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NBA could see $400M revenue decline in China this season

The NBA stands to lose hundreds of millions in revenues this season in China, stemming largely from a setback last fall with its business relations in the country.

During his annual state of the league address on Feb. 16, NBA Commissioner Adam Silver said "the magnitude of the loss will be in the hundreds of millions of dollars" for its second-largest market but "probably less than $400 million."

Following a tweet last fall from Houston Rockets General Manager Daryl Morey that expressed support for protesters in Hong Kong, the league's 40-year relationship with China took a downturn. China Central Television, the state-run television broadcaster, has not aired any NBA games this campaign, and many sponsors quickly cut ties.

The league expects to reconcile with the Chinese government at some point, and there had been discussions in that regard already, said Silver. But the outbreak and spread of the novel coronavirus in the country has Chinese officials focusing their time and resources on the health epidemic at the moment. Silver did not say specifically when he thought the NBA's relationship with broadcaster CCTV would resume.

However, China-based streamer Tencent Holdings Ltd. has provided a reduced number of games this season. Tencent is reportedly paying the NBA $1.5 billion over a five-year rights deal.

In the U.S., national games on AT&T Inc.'s TNT (US) and The Walt Disney Co.'s ESPN (US) and ABC (US) have sustained a 12% audience decline through the All-Star break. However, the reformatted All-Star Game simulcast on TNT and TBS (US) — featuring an extended tribute to the late Kobe Bryant and his daughter Gianna, who recently died in a helicopter crash — was up 8% over the 2019 contest.

Silver has cited a number of reasons for the regular-season audience erosion, including injuries to key players like Steph Curry and Klay Thompson of the Golden State Warriors, as well as No. 1 draft pick Zion Williamson, the presumptive rookie of the year favorite, who only recently hit the court. The league's youthful fan base also is engaging with the league and its players on social media and highlights, Silver noted. But many of those fans either cut the cord or never became part of the legacy TV ecosystem.

Silver believes that is "a very solvable problem."

"Our two primary media partners, Disney and AT&T, are both very engaged in these issues," he said, adding that both companies are looking to grow their direct-to-consumer streaming businesses.

Silver also addressed the negative impact of recent carriage disputes, including ones between operators like Comcast Corp. and DISH Network Corp. and regional sports network Altitude Sports & Entertainment (US). Altitude is home to the National Hockey League's Colorado Avalanche games and the NBA's Denver Nuggets.

"I'm incredibly sympathetic to those fans that live in Colorado and are unable to get those games," he said.

Silver said there is "a lot happening right now transformationally in the media market," noting that regional sports networks are resetting their business models, while teams are trying to distribute their games to reach as many fans as possible.

He said the league, coming out of the All-Star break, will redouble its efforts with the parties to "try to find a path forward here."