On average, an NBA team by today’s figures is worth a whopping $1.1 billion. According to NBA Team Owner Bruce Levenson on prnewswire, this is by all accounts massive but when considering that this was a rise of 74% as compared to the year before, minds start exploding. But what makes these teams so valuable? To the extent of such growth percentages, non-comparable to the other three major US sports leagues.
Basketball has millions of fans worldwide. This and their loyalty to the game too is what makes them so valuable. There is always significant money streaming in from various sources. This making the team’s valuation skyrocket.
One of these primary sources has got to be viewership deals. The NBA National TV contract with ESPN/ABC and Turner which earns each team in the series some cool $30 million each annually. Other than this, the teams are free to negotiate third party deals with other broadcasters. The more marketable a team is, the sweeter the deal is. Currently, the most candied of these deals being that between the LA Lakers and Time Warner Cable is worth at least $150 million per season.
Endorsement deals also bring in serious cash to the teams. This because these firms want to be associated with the teams as their fans are potential markets for their products. To these end, the Fortune 500 companies pay top dollar to be endorsed by basketball teams in the NBA.
Also, nowadays these teams are more than just toys for the super-rich. The new collective bargaining agreement between the players through their union, and the NBA owners cut salaries by over $280 million per annum. This represents a $2.8 billion savings, minimum for the league’s owners. On average $93 million per team. These is a very healthy margin that will undoubtedly increase profitability/chances of among all basketball teams.
However, they remain toys for the dollar billionaires who are also enthusiasts of the sport. As a tool to flaunt once affluence, they certainly could do no better than a team in the NBA. Case in point, during the Lockout of 2011, the league halted for months, fans being deprived of the sport and billions in revenue being lost, but the handful of owners had their way against every other stakeholder in the sport.
The nature through which these teams are sold also encourages these sky-high valuations. These transactions frequently involve competitive bidding, with deadlines for bid submissions being set. With the buyers involved and the money they bring to the table, it’s little wonder the shelf price for one of these is a billion. Give or take.
The recent acquisitions drive this point home. The Owners of Atlanta Hawks were recently working on a deal to sell the team to a group of investors led by Antony Ressler. The acquisition price being $850 million. That the new owners are looking to attract money from the local Fortune 500 companies, as well as reputable sports economists agreeing that it was a fair valuation indicates that indeed investment was worthwhile.