The NBA is thriving!
Just three years removed from a time when we were all seduced by claims of poverty from owners facing supposed losses that were mounting so quickly and so heavily that they forced a nasty lockout that nearly cost us the entire 2011-12 NBA season, we’ve entered into a period of unprecedented success for a league which has never been stronger.
Profits are soaring.
Just about every team in the NBA that wants to be profitable can now be profitable, and without taking drastic Jeffrey-Loria-like actions that adversely affect their fan bases in doing so (here’s to you, Miguel Cabrera!).(1) Teams aren’t just profitable; they’re wildly profitable. The league as a whole projects to generate roughly $300 million in basketball profit this year. More than half of the league’s teams should produce eight-figure profits. One or two could touch $100 million!
Rising profitability means rising team valuations.
Just last year, the Maloof family sold a 65% stake in the Sacramento Kings along with Sleep Train Arena to a group led by tech entrepreneur Vivek Ranadive at an all-time record valuation of $534 million, despite the team playing in one of the league’s smallest markets. And that was after owners blocked the Maloofs’ agreement with investor Chris Hansen to buy and relocate the Kings to Seattle at a total franchise valuation of $625 million.
That all-time record valuation was eclipsed earlier this month, when Herb Kohl sold the Milwaukee Bucks, widely considering the least valuable team in the league, to hedge-fund billionaires Wesley Edens and Marc Lasry for $550 million (without an accompanying arena), a price which would likely have been significantly higher had Kohl, who paid just $18 million for the team in 1985, not required as a condition to the sale that the team remain in the city and with the fans of Milwaukee. It was a stunning amount for the Bucks, who are universally regarded as having the worst financial situation of any NBA team. And yet, Dallas Mavericks owner Mark Cuban called the purchase price a bargain, suggesting that even the least valuable NBA franchises are truly worth more than $1 billion.
That newly-minted all-time record valuation is about to get shattered. The impending forced sale of the Los Angeles Clippers, who play in the second largest market in the NBA, is about to multiply the current record times four! Former Microsoft executive Steve Ballmer has agreed to buy the team for a whopping $2 billion! That’s the second highest price ever paid for any professional sports franchise. The Dodgers baseball team, also of Los Angeles, were sold to the Guggenheim Group for $2.15 billion in 2012, but that price included land, parking lots and TV deals. The only real estate involved in the Clippers deal is for their training facility in Playa Vista. So, not a bad return on a $12.5 million investment by Donald Sterling in 1981. The deal has been submitted to the league for final approval.
Why the massive change? Read more…