AEG and NBA formed a partnership back in May of 2008 announcing their plans to build a dozen top of the line stadiums around China. Today, that plan saw its first major victory by selling the naming rights of their soon to be completed Shanghai Arena for around 100 million dollars.

The 18,000 seat arena being built at Shanghai’s World Expo Site is  still underway, being currently jointly built by partners AEG and NBA as well as the Oriental Pearl Group (of the Shanghai Media Group). The $280 million stadium is being constructed around the Huangpu River and will have a look reminiscing a clam or a flying saucer, depending on personal taste. A glimspe of what the arena will look like can be seen in the artist rendering displayed below .

Shanghai Mercedes Benz Arena

In what is considered a first in China – the NBA and AEG have managed to sell the naming rights of this arena for an estimated value of ~$100 million (terms of the deal have not been announced and analysts estimate anywhere from 75-150$ million dollars)  to German luxury car maker Mercedes-Benz. The stadium will be ready in time for the 2010 expo set to begin in May, but the deal and naming of the stadium will only begin in 2011 and last a total of 10 years. To put the price in perspective, Staples had to pay $100 million for the rights to name the arena where the prestigious Los Angeles Lakers play along with the Los Angeles Clippers and Los Angeles Kings (NHL) for a contract lasting 20 years.

Shanghai is considered by some as the capital of Asia, and the business center of the soon to be superpower of the world. Many companies were interested in placing their name on Shanghai’s number one arena to be, but it took a company of Mercedes’ size, ambition and growth prospects (55% growth in China in first 9 months of 2009) in China to get such an astronomical figure. Analysts predict that it will be near impossible for Mercedes-Benz to get adequate returns on this investment (even with a showroom for its cars, and exlusive rights relating to the Arena) but according to Mercedes-Benz China CEO Klaus Maier, this deal is about more than that:

“The new Mercedes-Benz Arena will reinforce Shanghai as culturally-rich city on the world map and create a new destination of arts and lifestyle on the international stage.”

Tim Chen, NBA China CEO, also agrees:

“Mercedes-Benz Arena will truly become Shanghai’ s and all of China’ s state-of-the-art showplace for culture, arts, sports and entertainment events when this world-class arena debuts. With the help of our partners, we are certain this arena will be the premier destination for sports, entertainment and cultural events in Shanghai.”

In essence, the above claims are more than just PR jargon and hold some valid and important claims. China is still a hugely undevelopped market in terms of entertainment, arts, lifestyle and sports. It’s a country with rich culture and much to offer on the grandest of stages (as was demonstarted in the Beijing 2008 Opening Ceremony), but so far a lack of business experience, logistical capabilities, and market know-how have kept this potentially enormous market dormant. The NBA and AEG were well aware of these limitations when commiting to build world class arenas all around China, and they stepped in trying to change that course. Basketball was the main factor in pushing such a project, but hardly the only factor.

Already, companies involved with the deal have said the arena will include recreational elements such as a cinema, public ice skating rink, bowling alley, live music club and retail space. Top performers from all four corners of arts and entertainment world have already started flocking to the Pearl of the Orient – and the arena will only attract more. Shanghai is a metropolis in dire need of commercialization and proper marketing of cultural showcases, and Mercedes-Benz have acquired the rights to be in the same sentence of every conversation we will have about this booming market in the next decade.

Putting aside Mercedes-Benz and the new arena, this is no doubt a tremendous development for the sports business in China. While there have been previous namings of stadiums in China after sponsors (most notably the Chinese Super League football team Shaanxi Neo-China Chanba playing in the Shaanxi Coca-Cola Stadium), it is the first major arena to sell naming rights. The sports marketing field never managed to develop as rapidly as predicted following the Beijing Olympics, but this development is sure to give new hope and inspiration to those in the industry.