Tencent Renewal: NBA the Envy of Global Sports Rights Holders?

The National Basketball Association (NBA) and Chinese tech conglomerate Tencent have announced a five-year extension of their existing partnership, with Tencent acting as the NBA’s official digital partner until the culmination of the 2024/2025 season.

The partnership will grant Chinese fans access to live NBA games, video on-demand, NBA programming and short form video content via Tencent’s various social media and digital platforms, including QQ, QQ.com, Tencent Sports, Tencent Video, Tencent News, Weshi and most importantly to the NBA Weixin / WeChat with its 1.1 billion monthly active users (MAUs) as of March 2019. According to the Wall Street Journal, the deal is worth $1.5 billion, over double the amount Tencent paid for the previous five-year contract.

Through leveraging the data resources on consumer insights at Tencent’s disposal, the NBA intends to grow its already-established fanbase in China through the creation of new, customised interactive services.

The NBA commissioner Adam Silver announced strategic actions to drive further growth, intending to collaborate with Tencent on developing new advertising products, as well as launching and operating mini programmes for mobile devices, including the NBA’s loyalty initiative. This deal comes one week after the NBA’s e-sports competition, the NBA 2K League, announced a deal making Tencent its first distribution partner in China to stream the play-offs and finals of the NBA 2K League competition. This showcases how rights holders can diversify audience engagement, going after gamers, not just sports fans, with 54% of Chinese TV sports viewers also owning a games console (source: MIDiA Research).

Slam Dunk

This NBA growth story in China took off when the Houston Rockets, back in 2002, drafted a 7-foot-6 Chinese athlete from the Shanghai Sharks of the Chinese Basketball Association, Yao Ming, with its first overall pick. Following the excitement around Yao’s arrival to the NBA, which drew 200 million people to view his first game, the Rockets brought two preseason games to China in 2004. The NBA followed this in 2008 with the launch of the NBA China Organisation, with then-commissioner David Stern illustrating his commitment to growing the game of basketball in international markets.

In 2009, Tencent became the digital media partner of the NBA in China, subsequently announcing a five-year partnership in 2015 for Tencent to stream live games and highlights on its social platform WeChat for $700 million, increasing the Chinese viewership of NBA by a massive 66%. Serving the NBA on a platform reaching 1.1 billion inhabitants resulted in the NBA becoming the most popular sports league online in China, with the NBA’s official WeChat account generating one million total reads per month. Another deal signed with social media platform Weibo in 2017 allowed the NBA to deliver game highlights, player interviews, photos, stats and behind-the-scene access to more than 400 million monthly active users, increasing its exposure further. The official NBA Weibo account clocked 2.9 billion video views during the NBA playoffs in June that year, showcasing the mass engagement which the Chinese market offers rights holders.

During the Toronto Raptors 2018/2019 Championship winning season, 490 million fans in China consumed NBA content on Tencent’s platforms, nearly three times the audience the NBA 2014-2015 season achieved. The climactic game 6 of the NBA Finals, in which Toronto won its first ever Championship, was live streamed by a Chinese audience of 21 million – making it the most-watched NBA game ever on a Chinese digital platform.

US Sports Franchises Remain Laser-Focused on Growing the China Market

This $1.5 billion five-year extension underlines the NBA’s intention to corner the largest market in the world by sheer number of consumers. Its presence on China’s leading social platform has 78% market penetration, offering unrivalled reach to engaged audiences. The success of the NBA in China has resulted in other sporting bodies emulating the NBA’s strategy in China, with the UFC aiming to capture the Chinese audience through establishing a social media partnership with Weibo in May 2019 and launching a dedicated UFC performance institute in Shanghai in June, aiming to uncover its first Asian UFC World Champion.

Is Tencent Biding its Time to Fast Break?

The value increase of the NBA’s extension with Tencent has seen revenues increase approximately 114%, showing rights holders just how lucrative this international venture for the NBA has been. Over the course of the previous five-year partnership, which generated $700 million for the NBA, viewership of NBA content on Tencent grew three-fold from the 2014/2015 season to last years’ campaign. As revenue per fan increases from the deal, and domestic rights revenue slows, the NBA could become increasingly dependent on its international revenue stream. This could result in an inflection point where the ball moves over to Tencent’s court, who suddenly own the invaluable audience reach so important to the NBA. Tencent could then potentially assert control and negotiating power as the NBA is overly reliant on the addressable audience which Tencent’s platforms provide.  

Internationalism inevitably brings its own challenges for sports franchises.