If your business is owning an NBA franchise, right now business is good.
Today Forbes released their annual NBA franchise valuations, and the New York Knicks and the Los Angeles Lakers remained on top. Jumping into the top three this season are the Golden State Warriors, with Chicago and Boston not far behind.
The hardwood might as well be paved with gold: The average National Basketball Association franchise is now worth $1.36 billion, a 3.5-fold increase over the last five years. Fueling the gains are the NBA’s $24 billion media deal with ESPN and TNT that kicked off this season, a new collective bargaining agreement ensuring seven years of labor peace and massive international opportunities.
Leading the way are a pair of big-market franchises mired in dysfunction: the New York Knicks and Los Angeles Lakers. The pair have lost 68% of their games over the past three-plus seasons, but businesswise it seems that they can do no wrong.
The Knicks are the NBA’s most valuable team for the second straight year, worth $3.3 billion, up 10% over last year.
The Knicks have been shut out of the playoffs since 2013, but they are reaping the rewards of a $1 billion renovation of Madison Square Garden, which produced new revenue opportunities from sponsorships and seating. The team turned an NBA-record operating profit of $141 million last season despite a 32-50 tally on the hardwood. It was the first season of the team’s new local cable deal with MSG, which paid $100 million in year one.
The Lakers are worth $3 billion, up 11%. Last season was the worst in franchise history on the court, but the team still made a mint as fans flocked to the Staples Center to see the Kobe Bryant retirement tour. The team sold out Staples per usual with courtside seats costing $2,750 per game. Bryant's final game featured $1.2 million worth of Kobe merchandise sold at the Staples Center, setting a one-day sales record for an arena. The Lakers banked $119 million in profit, second most behind the Knicks.
The Knicks and Lakers have been the NBA’s most valuable teams for nearly two decades (both have held the top spot), but they better watch their backs because another franchise is soaring up the ranks. The value of the Golden State Warriors jumped an NBA-high 37% to $2.6 billion, third place in the league (the Warriors ranked sixth last year).
The club posted the highest average cable TV rating (9.8) during the 2015-16 season, more than double the previous year. The season ticket wait list is at 32,000 with a renewal rate of 99.5%. No wonder the team felt comfortable sending out season ticket invoices last week for next season with price hikes of 15-25%.
The Warriors and their NBA Finals opponent, the Cleveland Cavaliers, both benefited from a reduction last year to the share of playoff ticket revenue going to the league office from 45% to 25%. The move incentivized teams to jack up playoff ticket prices with more of the spoils staying with the teams. The Warriors hosted 14 playoff games and during the NBA Finals grossed $10 million per game, before the NBA took their cut. After the exorbitant playoff ticket price hikes last year, the Warriors are taking a breather, not increasing prices for the first three rounds of the 2017 playoffs.
But the team is ready to cash in more in other areas. The Warriors broke ground in January on their new privately financed $1 billion arena in San Francisco’s Mission Bay neighborhood, which is set to open for the 2019-20 season. They’ve already secured a 20-year naming right agreement with Chase worth an estimated $300 million that is the richest ever for a U.S. arena. The Warriors could challenge the Knicks and Lakers for the NBA’s highest revenues when the building opens.
Operating profits are at a record high -- an average of $31 million per team. Owners, meanwhile, are salivating at what’s on the immediate horizon: a new seven-year collective bargaining agreement that secures labor peace through the 2023–24 season, and the start of a nine-year, $24 billion national TV deal this season with ESPN and TNT worth triple the previous annual amount. Operating profits could double this season.
While no majority stakes in teams are up for bid (Mikhail Prokhorov is shopping a minority stake in the Brooklyn Nets), investors are getting into the NBA any way they can. The league recently refinanced $300 million of its $3.5 billion credit facility. Demand was 10 times the offering at a 3.6% interest rate thanks to the strength of the league’s financial prospects.
Rounding out the five most valuable franchises are the Chicago Bulls ($2.5 billion) and Boston Celtics ($2.2 billion). Other big movers besides the Warriors were the Sacramento Kings ($1.075 billion) and Milwaukee Bucks ($785 million), both up 16%. The Kings opened their new arena, Golden 1 Center, this season to rave reviews, while the Bucks are set to open their new building in 2018.