These are boom times for sports in China. An increased national focus on health and fitness is coinciding with a big increase in entertainment consumption. The State Council has set a goal of making the sports industry a 5 trillion yuan ($750 billion) sector by 2025.
So stadiums and fields are being built, European soccer teams are being purchased and Adidas is opening stores as fast as possible. Sportswear has become fashionable attire in China this year.
Against this backdrop, baseball is playing a long game to become a major spectator sport in China. While America's favorite pastime has long been all but ignored in the world's most populous nation, this may finally be changing. Major League Baseball, the U.S. professional league, has been quietly and patiently making all the right moves in China.
The National Basketball Association is really the model for sports success in China. It is wildly popular, with over 30 million regular weekly viewers and more than 200 million tuning in for big games. Even President Xi Jinping has said he watches the NBA in his spare time. And this for a sport that had very little presence in China prior to 1985. How basketball went from a playground and school activity to a national obsession in China is an important business question.
The NBA's success is frequently attributed to retired Chinese star Yao Ming. This is mostly incorrect. Certainly Yao was a unique phenomenon who catapulted the sport upwards but the NBA had already been in China for over 15 years before Yao joined the Houston Rockets in 2002. Michael Jordan, the Chicago Bulls and the Olympic "Dream Team" were already well known in China.
The NBA's success in China has actually been more about a clever long-term business strategy, which is what MLB appears to be replicating.
The NBA has long provided free public access to its games in China. Starting from the late 1980s state broadcaster China Central Television showed weekly game highlights that the league sent on video tape to Beijing for free. This was particularly good timing as CCTV then had little competition for viewers and Michael Jordan was becoming a big draw. The NBA has continued to provide free access since, most recently via a deal for online streaming with Tencent Holdings.
MLB has put in place a similar free mass dissemination strategy. Since around 2008, MLB games have been shown on more than 10 government TV channels, reaching over 80% of the population. Under a three-year deal signed in January, Le Sports, an affiliate of online streaming company Leshi Internet Information & Technology, is streaming 125 live games in China per season.
These are early moves in a long-term strategy. The Chinese Baseball Association was only formed in 2002 and MLB did not have a China office until 2007. According to Leon Xie, managing director of MLB China, there were then only three real baseball diamonds in all of China.
MLB is unlikely to create a phenomenon as big as Yao Ming but it is working to develop Chinese players. MLB opened its first training camp in the country in 2009, in the eastern city of Wuxi. Training centers have also opened in Changzhou and Nanjing. Some younger players have gone to the U.S. to play in elite high school leagues. In 2015, Xu Guiyuan became the first player trained in Wuxi to sign with an MLB club, joining the Baltimore Orioles.
Players at the training centers are now playing over 100 games a year and often moving directly onto Chinese university baseball teams upon graduation. The number of baseball diamonds in China has grown to over 50. And the official Chinese Baseball League, which had gone dormant, was relaunched in 2014 in partnership with property developer Hengda Lianghe Investment.
As shown by the success of the NBA's Jeremy Lin, Chinese consumers can also become very enthusiastic about Asian-American athletes. Given that baseball is popular in the U.S. and Taiwan, these could be sources for high-profile ethnic Chinese players. For example, Chinese-American Ray Chang, born in Kansas City, has been playing for minor league teams for more than a decade and is now on a team affiliated with the Cincinnati Reds.
Focus on eyeballs
Ultimately, it wasn't getting lots of people to play basketball that made the NBA successful in China and it wasn't building basketball courts. Those things all came later after hundreds of millions of Chinese were already big fans.
Basketball and the NBA were mostly something that was watched on television. By around 2005, the NBA had become an almost one-of-a-kind cross-border media vehicle. Between Yao Ming and years of free games on CCTV, the league had captured a large viewership. As a result, large Chinese and Western companies began seeing the games as a way to reach Chinese consumers and placing Chinese-language ads in places like the Houston Rockets' arena.
Western multinationals like Nike and McDonald's began partnering with the NBA as a way to expand their business in China too. Walking into a KFC or McDonald's outlet in China, you would often see NBA promotions. Nike funded basketball camps for teens. Many large companies became deeply invested in the success of the NBA in China.
Building this type of media platform and corporate team approach was a big part of the NBA's success. This will be one of the next big challenges for MLB in China.
MLB is following a long-term strategy. This will be a process of introducing baseball as media entertainment and building a following. It will likely take decades, not years. MLB held its first game in China just nine years ago, about 30 years after the NBA's local debut. But unlike virtually every other industry in China, entering late in sports is not necessarily a disadvantage. There is no limit to a sport becoming more and more popular over time.
Baseball is the third-largest sport globally, with 12% of the market by value and a high concentration in East Asia. MLB's 30 teams produced $10 billion in revenue in 2015. Since entering China almost a decade ago, the league has patiently been making the right moves. Baseball could be a surprise hit in China.
Jeffrey Towson is a professor of investment at Peking University's Guanghua School of Management and co-author of "The One Hour China Book."