The development of the NBA in China - An Interview with Ella Betsy Wong, Senior VP and General Counsel, NBA China

Friday, 02 October 2015

The NBA is a worldwide brand, but for those not familiar with the NBA one can be forgiven for thinking that it is predominately a US centric organization. However, that is not the case; the NBA has been successfully growing its brand internationally for many years, with notable success in Asia. This captured my imagination and I thought our readers would be keen to find out in detail about the NBA activities in Asia and some of the legal challenges of growing an international sports brand in Asia. Therefore I reached out to someone with an extensive knowledge of broadcasting and sports industry in Asia Ella Betsy Wong. Ella is the Senior Vice President and General Counsel for NBA China with responsibility for all the legal, regulatory, and compliance issues arising out of the commercialization of the NBA brand in the Greater China Region.

This interview will be of particular interest to anyone wanting to know:

The NBA’s strategy in Greater China
Gain more knowledge about sports law and sports business in Asia;
How to become a leading figure in sports business and sports law.

In this interview, Ella provides insights into business of NBA China, her role in growing the business and how the legal environment influences the commercial decisions the business has to make whilst operating in the Greater China region.

SEAN: Ella, thank you taking the time out of your hectic schedule to speak with me. To begin with can you explain the business model of NBA China and how it fits within the Chinese sports market?

ELLA: The NBA is a global business that is operationally divided into four regions. The first and largest region is North America, and then there is Europe Middle East and Africa (EMEA), Greater China, and the rest of Asia. NBA China is the division that covers the regions of China, including Hong Kong, Taiwan, and Macau. The business of NBA China is the business of commercializing the assets of the NBA in these regions.

This includes the traditional businesses of content distribution (what we call media distribution, over television, digital, mobile, and so on) original programming, product licenses or merchandising, interactive gaming, and marketing and sponsorships. We also run both professional events and grass roots events every year, and we have a branded destinations business, which involves putting the NBA brand and content in entertainment venues. The legal team of NBA China handles all of the work in relation to all these businesses. In addition, the legal team handles the regulatory, advocacy, enforcement as well as compliance aspects of all of these commercial business lines.

In addition to such commercial transactional work, the NBA headquarters legal team also handles league and player matters. These are matters executed centrally at headquarters where there are experienced lawyers who are in the best position to deal with collective bargaining, salary caps, player discipline, drug testing, and such issues- issues relating to the competition itself.

“There are an estimated 300 million people who play basketball in China”

SEAN: How big is the footprint of NBA China and how long have the NBA had a presence in China?

ELLA: Basketball is the number one team sport in China and that the NBA is the number one sports league in terms of fan interest. There are an estimated 300 million people who play basketball in China. We also believe we are the most followed sports league on social media in China, with more than 70 million followers.

The 2014-2015 season just past will be the 28th year in which CCTV has broadcasted our games in China. CCTV has been our broadcasters since the 1987-88 season. NBA China only established a formal presence - meaning an office - in Beijing, in China in 2008, but the games have been broadcasted in China long before that.

SEAN: Do you think that having a permanent presence in China has helped the NBA brand grow?

ELLA: There are not many international sports brands with a permanent presence in China. This means we are so much closer to the market and to our fans, so we are able to do more deals, better deals, and we are able to offer more personalized content, products and services for our fans in this region. The fact that we have so many diverse business lines in China, I think, is also a testimony to the fact that we are close to the market and know what our customers and fans want.

SEAN: Does this proximity to the fans/consumer enable the NBA to carve out more lucrative and beneficial deals?

ELLA: We certainly think we are able to deliver more value to our customers and more value to ourselves because we know our customers better and in a real-time manner, being on the ground here in China. We also know our ultimate end users, our fans, better. Let me take a step back - we have over 130 employees at NBA China spread across offices in Beijing, Shanghai, Taipei and Hong Kong. Through the executives in China, we have active and frequent contact with existing and potential customers. We are also first hand observers and users of the various NBA products and services that our clients offer. It could be apps, it could be particular video players, so on. We are also closer to our sponsors whether it is Nike, Pepsi, Castrol or others, as we can directly engage with their local management who are best positioned to decide on how they want to activate the NBA brand locally. Furthermore, to my knowledge, we are the only international sports league that actually has an on ground legal team in China. Since my team and I are actually in the market, we get market and legal information more quickly and we can react to challenges risks a lot more quickly as well.

“…this is an important time for sports in China in that the Chinese government has announced sports industry reform at the highest level”

SEAN: Do you have any examples of some of those risks or challenges on a day-to-day basis?

ELLA: I think the risks and challenges are also opportunities as well. First, this is an important time for sports in China in that the Chinese government has announced sports industry reform at the highest level (the State Council level) late last year so sports is something that the government is putting a lot of effort and funding into. We will be beneficiaries, along with other sports of course, of the reform. Second, as you also know, China is one of the most advanced countries in the world in terms of the availability and usage of digital media and mobile devices. There is access in China to a lot of very creative digital products. Delivery of content via mobile, online, over-the-top - all of it is prevalent in China already.

“The main regulatory challenge in the sports industry in China is that live sports broadcasting in China is not yet clearly copyrightable”

SEAN: How does that feed into the legislation in China? Has the digital revolution has impacted the ability of the NBA to commercialise its rights in China? Also, do you think that the NBA, given it’s presence in China, has an opportunity to help shape that as it develop legislation around the protection and exploitation intellectual property rights to improve the commercialization of sport in China?

ELLA: I think the intellectual property issue is a fundamental one and has been exacerbated by the digital revolution. The main regulatory challenge in the sports industry in China is that live sports broadcasting in China is not yet clearly copyrightable. This is of course not an issue unique to the NBA, it is an issue that all significant players in the sports industry are concerned about.

In China, a live sports broadcast is not yet definitively recognized as an audio-visual work and protected under copyright legislation. As there is a debate about this, that adds an additional challenge to anti-piracy efforts in courts. There are several ways to tackle the piracy problem. Copyright law is not the only tool but it’s a big lacuna that many in the sports industry are very anxious to close. I think we have seen some good case law come out and we are productively, I think, working towards a good outcome, but there is more work to be done on this particular front and it will take time. We have a strategy and we are now executing it in partnership with our media licensees. One of the actions is to try to build a body of favorable case law in key courts, and that in part involves demonstrating to the influential legislative and judicial decision-makers that a live sports broadcast is as equally creative as a film or television program. There is also more straightforward advocacy through industry associations. We are not quite there yet but we are actively progressing on paths that are happening concurrently to try to move towards the desired outcome. From a more general perspective, because the Chinese economy is so dominant, the slowing growth and the high volatility in the capital markets recently affect our clients, both local and international, and in turn, us. At the same time, there is also growing anti-trust and tax scrutiny on multi-nationals, so we just have to put a lot more work to make sure we are well shored up on that front. Of course, there is also the ongoing crackdown on corruption. Within the NBA we are very conscious of our compliance responsibilities at all times, but around us there is also now a growing focus on corruption within some of our potential or existing customers. All of these things are challenges that we deal with, may be not on a day-to-day, but certainly on a very conscious basis as we plan and execute our business. I have to say, I was very impressed when I joined NBA China to see that they already had very established compliance policies and procedures throughout the company globally.

“I did not find the partnership path appealing at the end of the day and wanted to get closer to and participate in the business decision-making process”

SEAN: You can see there are many factors in role, which must be exciting. How did you end up working for NBA China? How did you transition initially from private practice to an in-house role starting and eventually onto the NBA?

ELLA: I was brought up and educated in Hong Kong and then left after secondary school to attend university in England. I planned to stay and qualify, but my family situation changed and I decided to get a law degree in the United States and settle down in the U.S. doing corporate law, but when I started practicing it coincided with the first wave of interest in Chinese companies in tapping the international capital markets. A lot of law firms were interested to establish an outpost in Asia to take advantage of this outbound work, not just from China, but Southeast Asia as well. I was based in New York after law school in the U.S. and later returned with my law firm to Hong Kong because they decided to start a branch office there. I stayed with them for a couple of years and covering China and Southeast Asia, doing a variety of venture capital, M & A, capital markets and compliance work. I was quite lucky at that time I think. My firm’s office in Hong Kong was not very large, so it did not silo its lawyers into very specific practice areas. As its clients were mostly the business organizations as opposed to financial services clients, I was able to be exposed to different areas of practice, which in hindsight proved to be very useful for my future development. Around about my fifth year, I decided that I wanted to go in-house. Like many lawyers, I did not find the partnership path appealing at the end of the day and wanted to get closer to and participate in the business decision-making process and seeing a company’s strategy from inception to execution.

To be honest, I stumbled into the TMT [telecoms, media and technology] sector. At that time, the law firm I had worked for had a variety of clients in different industries and I hadn’t decided on the industry that I wanted to get into. I was open-minded in terms of different companies and industries when a role in STAR TV presented itself. I was very impressed by my boss at that time, the way he explained the vision of STAR TV and how he took the time to do so, so I decided to join them. As you know, STAR TV was then the television arm of News Corporation, then a diversified global print and entertainment business (now the organization has restructured and the media and entertainment side has been separated from the print business and rebranded as 21st Century Fox). I gained the opportunity to handle media and entertainment work around the Asia-Pacific region, focusing on several key territories, including China. I managed to handle a lot of different types of work, and challenge myself in a lot of different ways. I also had to learn to work with people from many different countries and backgrounds, so it was a very good education for me to be exposed to different cultures and working styles.

SEAN: Did you have any inkling that that was the type of experience you would gain working at a business like Star TV?

ELLA: Not at all. I think in hindsight my boss at the time explained STAR TV’s business strategy to me very well – which was the importance of localizing the company’s business in Asia and tailoring the content to each major local market. For an international organization, STAR TV was very pioneering at that time and gave me a chance at very broad exposure, both internally and externally. I think I was very fortunate at that time, but I don’t know if I knew that necessarily when I accepted the role.

SEAN: Hindsight is a wonderful thing. So after being in that role at STAR TV for 14 years what happened?

ELLA: The Asian business was growing for about 14 years and then a very important strategic decision was taken to restructure the business for all the right reasons. As a result of the restructuring, I was a given a choice and I decided to opt for a more corporate role. Less on the operational front and more corporate M&A and compliance. After about 2 ½ years of that corporate role, I decided that my heart really was back in the more diverse role where I was more hands-on in the business. I am grateful for those last 2 ½ years of experience because they helped reinvigorate my M&A and capital markets background. But I knew what I wanted to do was a more holistic and diverse role with a direct impact on P & L ([profit and loss]. I knew I didn’t want to join another international TMT company with pan-Asian regional focus similar to 21st Century Fox, but I was hoping to join a business looking to put in the effort and funding, and take risks, in a more targeted way. It was an amicable departure. By that time, STAR TV had restructured and the brand is now used primarily for the Indian business. I left 21st Century Fox in early 2014.

“The more important difference is that sport is such a unique asset and I am with the NBA which is a business with a unique product”

SEAN: What were your observations on the differences in the business between a big international media business [News Corp/21st Century Fox] and then moving to another international business [NBA], but one that is a bit smaller and maybe a bit more entrepreneurial?

ELLA: First of all, I think both the NBA and 21st Century Fox are equally entrepreneurial, so I don’t think that is the difference. I think the difference is that I am at a focused Greater China business and in the past, I was in a more pan-Asia-Pacific role. But the more important difference is that sport is such a unique asset and I am with the NBA which is a business with a unique product. You can only get NBA content and branding from the NBA, there is nobody else that can give that to you, which means we are in a position to fully exploit NBA rights and assets and map the way we want to develop the business. To use sports lawyer language, I am in a rights holder business now, but in the past I was in more of an acquisition and aggregation business. As a rights holder we control all of the rights, and it is up to us as to how to split up the pie in the way we best see fit to maximize interests and to provide the best product to our fans. Because we have all rights, we can deal with the rights in many more ways. Obviously, there is the distribution of the media, the content of the game itself but we can also use our brands and content in sponsorships and the advertising inventory sales around the games, use the NBA and team brands in interactive gaming. Through our youth development and branded destination businesses, we are able to not just develop professional basketball but also to grow and deepen our engagement with the casual fan base. One of the things we’ve been doing is an after school basketball fitness program for kids. We have also been working with the Ministry of Education in China to bring basketball, officially, into the curriculum of elementary, middle, and high schools. Because we own all rights, – effectively, the imagination is your only limitation. That is very refreshing to me.

SEAN: I could tell just from speaking with you that this is a huge motivation for you and, as you said, the limit is only your imagination.

ELLA: Exactly! I mean as a lawyer one is also limited by local regulatory restrictions and so on, but you know that is true of any place. But barring that, we can really explore so much more. The other big difference of course, and this is perhaps a lawyer’s difference; I am now dealing with live content. That is a critical difference from an entertainment and media business where most of the content is recorded.

“Deepening our engagement with fans is an important opportunity, and we’re doing that through establishing a new customer loyalty program”

SEAN: Yeah, of course. Sport is one attraction that we can capture the attention of an audience at the very specific moment in time, where the emotions are running high, when they’re the most engaged. In an age when they’re so many distractions this presents a powerful opportunities to reach a particular demographic of people. This is, in my opinion, where sport starts to come into it’s own. So, following up from that, what would you say are the opportunities and threats in the sports market in Greater China? What role do you think sports law will play in the development of sport in Greater China?

ELLA: We have a number of strategic goals throughout the company, not just in China, but globally. It is very important to us to continue to attract more fans to the game and to grow basketball at all levels. It can happen in various ways, by improving the competition structure, the calendar, game formats and delivery technology. In particular, we are looking into whether it is possible to hold a few time-shifted games in more Asian-friendly time zones. Another important goal is to get to know our fans better. We know we have a lot of fans and while our business is primarily conducted through a licensing model, we still want to find out more about our fans - their demographics, where they are, what their backgrounds are, so that we can deliver more personalized content and products to them and ultimately drive increased engagement as well as, obviously, monetization for us. Deepening our engagement with fans is an important opportunity, and we’re doing that through establishing a new customer loyalty program. The NBA China legal team is deeply involved in the execution of all of these goals. The legal team’s role is not just to execute on existing business lines. It is, more importantly, forward-looking to help the company think about and execute on these longer-ranged goals and also to minimize challenges that may impede the maximization of deal value or the realization of strategic goals. Within the legal team, as I mentioned, our key goal is to push forward on having the legislature and the courts in China recognize that live sports broadcast is capable of copyright protection. While this goal is primarily actionable by the legal team, it is one that is very important to both sports rightsholders and licensees to protect the value that licensees have bargained for.

SEAN: I can see why you are so excited about your role. There is so much going on. China is a really exciting place to be, particularly in this development of the live sports events rights.

ELLA: Yes. I must point out that I am fortunate to be part of a very experienced and sophisticated legal team. First, we are part of a global legal team that has really given us huge support in executing our objectives in China. Second, the NBA places great respect and weight on legal input. The fact that we are in Greater China, particularly in Mainland China, means that there are a lot of opportunities albeit with a slowing economy. Now obviously Sean, every sports business has it’s own approach to monetization and different businesses run in different ways, but we have certainly found that to be here, in the thick of things, in the country, has been very rewarding for the NBA and certainly rewarding for me personally.

SEAN: Where do you see the future of basketball in China in the next 5-10 years?

ELLA: I cannot speak about basketball generally, but as far as the NBA, we will have a broaden fan base, we will know our fans better and we will be in greater and more direct touch with them in many different ways.

SEAN: Thank you very much for taking the time to speak with me. It was extremely interesting, so thank you again your time and making yourself available, particularly given your busy schedule. I really appreciate it.

**A special thank you to Yasmin Hosseini of Pepperdine University, School of Law, for her excellent work transcribing this interview.