The China/NBA FAQ

The NBA’s kerfuffle with China has been all the talk of the pre-season.  I was frankly hoping it would blow over and we could focus on the game, but the fact is that the issue is quite significant and bears a moment of our time.  Most coverage of the issue involves whether the NBA has compromised its values to ease the anger of a large business partner.  This is the largest of the issues from this dispute but there are number of interesting sub-issues/questions that also occur to me.  I thought we could quickly review the facts and then briefly go over the major questions.  So, here are the basic facts:

On October 4, 2019, Daryl Morey tweets out a modicum of support for Hong Kong protesters who initially objected to new Chinese laws that allowed Hong Kong residents to be extradited to mainland China.  Since then, the laws have been tabled but the protests have gotten louder and clashes more violent.

On October 6, 2019, The Chinese Basketball Association, Chinese state television (which streams NBA games), and some other Chinese vendors suspended cooperation with the Rockets and the NBA.  The Chinese found the tweet an attack on their “sovereignty.”

-The Rockets ownership immediately apologizes (as does James Harden and Morey) and the tweet was deleted.

Adam Silver also apologized for the tweet but said that Morey had the right to state his political beliefs and that Morey would not be disciplined stating that American values preclude punishment from freedom of expression.  Silver specifically said that “the NBA will not put itself in a position of regulating what players, employees and team owners say or will not say on these issues. We simply could not operate that way.”

-China did not cancel already scheduled NBA exhibition games in China but did not promote them and there appears to be no future cooperation forthcoming.

-NBA revenue from China is not exactly clear but NBA officials told Forbes in 2018 that it exceeds $4 billion in total.  More recently, the US Today pegged the annual Chinese revenue at over $500 million (total league revenues were estimated at over $8 billion recently).

On October 14, 2019, LeBron James criticized Morey for being “misinformed” about how China would react to the tweet and noted that “[s]o many people could have been harmed, not only physically or financially, but emotionally and spiritually. Just be careful what we tweet, what we say and what we do. We do have freedom of speech, but there can be a lot of negative things that come with that too.”

On October 17, 2019, Adam Silver spoke with the media and said that the relationship with China was in limbo and it was not clear if China would ever re-engage.  Silver expressed frustration about criticism he received on his handling of the situation because he felt had not bowed to the pressure of the Chinese (and their large revenues) when that would have been a much easier route for the NBA.  He also noted that China wanted him to fire Morey and he refused to do so.

On October 19, 2019, reports indicated that China felt “defamed” by Silver’s claim that it wanted Morey fired.  Chinese media said that Silver would “receive retribution sooner or later” for this statement.

This is a vortex scandal: the more the NBA tried to de-escalate, the more the dispute grew.

Let’s address the major issues:

Did Morey know his tweet would cause a problem?

Morey is a smart guy but there is no way he anticipated this level of scrutiny.  No doubt he thought the tweet would get a little attention and start a conversation on the merits of the Hong Kong protests but if he had an inkling that the tweet might cost billions, he would not have done it (as evidenced by his quick delete and apology).  Morey has been a strong GM,prr but it will be quite difficult for him going forward because the owners and players are obviously unhappy that he may have single-handedly cost them a huge revenue stream.  This isn’t totally fair to Morey, who is a strong GM and his tweet’s content did not seem proportional to the Chinese anger.  Hopefully, this controversy does de-escalate at some point.

Did the NBA handle this issue well?

Much of the commentary noted that the NBA wants it both ways….they want Chinese money but do not want to have to deal with complicated issues like human rights where China and the U.S. don’t see eye-to-eye.  To a certain extent, this is quite true.  The Chinese government policies on many issues would not be considered acceptable in the U.S. and the NBA isn’t talking about some issues that some American fans could find problematic.

But Silver’s argument that he did take something of a stand has merit.  Yes, he has not commented on Chinese internal politics but he did not cave when China pressured him to support it on the Hong Kong issue.   Still, the relationship does represent a degree of compromise and some argue that doing business with China tacitly endorses a regime that some find repressive.  The counter to this point is that virtually all American companies do business with China and some have made compromises that pale in comparison to firing Morey.   In that sense, it is unrealistic to believe that a large global company would turn down billions of Chinese revenue voluntarily, though it looks like Silver has effectively done this and is still being whacked for hypocrisy.

Did LeBron handle this issue well?

LBJ is also getting some heat for implying that Morey’s tweet was bad, regardless of the merits, because it cost the players a lot of cash.  James later clarified that it wasn’t just money that was an issue but also player safety.  James, though, did not dispute that money was a factor.  The reaction of some is to hit James for complaining about Morey’s tweet when, LBJ has been pretty vocal in supporting his own social causes.

Of course, James’ political stands have not directly cost the NBA and the players nearly as much revenue as the Morey tweet did.  But LBJ’s response does implicitly acknowledge that financial cost is a major factor to consider when deciding whether to take a political stand.  I don’t find this fact as shocking (or as hypocritical) as some do.  Nevertheless, it would have been nice to hear James acknowledge this tension when he spoke out.

Did China ask Silver to fire Morey?

I have no inside information but Silver has absolutely no reason to lie about this and, in fact, it would have been in the NBA’s interests to downplay China’s outrage.  China’s reaction to the claim also seems a bit much.  “Retribution” is not something a sports executive should face, unless he or she hires Isiah Thomas as GM.

Hypocrisy and money, a sliding scale…

After chewing over the facts, there is a viable argument that both the NBA and its players showed a degree of hypocrisy with the Morey affair.  I can understand those who, in principle, would refuse to take the cash but, at the end of the day, few large global companies would cut off such a large market, even with the baggage it brings.  Silver’s response was about as fair as possible under the circumstances.  He, ultimately, refused to compromise on a value issue when faced with a stark choice between placating a large cash partner that makes up about 6% of NBA revenues and First Amendment rights.  There is no definitive answer here but the choice between money and values is not usually binary.  Compromises are made but you can reach a point where no more compromise can be made.

What about the future between the NBA and China?

This is a difficult question but a thaw could obviously occur.  The NBA is more than willing to accept Chinese revenues.  The question is whether China needs NBA content enough to de-escalate the fight.  Well, there is evidence that China will want to the content to return.  The NBA is the most popular sports league in China and China loses money in this standoff too.  In addition, the NBA had and has invested a lot cash in China as well. For these reasons, this fight feels self-defeating for China in the long run and it makes sense for it to reengage.

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