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Report: China fallout could cost Rockets $10 million to $25 million

RocketsWire logo RocketsWire 10/9/2019 Ben DuBose

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The backlash from Chinese organizations in the wake of GM Daryl Morey's now infamous Hong Kong tweet could cost the Houston Rockets between $10 million and $25 million, according to the Houston Chronicle's Jonathan Feigen.

In his story examining the financial consequences, Feigen writes:

The fallout could cost the Rockets between $10 million and $25 million, as well as American jobs in China, a person with knowledge of the situation said. The team has long been tight-lipped about the value of their Chinese business, but in recent years the franchise has typically partnered with five to seven Chinese companies with additional multinational companies seeking relationships with the Rockets to expand their brand into China.

"There is no doubt, the economic impact is already clear," NBA commissioner Adam Silver said earlier this week. "There have already been fairly dramatic consequences from that tweet."

Financially, a connection to China is also useful for the personal brands and endorsements of NBA players, which may have given the Rockets an advantage in their recruitment of star players over the last few seasons. For example, in Houston's free agency meeting with Dwight Howard in July 2013, former Rockets big man Yao Ming reportedly called in from China to assist in the presentation. Howard, of course, signed with the Rockets several days later.

It remains to be seen if any of China's moves are permanent. On Monday, Rockets superstar James Harden attempted to mend fences with an apology to Chinese fans for the team's involvement in the controversy. Harden typically travels to China at least once per NBA offseason for endorsement purposes and to promote his brands.

The controversy all began early Saturday in Japan, when Morey tweeted an image in apparent support of a Hong Kong protest mopvement. The situation then escalated Sunday, when a number of Chinese sponsors and organizations suspended their ties with the Rockets over Morey's comments.

Then, on Tuesday, the scope of the backlash moved beyond just the Rockets and extended to the NBA as a whole. The expanded scope is critical for the Rockets, because it would put them at much less of a competitive revenue disadvantage relative to other teams than if the boycott was solely aimed at Houston.

The Rockets would still feel a disproportionately higher impact, if any boycott holds, because Houston has had a higher percentage of Chinese fans and revenues than most NBA teams since drafting Yao No. 1 overall in the 2002 NBA Draft. But if all teams are affected, at least to some degree, that's a far better scenario by comparison for the Rockets than what appeared to be the case earlier in the week.

According to ESPN's Rachel Nichols, Silver is seeking to meet with Yao regarding the situation. Yao is currently president of the Chinese Basketball Association, which is one of the groups to have cut ties with the Rockets following Morey's tweet.

But even with the consequences becoming more clear, Silver says he stands by Morey's rights to freedom of expression. "If those are the consequences of us adhering to our values, I still feel it's very, very important to adhere to those values," Silver said Tuesday.

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