Most of the NBA headlines published in recent months are not good news. Television ratings have plummeted, star players have been injured, business with China is in jeopardy thanks to a tweet from Houston Rockets general manager Daryl Morey, and in New York, the league’s biggest market, the Knicks are going through their seventh back-to-back losing season, while its owner fights with fans.
But our survey shows that the basketball business is still hot. NBA franchise values continue to rise — up 14% over the past year to an average of $2.12 billion.
For comparison purposes, the annual increase in NFL teams was 11% and in Major League Baseball 8%, with average values of US$ 2.86 billion and US$ 1.78 billion, respectively.
NBA values have risen nearly six times over the last decade. The NBA’s 30 teams generated a record $8.8 billion in revenue last season, up 10% year-over-year. That figure will rise again in the current season, with ticket sales revenues projected to increase by 8% in total. That amount will also be boosted by a new arena for Golden
State and renovations to existing arenas in Boston, Cleveland, Philadelphia and Washington. “The foundations of the NBA are still strong and the league is extremely well run,” says Sal Galatioto, president of sports finance and consulting firm Galatioto Sports Partners. “It has suffered from some obstacles, but it is still very powerful media content and the number one international sport after football.”
Most of the NBA headlines published in recent months are not good news. Television ratings have plummeted, star players have been injured, business with China is in jeopardy thanks to a tweet from Houston Rockets general manager Daryl Morey, and in New York, the league’s biggest market, the Knicks are going through their seventh back-to-back losing season, while its owner fights with fans
But our survey shows that the basketball business is still hot.
NBA franchise values continue to rise — up 14% over the past year to an average of $2.12 billion. For comparison purposes, the annual increase in NFL teams was 11% and in Major League Baseball 8%, with average values of US$ 2.86 billion and US$ 1.78 billion, respectively. NBA values have risen nearly six times over the last decade.
The NBA’s 30 teams generated a record $8.8 billion in revenue last season, up 10% year-over-year. That figure will rise again in the current season, with ticket sales revenues projected to increase by 8% in total. That amount will also be boosted by a new arena for Golden State and renovations to existing arenas in Boston, Cleveland, Philadelphia and Washington.
“The foundations of the NBA are still strong and the league is extremely well run,” says Sal Galatioto, president of sports finance and consulting firm Galatioto Sports Partners. “It has suffered from some obstacles, but it is still very powerful media content and the number one international sport after football.”
Consider two 2019 deals. Alibaba co-founder Joseph Tsai agreed to buy Brooklyn Nets for $2.35 billion in 2018, paid over three years, but fast-tracked the deal in August and added Barclays operating rights Center in a $3.3 billion deal for the team and arena.
A month later, Michael Jordan announced plans to sell about 20% of the Charlotte Hornets to Gabe Plotkin and Daniel Sundheim. The deal valued the team at $1.5 billion, up from $175 million in 2010 when Jordan bought majority control of the club. Non-basketball factors are also at play. With the S&P 500 up 80% over the past five years, NBA teams remain a diversification option for those looking to reduce their equity holdings.
High stock market valuations helped boost team prices.
Buying a team can also be a huge tax relief, as tax law often requires that a company’s purchase value allocated to intangibles (generally the vast majority of sports team acquisitions) be amortized over 15 years. Such deductions may offset other taxable income.
According to our survey, the moribund New York Knicks appear in 1st place ($4.6 billion) for the fifth straight year, up 15%, followed by the Los Angeles Lakers ($4.4 billion) and the Golden State Warriors ($4.3 billion). These three teams have by far the highest revenue in the NBA.
Only the Dallas Cowboys ($5.5 billion) are worth more than the Knicks among North American sports franchises, with the New York Yankees ($4.6 billion) the only other team ahead of the Lakers and Warriors. Additionally, the New York and Los Angeles teams are looking for large revenue multiples.
Recall that Steve Ballmer paid 14 times revenue for the Los Angeles Clippers in 2014. Tsai paid 11 times revenue for the Nets. The revenue multiple that billionaire Tilman Fertitta paid for the Houston Rockets in 2017 was seven, which is relatively low.