from China
“We’re taking advantage of the boom in basketball coming out of the Beijing,” he said, “Despite the terrible economy, the timing is good to make this announcement.”
The N.B.A.’s business interests in China have been growing for nearly 30 years. The league has 100 employees in four cities, and 15 marketing partners. A third of the online traffic to NBA.com comes from the Mandarin Chinese part of the site, and league merchandise is sold at 30,000 retailers in China, among them two NBA Stores.
In addition, N.B.A. games are available on 51 networks in China. where 1.6 billion viewers watched league programming last season. One of China’s leading exports, Yao Ming, is an All-Star center with the Houston Rockets, and Yi Jianlian, a 20-year-old forward, is seen as a liaison between the Nets and the region’s Chinese-American community.
Last year, the league created N.B.A. China, a subsidiary with five investors — the Walt Disney Company and four Chinese partners that paid $253 million. The league’s contribution to the arenas will come from that money.
“This is not only a content play, but a development, facility and real estate play,” Leiweke said. “The N.B.A. is thinking out of the box, beyond basketball. Its brand in China is amazing. If you go to China, you get an appreciation for what they’ve built.”
The league and AEG did not realize that they were each working separately on arena-development strategies until the Boston-Minnesota preseason game in London last October.
“We realized it made more sense for us to be partners,” Stern said.
Will they miss half a season and overvalue themselves???
FTW.
Damn you for beating me to it.
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