When doing business in China, you play by China's rules, some execs say about NBA

Daniel Roberts

The NBA’s crisis in China has dragged on for two weeks, after Houston Rockets GM Daryl Morey tweeted on Oct. 4 a single image in support of Hong Kong protesters, enraging the league’s business partners in China. Tencent stopped streaming all NBA preseason games; Alibaba pulled Rockets merchandise from its online store; sneaker brand Anta suspended NBA contract negotiations, to name just a few of the ripple effects.

Most recently, the league’s biggest star player, LeBron James, chose to speak out about the issue and angered many fans by criticizing Morey for the tweet. Now, unsurprisingly, James says he will not be commenting further on the situation.

The NBA has a $5 billion business in China, and on Thursday at the TIME 100 Health Summit, Commissioner Adam Silver acknowledged that “the financial consequences have been and may continue to be fairly dramatic” from the Morey tweet fallout.

Of course, the entire debate in America is over how the NBA handled and should have handled it. Many American fans were upset that the league’s initial response appeared to condemn Morey and bow to China. The league’s initial statement said that Morey’s tweet “deeply offended many of our friends and fans in China, which is regrettable,” and the Chinese language version of the same statement was more harshly worded, saying the tweet “severely hurt the feelings of Chinese fans.” (In a followup statement, Silver stood by Morey, saying: “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.”) Rockets star James Harden apologized to China, and Brooklyn Nets owner Joe Tsai criticized Morey’s tweet in a Facebook post. Many fans think the NBA ought to have put its foot down with China from minute one.

But some sports business leaders see the situation differently from angry fans.

At the Yahoo Finance All Markets Summit last week in New York City, two prominent sports industry executives framed it this way: If you choose to do business in China, you should prepare to play by China’s rules—whether or not American onlookers approve.

‘Respect the norms’

“I have a factory in China,” said Jacksonville Jaguars owner Shad Khan, who is CEO of car bumper maker Flex-N-Gate. “And there are thousands of other people who have factories and operations in China, and they do very well. But you have to respect the norms.”

Khan said he also has factories in Catalonia, Spain, which for years has been in the midst of an independence push that just recently has grown violent. When he was there visiting his factories recently, he says, “I didn’t think, as an American, I should really be having an opinion on it, even though a lot of people wanted us to. I want to have an opinion in America—there’s a civic duty to engage and do the right thing—but having an opinion on sovereign matters in other countries, it’s for those people to decide.”

Many people don’t like that view, and see it as restrictive of free speech. But Khan is hardly the only businessperson who has pointed out, amid the broader discussion over the last few years about American business in China, that companies don’t have to enter China. If they do choose to bring their business there, they typically have to follow a very different rulebook.

Jacksonville Jaguars owner Shad Khan (L) and Bruin Sports Capital CEO George Pyne (R) at the Yahoo Finance All Markets Summit on Oct. 10, 2019 in New York. (Khan: Simon Cooper/Getty Images; Pyne: Jim Spellman/Getty Images)
Jacksonville Jaguars owner Shad Khan (L) and Bruin Sports Capital CEO George Pyne (R) at the Yahoo Finance All Markets Summit on Oct. 10, 2019 in New York. (Khan: Simon Cooper/Getty Images; Pyne: Jim Spellman/Getty Images)

‘Less is more’

George Pyne, the former COO of Nascar, former president of sports mega-agency IMG, and now CEO of his own VC firm Bruin Sports Capital, echoed a similar (though not identical) sentiment when he spoke later on at the Yahoo Finance summit. Pyne fell short of saying Morey should not have sent the tweet, but he suggested that the NBA and all businesses operating in China should know what to expect when a representative of the business says something China doesn’t like.

“When you do business in a territory that doesn't have free speech, freedom of expression, free trade, there's risk in that,” Pyne said. “And China is not the only territory like that in the world... And if there's a penalty, a business penalty, that comes along with standing up for free speech, then they're going to have to live with it. I think that's where it is, and I think they've got to tough it out. And I don't think there's much more to say if I were the NBA. Less is more, and you hope life goes on.”

In other words: When the NBA first began making inroads in China years ago, it knew (or should have known) what it was getting into. That doesn’t mean it should not be doing business in China, but if and when one of its people says something publicly that the Chinese don’t like, the NBA ought to be prepared for that, rather than getting caught flat-footed.

“If I go speak to my investors and I do something that's polarizing to my investors, that’s probably not good for business,” Pyne added. “You have to choose sometimes: Whatever you say is polarizing, and less is probably more.”

Daniel Roberts is the sports business writer at Yahoo Finance. Follow him on Twitter at @readDanwrite.

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