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Assessing the financial impact from the China fallout on the Houston Rockets

This article was originally posted for Red94.net on October 29th, 2019.

By now, everyone is aware of geopolitical firestorm created by Daryl Morey’s tweet supporting the Hong Kong protests. I won’t rehash the events, as they have already been covered extensively by every media publication around the world. I completely support Daryl on the basis of his right to express freedom of speech, and certainly abhor the strong-arm tactics China employed in trying to have Morey fired. Still, the financial impact on the Houston Rockets and NBA from the “tweet read around the world” is not insignificant.

Many people could scoff at the Houston Chronicle’s estimate, with the general line of thinking being if Mr. Fertitta can afford to pay $2.2bn for the team, what’s $10-25 million? But one has to consider the drop in valuation and leverage Mr. Fertitta utilized to purchase the team.

It is no secret that the Rockets have been China’s most popular team since they selected Yao Ming as the #1 draft pick in 2002. Up until this 2019-2020 season, the Rockets donned alternate jerseys that paid respect to the Chinese market rather than their hometown. The team has also played in China three times and hosts the Shanghai Sharks annually at Toyota Center during the preseason. Further, the team has had longstanding sponsorships with several Chinese brands, including sports apparel company Li-Ning, bitcoin mining company Antpool, Shanghai Pudong Development Bank, and, most importantly, media conglomerate Tencent, for which the NBA just enacted a $1.5 billion five-year partnership to stream games in China. So when these Chinese businesses suspended ties with the Rockets, one begins to understand what is at financial stake for the team.