Brick City

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Profiting from Chinese basketball ought to be a slam dunk. The fans are there; attendance at Chinese Basketball Association games has been rising steadily and is on pace to break 600,000 this season. Valuable sponsors are eager to plaster their logos on team jerseys and arena signboards. Homegrown superstars are emerging, such as rangy prodigies Hu Weidong, a crowd-pleasing Jiangsu Dragons forward, and Yao Ming, a 2.23-m windmill who regulates the paint for the Shanghai Sharks. Showtime in the CBA has all the trappings of big-time hoops. It's becoming a credible entertainment replete with thunderjams, jiggly cheerleaders and thousands of screaming spectators.

But no matter how exciting the on-court action, China's professional basketball league is leaving its best game in the locker room and shooting air balls in the boardroom. Seven years after it was sanctioned by Beijing, the CBA remains a profitless enterprise full of disgruntled players and frustrated team owners whose careers are orchestrated by a government bureaucracy. Despite a burgeoning fan base, all of the 13 Division I clubs are losing money. Inexperienced team owners and heavy-handed government restrictions have prevented the league from realizing the most lucrative sponsorships and licensing deals. "The CBA just doesn't understand how to exploit the TV rights and merchandising potential of the sport," says Richard Avory, a Beijing consultant and former manager of league promotion for IMG, the global sports marketing company that owned all CBA rights until last year.

When it comes to money, Chinese basketball has hands of stone—a fact many owners and managers blame on the control-happy CBA itself. The league is run as a government sports program. Top officials are Communist Party appointees accustomed to top-down dictatorship—and the league's lack of marketing and promotional expertise shows. At the beginning of the season, CBA officials lost a $4.2 million marquee sponsorship and promotion contract when its would-be partner, Y.C. Advertising, a media company owned by Hong Kong's Tom.com, withdrew only a month before the season was to begin. Motorola stepped in as the league's title sponsor, but the hastily arranged deal netted the CBA just $1.8 million, less than half of what it might have earned.

Yet the CBA zealously reserves the rights to most of the business's biggest money-spinners, including broadcasting rights and major licensing deals. Many potential sources of team revenue, including ads at courtside and on player jerseys, are restricted. It is the league's prerogative to make exclusive agreements with the makers of just about every product imaginable, from computers to cars, airlines to bottled water, leaving the franchises to pick from second-tier advertisers.

With the government maintaining control of key aspects of the game, internal league relationships are as contentious as a bench-clearing brawl. Players, many of whom make less than $10,000 a year while living in shoddy dormitories under a strict curfew, are very nearly indentured servants. And the servants are getting restless. Ma Jian, a 32-year-old forward, has taken the unprecedented step of suing his former team, the Beijing Olympians, in a highly publicized contract dispute. A few of the most talented players would like to move to the greener pastures of the NBA (center Wang Zhizhi, 23, became the first Chinese national to play in the NBA when he joined the Dallas Mavericks last year). But the government and the clubs themselves are the ones who decide who goes and who stays. "China views its athletes not as people but as tools that can be used to bring glory and honor to the country," says a former player.

Meanwhile, team owners say under the current system they feel more like sharecroppers than entrepreneurs. They want a bigger piece of the action. "The reason we have so many conflicts is because the CBA doesn't treat us as partners, they treat us as something they own," explains Li Yaomin, general manager of the Shanghai Sharks. "We should be like the NBA with truly independent franchises."

That's not how the state-run system works today. Only two teams, the Sina Lions and the Beijing Olympians, are privately held. The rest are either partially or wholly owned by government entities (the August 1 Rockets team is fielded by the People's Liberation Army). Each is expected to subsist mainly on an annual allowance doled out by the league. This year the stipend is $133,000 per team, which is supposed to help cover player salaries, food, equipment and travel for a 26-game schedule, plus play-offs. It doesn't go far. One poverty-stricken club in Shanxi province reportedly can't afford to feed its players meat during the season.

Cast as The Heavy in the courtside drama is CBA chief Xin Lancheng, a fortysomething Communist Party apparatchik who "wouldn't go to a basketball game unless it was his job," according to one industry insider. Xin, who missed the first half of the season to attend Communist Party school, admits to no great passion for hoops. "If I had things my way, I would be a full-time painter of traditional Chinese landscapes," he says. But he defends the system with the ardor of a Red Guard. "The CBA should earn the money and distribute it equally to the clubs," he says. "This is the only way we can maintain power and keep order." The lack of profits he attributes to poor budgeting by owners. "If the clubs understood how to take care of their finances better, they could make money," he says.

Even Xin's critics credit him with helping to develop the sport through initiatives such as this year's founding of the women's professional league, the WCBA. And his point about mismanagement is right on the mark. Most team owners are neophytes when it comes to running a sports franchise. Li Yaomin, a retired journalist, admits he knew zip about basketball—or business for that matter—when he was assigned to be general manager for the Shanghai team.

But there are signs owners are catching on. Teams this year were allowed for the first time to market their own licensed apparel; the Sharks recently sealed a deal with Adidas worth around $400,000, which includes a one-month training trip to the U.S. A new Taiwanese-owned team allowed into the league this year, the privately held Sina Lions, is raising the bar in terms of shrewd professionalism. Co-owner Daniel Tu managed to drum up $1 million in sponsorships in the Lions' first season. Still, the U.S.-educated Tu, former president of STAR TV in Taiwan, and his partner Daniel Chiang, chairman of China's largest Internet portal, Sina.com, say teams must be given more autonomy if China is to kick-start the high-voltage basketball culture promoted by NBA franchises. "The best policy would be to give the clubs the rights to earn money, then if they don't have the professional sense to earn a profit, they shouldn't even belong to the league," says Tu. "Sports should definitely be market-oriented and market-driven," says Chiang. "The less government intervention the better."

Though still lacking the sheer physicality of NBA play, the competitiveness of teams has improved drastically since the founding of the league—there are dozens of foreign players, including some with NBA experience, and several foreign coaches. Multinationals such as Nike, Adidas and Converse have invested millions of dollars in the development of the sport. Says Terry Rhoads, Nike's sports marketing director for China: "When people think about the potential of this country of 1.2 billion and the level of talent already being displayed, they see that if China can do basketball right it will change the whole landscape of basketball the world over."

While it's unlikely the government will be passing the ball to the private sector anytime soon, even Xin acknowledges that the CBA can improve. "We are desperately studying the NBA," says Xin, who attended the U.S. league's annual All-Star game this month in Philadelphia. If he closely studied the hoopla surrounding one of the sport's biggest hype-fests, Chinese basketball just might learn some dazzling new moves.