Keeping Score

Can Jeremy Lin’s Appeal in China Really Help Houston’s Bottom Line?

The Rockets, having drafted Yao Ming, know how to market in China, where Jeremy Lin is wildly popular.

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AFP / Getty Images

This photo taken on May 28, 2011 shows U.S. basketball player Jeremy Lin at the Pinghu middle school where his grandmother has donated to the school fund, in Pinghu, his family's ancestral home in eastern China's Zhejiang province

One reason the Houston Rockets were willing to offer Jeremy Lin a three-year, $25.1 million contract — a deal that Lin’s former New York Knicks teammate Carmelo Anthony labeled “ridiculous” — seems pretty clear. Since the Rockets drafted Yao Ming back in 2002, the team has extensive experience marketing players to the massive, fast-growing Chinese market. And Lin, a Taiwanese-American and the only Asian-American playing in the NBA, is hugely popular in China (and elsewhere: on NBA.com and in the NBA Store in New York City, Lin’s jersey was the second-highest seller of the regular season, behind only Derrick Rose’s N0. 1).

So as long as he doesn’t regress on the court, Lin’s high salary, even the $14.8 million he is slated to earn in the final year of his contract, could pay for itself, thanks to Houston’s global branding machine. Yes, Houston believes Linsanity is much more than a freakish string of games in February. But given Houston’s prior inroads into China with Yao, the Rockets could afford to take more of a financial risk with Lin, who has started only 25 games in his NBA career.

(PHOTOS: The New York Knicks’ Jeremy Lin in Action)

Will Houston’s investment in Lin pay off? Well, for starters, it’s harder for individual teams to profit from international marketing than you might imagine. When a Houston Rockets jersey bearing the name of Jeremy Lin is sold in China — or in a retail outlet in suburban Houston or anywhere else in the U.S., for that matter, outside of a team-owned store — that money does not flow directly to the Rockets. It’s split among the NBA’s 30 teams. The Rockets also can’t, say, cut their own television deals in China. The NBA handles those negotiations, and divvies up the money among its franchises. “It’s not easy for a single team to make a fortune off a guy in China,” says Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon, who has traveled to China frequently and closely studied the country.

A 2011 Marketwatch.com story, headlined “Yao Ming and the Rockets’ Weak China effect,” details some of these limitations:

Estimates from sponsorship experts IEG are that the Rockets earned somewhere between $800,000 to $1.25 million in deals from all their China-related sponsorships. That’s not negligible, as it’s about 5%-10% of the average NBA team’s annual sponsorship income, but it’s less than a percentage point of the Rockets’ estimated $150 million a year revenue. IEG said that the Rockets’ overall sponsorship revenue wasn’t notably higher than other NBA teams during Yao’s time with the team.

In 2010, the Houston Chronicle wrote:

The financial impact [of Yao Ming] on the Rockets has been significant, but nowhere near as large as most assume. The team has about 85 sponsors each season. Typically, about seven are based in China, accounting for about 5 percent of the Rockets’ sponsorship revenue.

That’s not to say teams don’t benefit from signing players with global appeal. Just look at Lin in New York. During the height of Linsanity in February, stock in the Madison Square Garden Company, owner of the Knicks, rose 15%. (By contrast, since the reports surfaced last week that the Knicks probably weren’t going to match Houston’s offer for Lin, the stock fell 9%). Lin’s popularity helped the MSG Network, which broadcasts Knicks games, break an impasse with one of its most important TV distributors, Time Warner Cable (Time Warner Cable was spun off in 2009 from Time Warner, TIME’s corporate parent.)

(MORE: These Prices Are Linsane! Fire Sale Begins For Jeremy Lin Knicks Merchandise)

Lin will probably put more Houston fans in seats. Last season, the Rockets finished 22nd in the NBA in home attendance, averaging 15,363 fans per game — that’s 85.1% of the Toyota Center’s capacity. So there’s room for growth, and Lin can provide a boost. Nearly 140,000 Asian-Americans live in Houston, the eighth highest total among U.S. cities: more of these fans will be more likely to buy Rockets tickets.

According to Forbes, Houston’s overall revenues increased 87% between 2002, the year the Rockets drafted Yao, and 2010, the year before he retired. Operating income jumped from $7 million in 2002 to $36 million in 2010, a more than a five-fold increase. The team’s value soared from $255 million in 2002 to $443 million in 2010, a 97% jump. Having the big guy clearly didn’t hurt.

Further, given Houston’s prior ties to the Chinese market because of Yao, the team is in better position than most to benefit from Lin’s strong performances. “Culturally, the Chinese market is built on long-term relationships,” says Swaangard. Chinese brands looking to increase their presence in the U.S. — and boost their prestige back home — partnered with the Rockets. For example Anta Sports Products Ltd., a Chinese athletic shoe company with 4,000 retail outlets in that country, inked a four-year arena signage deal with the Rockets back in 2007. Yao helped secure the 20-year, $100 million naming rights deal for Houston’s arena, which opened in 2003. Toyota was looking to expand sales in China, and signed on after Yao’s rookie year. With so many Rocket games being broadcast in China during the Yao era, multinational American companies like Anheuser-Busch and Adidas purchased bilingual Mandarin-English arena signage at the Toyota Center that television viewers could see. (NBA teams don’t have to share arena signage revenues).

After drafting Yao, Rockets owner Leslie Alexander founded Rocket Capital, a private investment company that “specializes in investments in emerging markets with a strong focus on the Greater China region.” Rocket Capital has invested in Chinese railway, auto, tea, and mining companies, among others; it has also poured millions into the Hong Kong’s IPO and equity markets. With Lin on board, and Yao maybe opening some doors, Alexander could gain access to more opportunities in China that could further benefit the franchise financially.

“The fact that the Rocket brand is a big deal in China makes Jeremy Lin more valuable to the team,” says George Postolos, the Rockets president and CEO from 2002-2006 who now holds the same positions with the Houston Astros. “The Rockets aren’t starting from scratch. Adding Jeremy Lin to the picture is a natural extension of what they’ve done.”

And not as ridiculous as some might think.

MORE: Linsanity! Jeremy Lin Recolors The Urban Hoops Culture

34 comments
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John8b2b
John8b2b

The Rocket owner thinking big, but knick owner thinking small. he  better sale his team now, if not he will loss big , such as loss sponsors, cable TV.

cpcheung
cpcheung

Many people once looked down at and critically suspect the ability of Joe Montana when he first joined NFL.  Jeremy Lin is no exception.  However, their commonality is that both Joe Montana and Jeremy Lin play with immediate and holistic wisdom, not just physical skills; and also play with leadership helping the entire team, not by selfish shooting and scoring for yourself alone.  That is the truly exciting part of NBA and NFL games !  Both Joe Montana and Jeremy Lin transcend the physical games into intellectual games from the individual savage contests to team smart strategies !

cpcheung
cpcheung

Jason Kidd pulled Lin's hair from behind during the game last year (see Youtube slow motion) and Lin fell heavily with his head abruptly backward down to hit the floor and it took Lin for a long minute lying on the floor before he could get up slowly.  From now on, we worry about Lin's safety in the court.  Rockets should have some big guys to be ready to protect him in each game, especially in the games against Knicks next year. 

Fei Hoong Wong
Fei Hoong Wong

 Yeah, them americunts are sore losers, I agree.

Jamjourn
Jamjourn

What, exactly, is a Vigger?

Wally
Wally

1. If Linasanity can improve occupation rate from current 85% to 90%, that is about $58,000 extra per game, or $5 million extra in regular season (assume average $65/ticket).

2. Knicks boosted by 70% last season due to Linasanity. Let us assume that Rockets only boost ticket price by 20% next season.  That is $20.1 million for regular season.

3. If Rockets enter playoff, that 5 minimum game income is extra $10 million.

4. Courtside ad: 1.2 million.

5. Broadcast income unkown.

6. Jercy and other item sales, neglected.

So Linsanity's contribution to Rockets bottom line is some where from $20 million to $36 million. 

Jon Jacobson
Jon Jacobson

It's not racist -- it's the truth.  The Rockets have lacked a definitive face of the team since the departure (and injuries prior to the departure) of Yao Ming, and bringing in Jeremy Lin will garner support from a lot of the same people who bought Yao jerseys

The contract is incredibly steep, but still the Knicks should have tried harder to keep him... Felton and Kidd won't get it done for them.

http://www.sportsfanhood.com/2...

kenrenden
kenrenden

I have not done much in my life so when i see people become successful and rich it makes me angry. Lin u suck and hope you have a sucky career.

Iamlazyihatelin
Iamlazyihatelin

 haha. so true. i hate lin so much because he shows my laziness..

Fei Hoong Wong
Fei Hoong Wong

I wanna hear why the ucking-f haters/racists (esp. them /Viggers like Stephen A. ) don't say nuthin' about the recent "ridiculous" contract that the Sixers gave to that piece of crap former #1 pick Kwame Brown. Why, coz he's a fellow /Vigger, u ucking-f hypocrites ain't gonna say nuthin' , ya dumb ucks-F !!!

Nickcannon
Nickcannon

Shiii.....my wife was about to do an interview w/ ESPN to battle it out. 

GBgreat88
GBgreat88

How's Mariah, does she support your answer?

Cannonisgreat
Cannonisgreat

Thanks Amy for two letter sum it up. For the rest of you people, that's why they play the games. I see couch potatoes will rise up and boast they week comments justify negative postings.... All I can say is good luck Lin....prove haters wrong so they can hopefully learn something here. I'm sure as always they will back peddle or powder coat their statements after Lin puts up numbers that will shut haters up...

ya boy Nick Cannon 

Basketball
Basketball

Jerry Stackhouse is jealous as so-so vete who never made much money because he's not that good. Shame on him. At least do your homework and make enough research before open your big dirty mouth. read article like this. Anybody who left Knicks don't root for Nets. They're jealous and stupid too. 

Basketball
Basketball

yes, you did your research。 Unlike Stephen A Smith, the big idiotic mouth, just  create rumors and copies the big money or spread his biased stupid opinion on the price of hurting Lin's reputation. He's ruthless, dishonest, stupid and vicious. I suggest people boycott his stupid TV program and radio appearance. He never did enough research, never had a level head, he constantly accused players for shocking effect... it's OK that he thinks Lin's not a good player... but He thought he got some insider news from the big boss Dolan, then he accused Lin not risking re-injury like D. Rose or Baron at 85% knee, he accused Lin having big head not appreciate Knicks giving him a chance, he accused Lin just want more money.... He is a vicious annoying stupid mouth! Knicks didn't handle Lin's free agency fairly, decently. MSG stocks deserves to go down hill. Anybody who has MSG should worry about investing an idiotic owner who never made the right decision for Knicks. You should sell your stock and save further loss. 

Amy Cushing
Amy Cushing

M...er f...er racist! If Lin is black or white he can still get a similar pay check and probably much bigger. Whenever an Asian get something someone just get so sour. 

Ted Striker
Ted Striker

Sorry but I'm not seeing the racism, I am seeing some big chips on people's shoulders though.

Jen W
Jen W

You are definitely right about that Amy!  So many people are jealous and so many haters out there.  Why can they just be happy for him?  I am a Lin supporter for life!  So proud of him!  So glad that he doesn't have to play with Carmelo and under Woodson.  Go Rockets!

Lumpsum
Lumpsum

Amy...you're RIGHT ON.

I know others ... But it's just a dark secret.

Thanks for saying IT!

Hans
Hans

 LOL Amy

Whosjohnny
Whosjohnny

Love you Amy. A million thumbs up.

mmontgomery5
mmontgomery5

As a resident of Houston, there in NO Linsanity here.

Blackie Chan
Blackie Chan

Not yet, but there will be, he will win over Houstonians with  his passionate play and humble personality. Let's see ... who on the Houston Texans are like that ?

Whosjohnny
Whosjohnny

Dumb ass. All my Houston friends crazy about Lin. A poll showed over 88% support, you must be minority racist OR ignorant.

Amy Cushing
Amy Cushing

Do you know what is Linsanity? Moron.

Jamelle
Jamelle

great article, very informative, now ima Rocket fan! and Brooklyn too! LOL

Wbe1996
Wbe1996

Linsanity is over just like his basketball career

Amy Cushing
Amy Cushing

Lin has heard this type of words many times and he has always overcome. That is a big reason for Linsanity. All racists go to hell!

Some Fan
Some Fan

 LoL, big words from a 16 year old. =). Don't know if you heard this, but he's also one of the hardest working NBA player in the league. You know what they say about hard workers right? They go far...

Yacko
Yacko

The key here is that the Rockets want players with a work ethic, even if they are not the most talented or athletic. I assume Houston has some plan to help Lin with his on court deficiencies and when you have a player willing to cooperate and learn, he may get better.

Unlike NY which seems to dive and not thrive with showboat egos. A DWI within a week of becoming a Knick? Carmelo doesn't like to be one-upped, I wonder what crazy stunt he has up his sleeve?

rory2012
rory2012

 Why you said this? Is it because he is an Asian or he slept with your mum?