A single tweet from Houston Rockets General Manager Daryl Morey managed to start a major international controversy that has alienated the National Basketball Association (NBA) from almost all of China. On October 4, 2019, Morey tweeted an image that featured the caption “Fight for Freedom. Stand with Hong Kong”, publicly announcing his support for Hong Kong protestors over mainland China. Soon after Morey’s public statement, the Chinese government called for the NBA to remove him from his position and publicly support the Chinese government’s rule.

With CNBC noting as recently as last November that the NBA has become the most popular sports league in China, the NBA was in a particularly difficult position. Many of the most popular current and former athletes in the NBA, including Stephen Curry, Joel Embiid, and Kobe Bryant, have been traveling across China for years to promote their partnerships with shoe companies. Other former NBA athletes such as Tracy McGrady and Stephen Marbury have found significant success through playing in China’s biggest basketball league, the Chinese Basketball Association (CBA), after their NBA careers came to a close. One of the biggest recent stars for the Shanghai Sharks organization, American player Jimmer Fredette, was able to use his positioning as a superstar in the CBA to briefly return to the NBA and later receive a major two-year contract with Greek organization Panathinaikos of the EuroLeague. The NBA even started a series known as the “China Games” in 2004, and as of 2018 they had organized 26 different preseason games for American teams to play in China in locations such as Beijing, Macau, and Taipei. Through this variety of partnerships, the NBA was able to promote its own international growth, the growth of the CBA, and the massive increase in popularity of American basketball apparel across China.

Given the NBA’s increased reliance on China as a flourishing market, some NBA figures did not receive Morey’s comment kindly. Within minutes of the publication of Morey’s tweet, Houston Rockets owner Tilman Fertitta heavily criticized his general manager, stating that Morey did “not speak for the Houston Rockets organization,” and pushed the idea that the Rockets would express no political viewpoints on the matter. The Rockets have historically been one of the most popular NBA teams in China, as former Rockets star center and Chinese native Yao Ming became a celebrity in the country after his dominant play in the U.S.. In addition, Ming currently serves as the president for the CBA, and much of his work is closely connected to the Chinese government.

Through Morey’s statement, not only did the Rockets risk losing their key connections to both their legions of Chinese fans and their relationship with their former star player, but also alienating many of their domestic fans. With many U.S. politicians attempting to pass the Hong Kong Human Rights and Democracy Act that would support the Hong Kong protestors’ goals, general support for the Hong Kong protestors in the United States has outweighed support of the Chinese government. While Fertitta’s declaration momentarily helped salvage relations between the Rockets and China, his comments also hurt domestic fan support.

In addition to Fertitta’s negative comments, Los Angeles Lakers superstar LeBron James described Morey’s tweet as “misinformed or not really educated” on what was going on between Hong Kong and China. LeBron has increased his visits to China to advertise his shoe brands with Nike, and his comments on the matter directly contradicted his previous views as an advocate for free speech among athletes. Most non-Chinese writers and fans were heavily critical of LeBron’s comments, perceiving him to be valuing his business deals over his character.

NBA Commissioner Adam Silver, however, did not choose to follow suit with Fertitta and LeBron, and he publicly stated that the NBA would not be apologizing to China for Morey’s decision to speak out against Hong Kong soon after Fertitta’s comments. In addition, the NBA also promised not to fire Morey for his use of freedom of speech. Many other companies that have dealt with interactions with the Chinese government before have succumbed to pressure to change aspects of their business: Apple removed the Taiwanese flag emoji from all of its products’ keyboards, Hollywood movies have significantly censored films shown in China that have portrayed Chinese officials in a negative light, and Mercedes-Benz apologized after quoting the Dalai Lama in one of its advertising campaigns. However, the NBA did declare Morey’s comments to be “regrettable” in nature.

The Wall Street Journal noted that the NBA’s response attempted to satisfy both Hong Kong supporters and China’s mainland but ended up satisfying neither group sufficiently. In response to the NBA’s statement, China Central Televi- sion (CCTV) publicly stated that both Silver and the league would face severe retribution for their actions, and the Chinese government has already canceled multiple schedule NBA games in major Chinese cities. In addition, many basketball fans in the U.S. felt that the league did not support Morey and the Hong Kong protestors enough. The NBA found itself in a lose-lose situation, as they had to decide whether to prioritize their growing international relations or please their steady base of domestic fans. In addition, the league could not control the comments of many of their individual players, coaches, and owners, thus adding further barriers to the NBA cleanly resolving the problem.

However, while the NBA’s official response to the controversy did not fully back Morey, it did demonstrate the league’s willingness to protect the freedom of speech of its employees, which it must continue to value even at the risk of further loss of business expansion opportunities.

In the summer of 2015, a string of emojis tweeted out by various NBA players sparked the rise of NBA Twitter as a staple of the league’s cultural footprint.  Free agent Deandre Jordan had agreed to a deal with the Dallas Mavericks.  However, he soon became uncertain about his decision to leave the Los Angeles Clippers.  As the marquee center flip-flopped, players across the league reacted to the intriguing situation with emojis on Twitter, causing an explosion in engagement with the NBA Twitter community.  Thousands of users offered their takes on the Deandre Jordan drama with emojis of their own, sparking a string of interactions between NBA fans and their favorite players that has since become a daily occurrence.

Previously just a small group of writers, insiders, and super-fans, the online community soon became a hub for NBA related news, highlights, jokes, and analyses.  Now, the NBA is the most tweeted about sports league, as there were 100 million NBA-related tweets heading into last year’s finals and over 76 million during last year’s offseason.  From live-commenting games to dissecting pre-game wardrobes, NBA twitter has become a tight-knit community active year-round.  Twitter’s head of sports league partnerships TJ Adeshola reflects, “NBA Twitter just has this really special connectivity to it that doesn’t exist anywhere else.”

The NBA doesn’t just dominate Twitter.  A new study by Sports Business Journal concluded that the NBA ranks first among all leagues globally in social media engagement.  The NBA has more than 82 million followers across its official league social media accounts globally and that number jumps to 1.2 billion when including team and player feeds.  Over 14.7 million of those followers were added in the last twelve months, representing a 21 percent year-over-year increase.  Of the four major American sports, Reddit’s NBA message board is now the only one with more than a million subscribers.  The NBA’s rule over social media is no coincidence.  According to the NBA’s chief marketing officer Pam El, “it’s certainly not by accident that [the NBA is] the number one league across all social platforms.  That is completely by design.  We know that’s where those younger fans are getting their information.”

Young sports fans are consuming sports content through social media and streaming services far more than fans in previous generations.  According to a recent Mckinsey report, 56 percent of Millennial sports fans report using streaming website and apps compared to just 29 percent of Generation X fans.  Millennials also check scores and game clips on social media far more often than Generation X fans (60 percent versus 40 percent).  Just last year, YouTube saw an 80 percent increase in time spent watching sports clips on its site, and highlight-focused social media accounts such as Bleacher Report’s “House of Highlights” have millions of followers.  With highlights and game summaries at their fingertips, there’s no need for young fans to sit through entire games and commercial breaks.

The McKinsey report also concluded that Millennial fans are watching fewer and shorter sessions of live sports on TV as a result, which has led to declining ratings for almost all major professional sports. ­­The NFL suffered a 9.7 percent dip in ratings during the 2017 regular season, marking a 17 percent drop since 2015.  NHL games also saw a 20 percent decline in their national broadcast on NBC.  MLB ratings stagnated on average, and even soccer, one of the fastest growing sports in the U.S, struggled to grow their audience in 2017.

As consumption of sports through social media has grown, leagues have had to decide how to protect their content, particularly the highlights and video that networks paid millions of dollars to broadcast exclusively.  While the NFL and MLB have gone after sites and social media users who posted video without permission, the NBA took the opposite approach and has allowed the free distribution of its content.  Commissioner Adam Silver considers online videos to be a form of marketing, likening them to “snacks” that might stimulate fans’ consumption of league content.  Silver recently told Strategy+Business magazine, “If we provide those snacks to our fans on a free basis, they’re still going to want to eat meals – which are our games.  There is no substitute for the live game experience.”

Adam Silver was right.  Though sports viewership in general has gone down, the league’s average TV viewers increased by 17 percent during the 2016-2017 compared to the previous year according to Nielsen Holdings.  Growth is particularly strong among Millennials, as viewership of NBA TV programming rose 21 percent among the 18-34 age group.  The NBA continues to leverage social media to increase engagement, as commissioner Silver notes, “we look at social media data every day to see how many people are following the league, our teams, and individual players. And we have various measures for whether the commentary is positive or negative.”  The NBA has only a dozen staffers devoted to managing social media activities. However, their operations are intertwined with sales, marketing, and other core league departments as engaging fans online has become an integral strategy.

Despite recent success, the NBA still has a long way to go before overtaking the incumbent American sports powerhouse. Although the NFL’s viewership has steadily declined over the past three years, they still have ten times the number of viewers on average as the NBA for their prime-time games.  The NFL also has significant more revenue compared to the NBA.  In the 2017-2018 season, the NFL made $14 billion in total revenue, nearly double the NBA’s $7.4 billion.  Overall popularity lies with the NFL too, as a Gallup poll released last year found that 37 percent of Americans consider football to be their favorite sport compared to just 11 percent who responded basketball.

Still, the trend in sports media consumption towards social media and streaming bodes well for the NBA’s prospects of someday overtaking the NFL.  As young viewers stray from conventional live TV viewership, the future of rights deals appears to be in jeopardy, and the NBA is positioned better than any other league to adjust to subscription-based streaming services. Commissioner Silver envisions that one day streaming services will bid for contracts the way television services do now.  Dallas Mavericks owner Mark Cuban agrees, stating that the competition between subscription services will be “greater than the competition between networks on TV ever was” and that “…our revenue could grow significantly if the landscape then is similar to today.”  Traditional media companies like CBS, Fox, ESPN, NBC and Turner currently have the rights to the big four U.S. sports league locked up until for multi-year deals worth hundreds of millions of dollars each.  Beginning in 2021, however, the rights go up for bidding again and tech companies like Facebook, Amazon and Google are poised to enter the competition.  The NBA has already entered partnership with Hulu and YouTube and experimented with streaming games on Facebook, Twitter, and Instagram.

The McKinsey study on Millennial sports media consumption also concluded that the distribution of online highlights is the gateway to obtaining subscriptions.  Fans who consume 30 minutes per day of sports highlights were shown to be three times as likely to subscribe to sports streaming services compared to the average fan.  Since the NBA already dominates the online sports content space, the league is set up well for a lucrative streaming deal once its TV rights contract expires in 2025.  If Cuban’s vision comes to fruition, it is not too far-fetched to say that the NBA could soon overtake the NFL in terms of both viewership and revenue, especially as Millennial audiences age and Generation X viewers phase out.

Over the past few years, we have seen the Golden State Warriors play the Cleveland Cavaliers four times in a row in the National Basketball Association (NBA) championships. To many, this seems normal; however, the dominance of just a couple teams exposes real inequity in the NBA: there are only a few teams who can reasonably contest for the world championship title. Although there are many factors that affect each individual teams ability to win (coaching ability, player talent, chemistry), the most important determinant is a team’s market size.


Teams from small market teams generally have no obstacles in making the playoffs, but they are seldom, if ever, able to reach the finals (not even to mention winning a championship). Since the NBA merger with the ABA in 1976, not a single team with a metro under two million people has won the NBA championship. In fact, three cities have been represented in a third of all the finals games since 1976: New York, Los Angeles and Chicago.


Across all professional sports, market size uniquely affects the NBA the most because superstar players have a much bigger impact on the outcome of the game. Statistically, basketball has a lower win-loss variance for a given level of skill compared to other sports. This means that better teams, with more skilled players, are less likely to suffer “upsets” compared to sports like soccer, hockey and baseball. This isn’t to say that elite basketball players are inherently more skillful that top players in other sports, but it does imply that improved skill in basketball translates to game wins more consistently.


However, the question of why small market teams are not able to keep star athletes on their roster remains.  For small market teams, there are many different rules in place that make it difficult to acquire and keep big stars. Big market NBA teams have the money to convince better players to. The NBA is unique in that it features a soft cap combined with a tax.


Teams are supposed to spend under this soft cap amount, but if they do go over the NBA taxes them for a large percentage of each dollar over the cap. When looking at the market value of each team calculated by Forbes, it isn’t a coincidence that the bottom five teams have never won a championship.


Teams that are worth more can spend over the soft cap limit and will gladly pay the luxury tax to keep attracting talent to the roster: winning to NBA franchises translates into actual revenue, whether from Steph Curry jerseys sold to tickets in the actual stadium. In the long run, this revenue is much larger when compared to tax expenditures, making the investment worth it.


The cap arguably sacrifices the ability of small market teams to succeed by giving teams with money the potential to be practically unbeatable. According to 538.com, the Golden State Warriors (former 2-time title winners), who were already tens of millions over the salary cap, were able to sign Demarcus Cousins for $5.3 million (who was valued at $46 million). Cousins was injured last season but is still ubiquitously recognized as one of the best centers in basketball today. He is just one of the many examples where teams can underpay superstars to save money. One exception that helps small teams are bird rights, which allows teams to resign players above the salary cap at an amount equal to the maximum salary.


However, at some point, money just doesn’t matter as much to NBA players, which is problematic for small market teams since it is the only real asset, they have for attracting talent. For someone making tens of millions any given year, some players would opt to win championships over an additional few million. To some incredibly wealthy players, it may make more sense to focus on the legacy one would leave on the league. At that level of income, each individual dollar has diminishing utility, making winning that much sweeter.


That phenomena explains why the super max contract barely works either. According to Heavy, the contract is an incredible sum of money ($70 million more than any other team) offered to a player who qualifies themselves as a star. The player has to be on the team that drafted them or traded as part of the rookie deal and made an all-NBA team, among other requirements. The contract has already failed for top tier talent, and it isn’t expected to work in the future.


Part of the reason the super max always fails is due to tampering, a situation in which players, and coaches at times, influence a player’s decision to leave or stay with a franchise. According to ABC30, LeBron James recently stated it would be “amazing” or “incredible” if Anthony Davis, MVP contender and New Orleans Pelicans’ star player, were to join the Lakers, LeBron’s team. These comments, among others, have forced the Pelicans’ franchise to face pressure to trade Davis.  This is because if became a free agent, the Pelicans will not receive anything if he chose to not stay. The NBA has fined teams like the Lakers for organizational tampering (defined as influencing franchise players of other teams to take certain actions regarding their contract), but some small market GM’s are upset that the league commissioner, Adam Silver, has failed to really enforce the laws.


Besides money, small teams can always try their luck at the annual NBA draft, wherein teams select college players who have proved themselves at their respective teams to play for their NBA franchise. The draft is organized so that worse teams have better picks in the draft. Oftentimes this still fails because teams can trade their picks in future drafts for short term assets to their team. However, this can lead to teams intentionally performing poorly to get a higher draft pick in the future. This has resulted in even lower amounts of competition in the modern NBA. Big market dominance and the intrinsic requirement of many skilled players to win has led to teams paying vast sums of money without hope of a title. In this way, these market distortions are a major disservice for the millions of NBA fans and the sports entertainment industry overall.