SBJ/20080512/This Week's News

AEG & NBA focus on China

The NBA and AEG are close to announcing an enhanced partnership in China that would make a significant investment in the future of basketball and other sports and entertainment options in that country.

The two will join forces to develop and operate up to 12 arenas in China, representing another key step in the NBA’s vision for its own league in Asia, while adding more facilities to the global expansion effort under Tim Leiweke at AEG.

The joint effort builds on an existing NBA and AEG partnership to run the 18,000-seat basketball arena being built for the 2008 Beijing Olympic Games. Under that deal, the two companies will jointly operate, manage and book the facility, which is known as the Wukesong Indoor Stadium, after the Summer Games end. The long-term partnership calls for an equal split of revenue generated from the arena, which is owned by the Chinese government.

AEG and the NBA are now expanding that agreement to include other arenas throughout mainland China, according to sources familiar with the deal.

Already working together at the Olympic
Basketball Gymnasium in Beijing (below),
the NBA and AEG are looking at other
arena markets such as Shanghai.

While the plan isn’t finalized, it is expected that the two will partner in pursuing an arena and possible neighboring development in Shanghai. Other possible cities targeted are Nanjing (population: 6 million) and Guangzhou (population: 10 million).

Neither the NBA nor AEG would comment on the deal, which is expected to be announced within weeks.

“With the NBA making this move, they can spur the growth of basketball in China like nobody else,” said Bruce O’Neil, president of the U.S. Basketball Academy and a consultant to the Chinese Basketball Association. “We are seeing the effects of the growth of interest in China, and with the NBA’s marketing capabilities, there is great opportunity.”

The deal helps cement the NBA’s aggressive goals in China. The league last year created its NBA China entity, which conducts all of the league’s business there. NBA China has attracted private investment from five companies that have put in a total of $253 million to acquire 11 percent of the entity.

The partners are Disney, Bank of China Group Investment, Legend Holdings Limited, Li Ka Shing Foundation and China Merchants Investments.

A main obstacle in the NBA’s China expansion strategy is the lack of suitable facilities to support an NBA-run league. But if the NBA and AEG can successfully develop new arenas, the pieces would be in place for the NBA to create such a venture.For AEG, the development would continue its plan to established a wired network of arenas to expand its entertainment business.

AEG also is no stranger to international operations (see related story). Last year, it opened The O2 in London, which includes an arena and entertainment district and was visited by several Chinese government delegations in the last year. It is also where the NBA played preseason games in 2007. AEG will open The O2 World arena in Berlin in September.

The partnership with the NBA helps pave the way for AEG to expand its entertainment business throughout China, which, along with India and Russia, is one of countries the company is focusing on.

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