The Los Angeles Rams have a chance to secure their spot in Super Bowl LVI in January, and at the biggest tv event in the U.S. comes with a chance to launch business in one of the NFL’s most prized markets. But the chance to tap into China, the world’s most populous country, brings unique challenges and uncertain costs.
Earlier this month, the league awarded the Rams exclusive merchandising and sponsorship rights in three international countries: Mexico, Australia and China. The home marketing area (HMA) license allows the Rams (and 17 other teams) to create commercial opportunities to boost fan engagement through in-person and digital marketing in their designations.
While all three markets present unique investment opportunities, China is the most intriguing, because it offers great potential and equally substantial pitfalls, as its authoritarian government remains at odds with the U.S. on economic, human rights and tech issues.
NFL commissioner Roger Goodell has considered the country a “priority market” in the past, but establishing business there continues to be a delicate situation. The Rams said that they’re still working on how they will activate their HMAs, of introducing an unfamiliar sport in a market more accustomed to the NBA.
“Every market is going to have different challenges on how you communicate to fans and corporations,” LA Sports Council chairman Dave Klewan said. Klewan believes the Rams’ presence in China will shine a brighter spotlight on the LA sports scene. “But you look at the amount of population there. It’s such an untapped opportunity, so you have to take the time to make sure you’re doing it right, that includes from launch to long-term plans.”
Los Angeles has the greatest Chinese population of any U.S. metro area outside of New York City. The Port of Los Angeles also connects China and the U.S. through transpacific trade. The Rams, meanwhile, already deliver content to Chinese fans via accounts with Weibo Corp. (NASDAQ: WB) and on Douyin, known in the West as TikTok, and owned by Chinese company ByteDance Ltd.
The NFL already caught heat for including Taiwan as part of mainland China in the HMA announcement, a move that was met with criticism from U.S. politicians. Business with China is fraught with peril, as the NBA as learned even before the pandemic.
Paul Argenti, a professor of corporate communications at Dartmouth’s Tuck School of Business, points to the firestorm created by NBA general manager Daryl Morey’s Hong Kong tweet in 2019 as a cautionary tale for sports leagues that get involved in China. Argenti, who has advised NFL teams, describes the chance to do business there as “a gift and a curse” that poses great reputational risk.
“You have to thread that needle,” he said. “It’s a lot harder when you’re in a consumer-facing business like the NFL. There’s tremendous third-party damage that can potentially come in and hassle you, whether it’s another team [or organization].”
Argenti is also skeptical about how the league’s politically conservative owners will handle issues, including the potential of players or media critics speaking out against the alliance with the authoritarian regime.
“It seems expensive, far-fetched and dangerous,” he added.
This isn’t the NFL’s first time examining the sport’s viability in China. There were plans to play an exhibition game there in 2007 when the ongoing International Series started but games never materialized.
With an uptick in streaming views, including on platforms like China-based service Tencent, the league says that it now has more than 40 million fans in China. It’s unclear how much the Rams will spend to engage fans there over the next five years. But you can add them to the list of major entities and properties interested in doing business there, despite strained government relations.
Time will tell if the league’s financial benefits of pairing with the world’s second largest economy will outweigh the potential political backlash.
American-Chinese CEO Society (ACCS) president Robert Sun believes involvement from NFL teams—especially one based in Los Angeles where China has heavy investments—can potentially help ease the tension between the powerhouses.
“A cultural exchange can help better the relationship,” he said. “Chinese coming to play there and Americans playing in China will create a better understanding. There’s mutual benefits.”