Today, Explained - Did China just dunk on the NBA?

Episode Date: October 11, 2019

An NBA executive’s tweet supporting protests in Hong Kong has exposed how vulnerable the biggest American companies are to China. Learn more about your ad choices. Visit podcastchoices.com/adchoices

It's been a while since I've said this on the show, but all the more reason to provide a fall reminder that you should be brushing your teeth once, twice, maybe thrice a day, and you can do so with the Quip electric toothbrush. The Quip starts at just $25, and you will get your first refills for free at getquip.com slash explained. You probably don't watch South Park anymore. Whatever! I do what I want!

All right, Cartman, all right. South Park is still going strong. It's in its 23rd season of profane satire, and the show's creators, Trey Parker and Matt Stone, have evidently learned how to make fun of the future. Last week's episode lambasted American companies that live in fear of the Chinese government. Google.

Hey, Mitchell, you're on this flight? Yeah, that's so funny. I'm working for Google now, overseeing the expansions into the Chinese user base. The NBA. He had still with the NBA, doing some press with the players to try to get more Chinese viewers. Even Mickey Mouse himself. You're telling me that I'm losing Chinese customers because of some shithead that's not even from my company. Just a few days after this episode aired, something just like this began to play out in real life.

Well, it began on Friday with Rockets General Manager Daryl Morey putting out a tweet that was an image that expressed support for the Hong Kong freedom movement. The controversy began when the Rockets' Maury fired off this tweet, fight for freedom, stand with Hong Kong. That statement of support for pro-democracy protesters was seen as an affront to the team's Chinese fan base. The tweet was quickly deleted, but the damage, it was already done. Tillman Fertitta, the owner of the Houston Rockets, distanced the Rockets very quickly. The team's owner tweeting, Maury does not speak for the Houston Rockets. China reacted strongly. They condemned Darrell's comments.

China's Consulate General in, urged the team to clarify and immediately correct the mistakes in his statement on Sunday. You know, across the NBA, there was sort of shock at just how big a story this had become. And now we have

a geopolitical incident that was effectively sparked with one tweet. Chris Mannix, you've been covering this story for Sports Illustrated. Do you have any idea why Daryl Morey tweeted support for Hong Kong all of a sudden? No, I've known Daryl Morey for a long time. He's an incredibly smart guy. I don't know what was the impetus for the

tweet. And it's interesting that he would do that just because Daryl's been the GM of the Rockets for a long time. And Daryl knows full well the influence of the Rockets and the NBA on China. I mean, Daryl is the GM of a team that was the home of Yao Ming, one of the biggest international stars ever. So he knows exactly what kind of effect this is going to have. And he went out there and did it all the same. Aside from China getting angry, have there been any consequences for the NBA? Well, Tencent, which has a long standing deal with the NBA, they stream the majority of the NBA games. They're responsible for the close to 500 million viewers that are watching NBA basketball in China. They announced that they will stop showing Houston Rockets games. The Chinese Basketball Association, which ironically is run by Yao Ming at this point, they said that they were cutting ties with the Houston Rockets.

Sponsors affiliated with China pulled away from the Rockets. So anything Chinese effectively severed their ties with the Rockets in a very short period of time. OK, so China got mad. The Rockets owner tried to sweep it under the rug. I saw Rockets players trying to deal with this. James Harden was like, yeah, we apologize. You know, we love China. We love playing there. You know, we appreciate China. We love, you know, playing there.

You know, we appreciate the support that they give us individually and as an organization. So, you know, we love you. But how did the NBA itself react? Well, the NBA's reaction wasn't great. We read part of the NBA statement saying, we recognize that the views expressed

by Houston Rockets general manager Daryl Morey have deeply offended many of our friends and fans in China, which is regrettable. Really? This is supposed to be the woke league. They did say in that kind of word salad of a statement that Daryl had the right to say anything he wanted, but they said that he had the right to say anything educated on the matter. And that rang a little hollow with some people. So it wasn't a very strong statement. And the NBA faced pretty swift backlash.

Senator Ted Cruz, Texas Republican, said the NBA is, quote, shamefully retreating in pursuit of big money. Democratic presidential candidate Julian Castro says the U.S. shouldn't allow American citizens to be bullied by an authoritarian government. Did they walk it back? Yeah, the NBA walked that statement back very quickly.

And, you know, Adam Silver, who was over in Asia anyway, as part of these international games that are taking place right now, he made a much more forceful statement, and a statement that, frankly, better reflects, I think, what the NBA really stands for. The long-held values of the NBA are to support freedom of expression and certainly freedom of expression by members of the NBA community. And in this case, Daryl Morey, as the general manager of the Houston Rockets, enjoys that right as one of our employees.

I understand that there are consequences from that exercise of, in essence, his freedom of speech. And, you know, we will have to live with those consequences. I mean, the NBA coaches like Steve Kerr and Greg Popovich take strong positions on domestic issues. Greg Popovich was once quoted calling Donald Trump a soulless coward. I wonder what the people think about who voted for him, where their line is, how much they can take, where does the morality and the decency kick in. The NBA didn't have anything to say on that publicly. So the NBA really can't take a position on Daryl Morey saying what he said publicly.

So the NBA, after initially kind of bungling their reaction, they recovered pretty quickly and put out a statement that I think better reflects their positions. How are the NBA statements perceived in China? It seems like anything short of Daryl Morey being fired and his comments being disavowed is not going to satisfy the Chinese government, the Chinese Basketball Association, or anybody that might be involved with this story. They came out with some statements of their own saying they disagreed with the NBA's position on this, but the NBA has stood pretty firm, and that's really all they can do at this point. There's a good chance that the NBA loses some money as a result

of this, but in the grand scheme of things, the NBA doesn't need that money to survive. So it's a bad situation that the NBA would like no part of, but it doesn't really affect their bottom line. So who needs who more here? Does the NBA need China more? Does China need the NBA more? I would argue that China needs the NBA more than the NBA needs China. I mean, China can't walk back decades of NBA basketball being introduced to its population of more than a billion people. The NBA proudly touts the number of people that play basketball in China. It's north people. The NBA proudly touts the number of people that play basketball in China.

It's north of 300 million. They talk about the number of people that watch basketball in China. It's just under 500 million. About 21 million people watch game six of the NBA finals this past year. That's an astronomical number, even for a domestic viewership.

You can't just take that away from people and not expect people to want it back. There really isn't an alternative in China. They have the Chinese Basketball Association, but it's nowhere near the level of basketball that the NBA plays on. These stars from the NBA, from LeBron James to James Harden to Steph Curry, they are close to household names in China. People buy their sneakers, they wear their jerseys, but it's still unclear exactly how far China's willing to take this. Do you think right now the NBA is regretting how open it is on speech? I mean, the NBA has proudly empowered its players to speak up, to be political. LeBron's spoken up a lot on race. Steph Curry and some of the other Warriors have spoken

out against Trump. Coaches give political speeches. Can the NBA walk that back when it comes to China, when it's so encouraged here? No, the NBA can't walk any of this back and they have to live with situations like this. They simply can't turn around and create new policy that says players can't speak on political issues or social issues. And frankly, I don't believe the NBA would do that. The NBA as an organization has established itself as a progressive one. You know, it was just back in 2016 when the NBA pulled an All-Star game out of Charlotte because the league disagreed with the North Carolina bathroom bill. They've positioned themselves as a league willing to take stands on these types of things.

Frankly, I think the NBA relishes the attention that its players get for taking stands on issues like this. So behind the scenes, maybe there are some conversations taking place, some reminders about just how much money is being brought in in foreign markets. But overall, the NBA is not going to stop anyone from saying anything about any particular issue. Chris Mannix is a senior writer at Sports Illustrated. This whole NBA thing is actually part of a much bigger plan that was hatched like a few decades ago

for the U.S. to bring businesses over to China to help foster democracy. But it looks like it might be going the other way. That's in a minute on Today Explained. I've been making the show from New York City for the past couple of days. I've been up in New York without my regular toothpaste that I keep at home. Brought some travel toothpaste and ran out of the first tube and then thought the second tube was my backup, but then realized that like it's some like funky organic toothpaste that like just straight up dried out. So I don't have toothpaste right now. And this is just one of the many benefits of the Quip electric toothbrush. Not only do they send you a new brush head every three months, but they send you

new toothpaste and a new battery for your toothbrush. In addition to that, the Quip has these 30 second pulses that ensure an even clean. They've got sensitive vibrations that ask you how your day went and have a built in timer that guides gentle brushing for the dentist recommended two minutes. There's all sorts of benefits to the Quip. Come on, get real. Go to getquip.com slash explained. You get your first refills for free. The Quip starts at just $25. And if you go to getquip.com slash explained, you can support the studio, but also at the Open Markets Institute. The NBA's development in China has not occurred in a vacuum, right?

How long has the United States had this kind of broad business outreach to China? Well, it started with Nixon reestablishing formal diplomatic ties in the 1970s, but the real trading relationship was developed in the early 1990s, largely by the Clinton administration. The United States has a huge stake in the continued emergence of China in a way that is open economically and stable politically. And then it accelerated in 1995 with the creation of the World Trade Organization. I think it would be a very good thing for the world and a very good thing for the Chinese.

China won the WTO. And then it accelerated once again when China became a permanent member of the WTO in 2001. And did like Bill Clinton not mind that, you know, China was undemocratic, an autocracy? Well, it was an interesting question. So Clinton was elected right after Tiananmen Square, and there were a bunch of discussions among American strategists about what to do. And what Clinton settled on was a strategy that I guess is called engagement. What Clinton posited was that if America trades with other countries, even if they're autocratic, that trade will tend to create more democracy or economic liberty in that country.

The question is not whether we approve or disapprove of China's practices. The question is, what's the smartest thing to do to improve these practices? So if we opened up China, especially to the internet, China would become more democratic. As it turns out, what has happened is that China has exported autocracy to us. But the original intent was to actually open up the country and create a more sort of stable international order. So the idea was China is going to become more democratic once we expose them to our capitalism. And that didn't really work out. Right. I mean, you remember Thomas Friedman used to say, you know, two countries that each have McDonald's have never fought a war with each other. So there were a whole bunch of thinkers who kind of said at the end of the Cold War, America won. We are the sole dominant superpower.

All we got to do is make sure that everybody has Xboxes and McDonald's and Microsoft. End of history. Finished. Peace and prosperity forever. What ended up happening is corporate executives at the behest of the Clinton administration and then the Bush administration and then Obama administration ended up exporting a lot of factories or production facilities to China and also created enormous dependencies on China for American and actually global production of all sorts of important goods and things that now we can actually only get in China. That was the consequence of those policy choices. Which I guess brings us to the NBA. We heard from Chris in the first half of the show that the NBA isn't exactly dependent on money from China.

But there are a ton of companies that are, right? Yeah. So you've got Apple, for example. Apple is, you know, they make all their pretty much all their iPhones and massive amounts of equipment in China. And that's true for a lot of high-tech electronics companies. The NBA thing is actually sort of the second stage of this dependency because now we're not just dependent on China for lots of production. Our corporations, in many cases, are actually dependent upon the Chinese market for export. We make a lot of things and services, And in this case, we make entertainment and companies, especially companies like Disney. But increasingly, institutions like the NBA are actually dependent upon China to sell things there.

And that gives China leverage in other ways. And that's what we're seeing with the NBA right now. That's interesting. I mean, we talked about the NBA up top and you just mentioned Apple. And I think most people are aware that their iPhones or iPads or laptops are assembled in China. But what about Disney? What's Disney up to in China? Well, Disney has theme parks there. But also, in 2015, the US government wrote a report about how Chinese censors increasingly control Hollywood. And the reason is because the Chinese movie market is so important that Hollywood will actually preemptively censor their own movies in the

hopes that they can get those movies into China. It's why you haven't seen any Chinese villains. It's why you don't see discussions on a lot of different media companies about what's going on in China or what's going on in Hong Kong. And in the case of Disney, which owns ESPN, there's actually internal censorship, or this was just reported, that ESPN will not talk about Hong Kong or Chinese politics. And it's because Disney is pretty dependent upon China. I know it's crazy, right? ESPN told China they wouldn't talk about Hong Kong?

Or they're preemptively just deciding we're not going to allow discussion of Chinese politics. And also, by the way, it's not just Hong Kong. There are about a million Uyghurs, which is a Muslim minority, that are in concentration camps in China. And there's actually an NBA practice facility near there. Wow. Yeah. We've covered that on the show, but minus the NBA practice facility. Wow. I didn't

know that. Yeah. Well, some of it is just overt, like where the Chinese are just saying, you know, don't allow your employee to say what he wants. And you haven't just seen this with the NBA. You know, you've seen it with Marriott. You've seen it with the Gap. You've seen it with a whole bunch of different companies. You just haven't noticed until now. But the other piece is just the preemptive self-censorship that takes place when you are trying to get into a market like China. And that's what you might be seeing with ESPN. It isn't necessarily the case that the Chinese told Disney to censor ESPN. It might be that Disney executives are preemptively doing it to avoid losing their market share in China. How does that compare to what we're seeing with South Park,

which I mentioned at the top of the show? So South Park had this amazing episode. It was just so funny. They had one of the characters go to China to try to sell legal weed there. I've been trying to figure out how to make more money selling weed. And last night it came to me.

We could grow the family business by selling Tegrity to the Chinese. At the same time as they had Chinese censors censoring what the kids in South Park were trying to say and write. Oh, oh, oh, yeah. No, no, we don't want to go there. Talking about the Dalai Lama doesn't go over well with the Chinese. And one of the main characters was like a foul-mouthed Mickey Mouse who was screaming at all the other Disney and Marvel characters to get in line. And then immediately China took all of South Park episodes and clips off of their internet so that the show didn't exist. And then the South Park creators released a fake apology.

Here it goes. Like the NBA, we welcome the Chinese censors into our homes and into our hearts. We too love money more than freedom and democracy. Long live the great Communist Party of China. We good now, China? They then did a follow-up where they said, OK, OK, no more selling to the Chinese. Then say it. Say, fuck the Chinese government. Fuck the Chinese government. I didn't hear you. Fuck the Chinese government there. You know, they're doing a series of episodes that are just making fun of China, but also, and I think the bigger target, American supplicants to China.

So the NBA and more importantly, Disney. So it sounds like on one end of the spectrum, you have a company like Disney. On the other, you have like Matt Stone and Trey Parker, the creators of South Park, who feel, you know, that they have the license to do whatever they want. And what the NBA sort of fall somewhere in between here? Yeah, that's right. So the NBA makes a lot of money from China and basketball is really popular in China. But really, China is more of the market of the future for the NBA. So they understand that it's 1.4 billion people. It's going to be the biggest economy in the world in a few years. So they get that that is where the future growth is. And for the last 15 or 20 years, So they get that that is where the future growth is.

And for the last 15 or 20 years, investors would kind of say, what's your China strategy? About five or six years ago, corporate America started complaining because the Chinese government was bullying them more and more and more and more, but they didn't want to give up the lucrative Chinese market or their Chinese production facilities. What you're seeing with the NBA now is finally there's a kind of a breaking point where it's like, okay, we now need a China strategy. And that China strategy is not going to be how can we get into the Chinese market? It's how can we reduce the dependencies that we have on China? And that's most extreme with a company with Apple. That company is super exposed to China, both on the consumer side and on the production side. So what we did in the 1990s is probably one of the most significant strategic mistakes in U.S. history.

It's not just the NBA. Let me just put it that way. We shipped missile technology over to China. We basically shipped massive amounts of know-how. They're a very, very powerful country, not entirely because of U.S. policy, but in country, not entirely because of U.S. policy, but in a lot of ways because of U.S. policy. And it is catastrophic. And we have structured a world that looks a lot more like the 1930s with kind of autocracies and sort of weak democracies

sort of battling ideologically and potentially militarily over the values of the global order. I mean, that's where we are. It's extremely serious. And if we do nothing? Well, then what will happen is our sovereign power will just evaporate, and we will become vassals of China. We will become governed by Chinese norms. In most cases, we won't really notice.

But over time, what we'll see is that situations like the NBA or maybe even, you know, shipping things and wanting to say certain things, you know, you just won't be able to do that. And we will lose our liberty as citizens. Matt Stoller has a book. It's called Goliath, the Hundred-Year War Between Monopoly, Power, and Democracy. I'm Sean Ramos for IMAVA Podcast. It's called Today Explained. Irene Noguchi is the executive producer. Afim Shapiro is the engineer. Bridget McCarthy produces.

Halima Shah produces two. And Amina Alsadi produces nine. Noam Hassenfeld produces and also makes music. The rest of the jams come from the mysterious Breakmaster Cylinder. We had extra help this week from Jelani Carter and Lee Zhou. Today Explained is produced in association with Stitcher, and we are part of the Vox Media Podcast Network. Thanks to the brushers over at the Quip Electric Toothbrush Company for supporting today's Explained Today.

One last reminder before we go for the day that the Quip Electric Toothbrush Company for supporting today's Explained Today. One last reminder before we go for the day that the Quip starts at just $25 and you'll get your first refills for free at getquip.com slash explained. That's getquip.com slash explained.