Cavaliers and LeBron Hope to Tap Growing Chinese Interest in Basketball
With the Cleveland Cavaliers’ decision to sell a minority interest in the franchise and arena to a group of Chinese investors, several questions arise. One of them is whether LeBron James – who has been quoted as saying he wants to become the first billionaire athlete — will be more likely to stay with the Cavaliers, given that the deal will no doubt raise his profile in the huge Chinese market. Another question is what role will this deal play in the National Basketball Association’s (NBA) efforts to ramp up its presence in China?
Scott Rosner, associate director of the Wharton Sports Business Initiative and an expert on sports business, has some answers. “It’s a great deal for the Cavaliers,” he says. “They get minority investors into the team and an influx of capital, which can always be a bit of a challenge. It’s a great deal for the Chinese, because they get minority ownership of a team that has a marquee athlete.” Rosner isn’t sure if the deal will be quite as valuable if James jumps to another team next year when he becomes a free agent, but that uncertainty isn’t a “deal breaker or deal maker.” And as for James, the deal “will certainly help him establish his brand in the Chinese marketplace.”
The only reason the NBA’s board of governors would not approve this deal, Rosner says, is “if there is something untoward about the prospective buyers,” a group that includes Kenny Huang, a Chinese-born investor who has already arranged sponsorship deals with such franchises as the New York Yankees and Houston Rockets. Indeed, Rosner expects the board “to go to great lengths [to okay the sale] because it is so concerned with its China operations.”
Rosner doesn’t see the deal as signifying a trend towards the increased globalization of U.S. sports teams. “The exception could be the NBA,” he says, “which is certainly the most global of the leagues. It already has a league in China – although so far it exists only on paper — called NBA China. The NBA owns the vast majority of it although Disney owns a piece, in addition to some Chinese nationals. Eleven percent of the company has reportedly been sold to private investors for more than $250 million. So the business is implicitly valued at more than $2 billion.”
Additional Reading from Knowledge@Wharton