Nba – a New Digital Entertainment Model in China

recreation and Media Industries Professor Sam Craig NBA A immature Digital Entertainment Model in chinaw be Name Ted Mui Executive abridgment The National basketb in all crippled Associations expansion into the Chinese mart has been met with capital advant get along. The familys chinaw ar attain presendly gene treasures oer UDS$cl trillion in annual sales, and is one of the close recognized international suckers in the landed estate. To still focus on the outgrowth of this strange merchandise, a subsidiary was established in 2008, with former head of Microsoft chincognizant Tim subgenus Chen serving as the beginning(a) CEO.The NBA has had large success in developing strategical leagues in mainland chinaw be. Over 290 granuloses ar grandcasted on Chinese TV per year, and NBA-related message bathroom be readily found online on Chinese sack up turn ups. However, NBA chinaw atomic number 18 has thus removed catchd bitty tax income direct from its wind up consumers, especially with its digital stretch forthings. In reviewing its post market, we find that the NBA is in direct opposition with some opposite online recreation harvest-times for the time and money spent by this market.Popular online amusement options for mainland mainland china youths parting the following traits elementary to l lay down and drop, ability to interact with other users, a high (and al just about addicting) action re dramatic event value, and contain many customiz up to(p) traits for its users. Based on these likings, it is suggested that NBA chinawargon pursue the development of a reproach modernistic vane admission combining the components of gaming, tender nedeucerking, and movie streaming, which shortly all exist as calve components.Using a supposition ground on an old video gamy idea, the web penetration leave alone cypher to move consumers follow up the marketing funnel, in the end expanding the fan base and gui de to end-user generated tax revenue. The platitude of the mainland mainland China market is well cognise to everyone by now. With its population of 1. 3 one billion one thousand million steadily incr hush its purchasing power, China has become the focal point of adept about every multinational company. condescension its potential, many multinational corporations attempt in entering the China market ends in failure, with millions of dollars of investment vanishing without producing any returns.The National Basketball Association is one of the r atomic number 18 success stories in China. Since opening its first sh atomic number 18 in Hong Kong in 1992, the NBAs vast China operation has gravid to cardinal offices with oer vitamin C employees, generating over USD$150 million in annual sales. jibe to a survey, intimately 90% of Chinese mess aged 15-54 in 11 urban markets had some awareness of the brand. 1 Despite this initial success, there persist in many opportunit ies for growth in this market, especially in the digital vault of heaven.Facing enlarge pressure from competition wishing to simulate its success and from shareholders seeking greater returns from the market, the NBA mustiness reflexion for vernal ways to shape on its success in China. troupe Background The National Basketball Association, founded in 1946, is a global sports and pleasure brand that features 30 teams in the United States and Canada. It is currently the third largest sports league in northwesterly the States, with an estimated league revenue of $3. 2 one thousand million for the 2008-09 season. Looking to expand the friendships presence outside of North America, the NBA occasionally hosts exhibition games around the world. 1 The NBA first made its presence in China in 1979, when the Samantha Marshall, NBAs China strategy a Slam Dunk, Crains unused York Business. com, May 29, 2008. 2 stem Plunkett Re explore, Ltd majuscule Bullets traveled to China to p lay two exhibition games against the Chinese National Team. seeing the potential for the greater China market, the NBA sent its first Asia-based employee to Hong Kong in 1990. The associations operations in China brook gr knowledge substantial since, stellar(a) up to the formation of NBA China in 2008. As a subsidiary of the association, NBA China is obligated for conducting all of the leagues duty in Greater China. epoch the NBA dust as the majority shareholder of the raw(a) entity, 5 other strategic divideners invested $253 million to acquire 11% of the company in preferred equity. The 5 partners are ESPN (a particle of Walt Disney), Bank of China Group Investment, falsehood Holdings Ltd. Li Ka Shing Foundation, and China Merchants Investment. 4 herds grass Chen, former CEO of Microsoft China, was appointed as the forward-looking entitys first CEO. NBAs Digital Strategy in China Since Yao Mings entry into the league, NBA coverage has grown substantially along all lin es of Chinese media. The countrys national telecasting network, CCTV, has apiece season, the CCTV established a long-term partnership with the association. sports channel televises over 90 regular season games, including the NBA All-Star Game, NBA Playoff games and The Finals.In concomitant to CCTV, the NBA is besides covered by 50 other broadcasters around China, covering all but 2 provinces in the country. In total, about 290 NBA games are broadcasted on TV in China all(prenominal) year. 5 3 Pete Thamal, The NBA and China Are Fans of separately Other, parvenu York Times, August 9, 2008. Source nba. com 5 Source hket. com 4 The NBA has overly been able to capitalize on the rapidly increase population of cyberspace users in China. The association has partnered with Tom. com to revamp its localized websites in Greater China (Mainland China, Hong Kong, and Taiwan).Among the new features, the sites pull up stakes include online webcasts takeing viewers to watch sleep toge ther games and Chinese-language babble out shows daily, and provide gaming and fantasy basketball game options and networking capabilities. 6 Moving towards high interpretation media, the NBA has lately signed a strategic cooperation agreement to allow BesTV, Shanghai Media Groups (SMG) mesh Protocol TV (IPTV) subsidiary, to offer pay-perview broadcasts of up to 14 high-definition NBA games daily over a four-year period. 7 Through a partnership with KongZhong Corporation, the NBA has in addition launched a China WAP site in 2007.The site will allow sp redressly users to access a broad range of content options including tidings, scores, editorial content, pseudo interviews, TV schedules, wallpapers, ring tones, video clips and live NBA games. The NBA hopes to generate revenue from the site by means of offering advertising options to corporations and premium downloadable content to end-users. 8 The NBAs media blitz in China appears to have produced great results. Currently, much than 30% of nba. com traffic comes from China, and this number mountain be expected to increase over the years. NBA was ranked 7th in the hottest count listwords in 2008 for Baidu, Chinas star search engine. Similarly, NBA was ranked 10th for Google Chinas most popular search words. Other than the NBA, solo Xunlei and QQ, 6 7 Anita Davis, NBA Inks Tom. com Online Deal, CEI, August 20, 2008 st Source 21 cytosine Business Herald 8 Source nba. com two of Chinas largest web portals, appear in the top 10 of both those lists. However, it is unknown how effective this web traffic has been in generating actual revenue for NBA China.Market Overview In 2008, China overtook America as the country with the largest number of net profit users. As of the second quarter of 2009, the country now has over 330 million users, with a growth rate of over 50% annually (see exhibit A). The demographic groups outgrowth comparatively faster than this average are people living in countrified a reas (with over 100% annual growth), newfangled netizens aged 18 and under, and adults aged 30 and up. depict B shows a sectionalisation of the age demography of internet users in China.There are also an increasing number of users accessing the internet finished mobile devices. Currently, over 29% of internet users use mobile phones to get online, with a growth rate off the beaten track(predicate) exceeding that of laptop users. 9 The high growth rate indicates that more and more of the countrys 600 million mobile-phone subs cheaters now own mobile devices capable of accessing internet information. With next coevals mobile technologies much(prenominal) as the iPhone and Google android yet to reach the mass market in China, there clay great potential for signifi croupet growth in this market for years to come. The Meek Shall get the Web, Economist, September 6, 2008 discover A 100 million Total internet users in China 2005-2009 3. 5 3 2. 5 2 1. 5 1 0. 5 0 1. 23 1. 03 1. 62 2. 50 3. 38 Total net income Users 2005 2006 2007 2008 2009 troop B Age structure of internet users in China Source statistical Survey Report on the Internet Development in China, CNNIC, January 2008 Competition numerous sports and pleasure companies have tried to emulate the NBAs success in China and have invested heavily in its digital marketing efforts.The National Football unify has launched a Chinese website (nflchina. com) providing up-to-date news and score, discussion boards and mini-games. Manchester United, the richest sports club in the world, also has an all-Chinese website with online media and shopping to capture on its Chinese fan base. But as the before search rankings would suggest, the NBA is by furthermost the traceing sports entertainment company in China. starring(p) infotainment web portals much(prenominal) as sina. com and sohu. com have pages dedicated to the NBA linked from their former page.already in a plethoric position in the sports enterta inment sector in China, the NBA should perhaps look at its competitive landscape from some other perspective. At present, the NBA generates the majority of its revenue in China done broadcast rights, branding partnerships and ad sales through its media channels. However, it has thus far been able to generate relatively little income from its actual fan base with its digital content. In comparison, end-user Internet Value Added go (IVAS) made up for the majority of the revenue for Tencent Holdings Ltd. a nonher digital media partner of NBA China. Tencent Holdings Ltd. is the largest and most used internet service portal in China. The companys strategic goal is to provide users with a one-stop online action service10 While its reaping offerings are similar to that of MSN Messenger, Facebook, World of Warcraft, 10 Source tencent. com and other leading nictation messaging, social networking, and online gaming companies, Tencent is anomalous in its ability to generate revenue dire ctly from the end users of its overlaps. Most of Tencents products are interconnected through its QQ Network, ncouraging its free users to get ahead in order to access its value-added work much(prenominal) as ringtone downloading, SMS sending/receiving, and online gaming. QQ currency was later introduced to allow users greater ease in making leveragings in the realistic(prenominal) world, and incentivizing video gamers with rewards for performance. With a sell value of 1 yuan (about 14 cents) per coin, users are able to use the coins to bribe virtual(prenominal)(prenominal) goods such as avatars, virtual gifts for friends, and even items for use in games. collectible to its ease of use and low denomination in value, the QQ Coin took off with the companys juvenility user base.It is estimated that nearly $2 billion in virtual currency was traded in 2008, even leading the Chinese government to implement restrictions to the trade. 11 Exhibit C Tencent Holdings Ltd. Quarterly revenue enhancement by Sector Source Tencent Holdings Ltd. Investor concomitant Sheet 11 David Barboza, In China, New Limits of Virtual Currency, New York Times, June 30, 2009 Strategic depth psychology While NBA China has succeeded in edifice brand awareness with its nates demographic market, its digital strategy has thus far only focused on only the active fan base of this market.Its commissioned product with Tencent and EA Sports, NBA Street Online, targets only the fraction of gamers who are passionate about NBA basketball. Likewise, operate on the NBA China website such as video games and news updates are chiefly targeted to already converted basketball fans. A recently initiative called NBAiD was launched exclusively for the NBA China website. Looking to capitalize on the increase popularity of social networking and blogging, NBAiD acts as a personal page for NBA fans, allowing fans to connect with one another and express opinions through blogs.However, at this point , the product itself has very little added value for active or casual fans. Segmenting user categories victimization the concept of the marketing funnel, we see that NBA China has succeeded in both capturing awareness in the mass market and driving homage from its core fan base through its digital strategy, but have make little to submit aware consumers down the funnel (see Exhibit D). There remains great potential for the NBA to generate greater interest and desire for its product through a revision of its digital strategy. Exhibit DThe Marketing Funnel use to NBA China Target Market sensation Casual internet users who are aware of the NBA brand, but have no intention to spend money on its products Internet users who are interested in education more about the NBA, and look to use free products and services made on hand(predicate) to them Interest Desire Internet users who are attracted by the entertainment value of the NBA and may take action upon receiving an attractive o ffer Action Individuals who are engaged to the NBA and are most likely to purchase new products and services offered to them Repeat PurchasesThe digital age has changed the landscape of sports marketing. Martin Sorell, chief executive of WPP, recently advised the International Committee on the importance of meeting the needs of the new generation of young and tech-savvy consumers There are 1. 6 billion people online now and 4 billion mobile phones. The key audience with whom these digital opportunities resonate is of race young people. They are a expensive and massive audience. Globally they impact over $600 billion in consumer spending. The young people take their media habits with them, so if you are ot part of their habit now you most by all odds will not be in the time to come. Let the children play. You have to let them play with your content, your assets in their own way. 12 12 Karolos Grohmann, Dont Restrict Games Media Access, Sorrell urges IOC, Reuters, October 5, 2009 While referring to a different context, Sorrells remarks whoremonger also be addressed to NBA Chinas current situation. There is and thence a huge market of internet and mobile users, and the majority of them belong to the young demographic group that NBA China is targeting.The media habits of youths in China also differ greatly than that of the United States (see Exhibit E for comparison). On average, Chinese youths spend about 18 hours on the internet a week, compared to 12 hours in the US. 13 Social networking sites such as renren. com and kaixin001. com, streaming video sites such as youku. com and todou. com, and online games make up for the majority of these hours spent online. NBA China should now look to capture a bigger share of the entertainment hours spent by youths online. To come across this, NBA China must understand and romance into the media habits of these users, as Sorrell suggests.Exhibit E comparison of Internet Activities Used by US and China Internet Use rs Source China Internet Network Information sum of money & Pew Research Center 13 Shaun Rein, Blogging Down in China, BusinessWeek, July 27, 2006 Popular online entertainment options for China youths share the following traits aboveboard to learn and use, ability to interact with other users, a high (and almost addicting) reproduce value, and contain many customizable features for its users. One such example is the recent phenomenon of the apt call forth game (see Exhibit F for screenshots).The concept of the game is not a discovery in any way In the game, histrions act as owners of a farm, and are responsible for cultivating, irrigating, fertilizing, spraying, harvesting and selling crops. Each action will add points to the players level. However, a player move not only take action on his own farm, but also on his friends farms. Thus, people house both help their friends manage their farms, or purloin crops from other players. The accumulation of all these actions will eventually help the players get bigger farms.Made available for users in social networking sites such as kaixin001. com and renren. com, the success of the impartial game has been phenomenal, with reportedly 23 million users now playing the game. 14 Tencent has since created its own version of the farming game, and is expected to generate RMB50 million (USD $7 million) from the game each month. 15 Exhibit F Screenshots of Happy Farm Game 14 15 Source duowan. com Source tradingmarkets. com Recommendation Currently, the NBA China already has components of gaming, social networking, and video streaming.The idea is to combine all these components into one entertainment web portal targeted to youths that will drive interest and desire, leading to generation of revenue from end users. In 2005-06, video game developer 2K Sports added a new feature to its yearly NBA and NFL games called The Crib. The feature awards players as they come upon feats and milestones within the game. With crib credits, players are then able to decorate their crib (slang for home), grease ones palms music, or play mini-games (see Exhibit G for screenshots of Cribs).While this feature was innovative in adding replay value to the game, its customizable options were limited and the feature was eventually removed in future renditions of the sports games. However, such a concept may be much better utilized in an online environment where crib owners can interact in real time, new videos and games are readily accessible, and virtual items are plenty to satisfy the customization appetite of its users. Exhibit F Screenshots of The Crib from video game NFL 2K5 Source ign. com The possibilities stemming from such an idea are endless.Having already an established network of corporate partners, The NBA Crib can serve as a media channel for product placement. Already showing an appetite for spend virtual dollars, users in return can earn or buy credits to purchase branded virtual products for their c ribs (ie. a coca Cola machine) or even themselves (ie. the in vogue(p) basketball shoes from Adidas). Other uses for crib credits can include purchasing coupons for use at the online NBA store and video clips and music exclusive to the NBA. Most importantly, fundamental interaction between crib owners should be encourage through games within the crib system.Basketball-themed games can take place within the charge neighborhoods of owners, and friends can visit each others crib with their custom avatar. With the right combination of attractive gaming options, customizable features, and synergetic capabilities, this concept will substantially increase the interaction between the NBA and its fans, and eventually lead to a sustainable model for generating revenue from its target market of Chinese youths. NBA China has successfully developed a unique and dominant position in the sports entertainment sector in China.However, the NBA can not simply rely on its popularity and brand reco gnition to succeed. With Yao Ming injured this season, there are worries that NBA viewership rates in China will significantly drop this coming season. It is and then crucial for NBA China to connect with its target market and provide supportive product offerings to satisfy their entertainment needs. In this market of technologydriven consumers, NBA China must strive to not only become the leader in sports entertainment in China, but also a leader in digital entertainment.