The National Basketball Association was originally founded over 70 years ago. The wealth of the organization and its franchises has grown incredibly since its inception. The original teams were each founded with $10,000 in franchise fees. Their net worth has increased 100,000 times over since then.
Over that time, the NBA has built one of the strongest brands in the world. Total annual revenue among all teams is around $6 billion, which is more than the vast majority of other franchises. With top players like Kobe Bryant, Kevin Durant, James Harden, Lebron James and many more earning in excess of $20 million plus per season, it’s no surprise the value of NBA teams continue to rise over time.
As of 2018, every one of The NBA’s 30 teams has a net worth of over $1 billion. The average team value is pegged at $1.65 billion. That is a sharp increase from their 2017 value of $1.35 billion.
What are the main reasons that NBA team values are increasing?
While revenues with the NFL and other sports leagues have slipped in recent years, the NBA is growing at a record pace. What factors are driving growth? Here are some of the biggest.
Teams have more autonomy with negotiating television contracts
The NFL and many some other sports leagues negotiate all media contracts on behalf of their respective franchises. They then share the revenue equally with every team in the franchise.
NBA teams negotiate contracts with local media outlets on their own. They have stronger ties to the local community and a greater incentive to negotiate more favorable contracts for their organization. This means they have much more lucrative deals than the NFL and their counterparts from other sports leagues.
Forbes’s reports that the beginning of a decade-long deal with national TV outlets will improve their bottom line considerably:
“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.”
Reduced engagement for the NFL
NFL revenue and engagement figures have plummeted in recent years. A variety of factors may have influenced the trend. However, the biggest appears to be growing saturation of the sport. Fans can watch NFL games every day of the week, so it is no longer the exciting game that it was when they looked forward to sitting down for Sunday night football.
Waning interest in the NFL appears to have helped the NBA. As players grow wary of watching football, they seem to turn to basketball instead. Rising ticket and merchandise sales may be a reflection of the fact that many new fans are refugees from the NFL.
Strong international presence
Basketball is a sport that is actively played all over the world. The NBA has built a strong base of fans in every major continent. This has fueled their revenue growth in recent years. International revenue is growing over 10% every year.
China is one of the biggest markets for growth. Over 300 million Chinese consumers follow basketball, so the NBA has focused on reaching more people in that region. In 2015, the league signed a five-year deal with Tencent to stream their content in China.
The entire league will generate $800 million from that deal alone. The NBA has media deals with over 30 other media outlets and has already accumulated a following of over 120 million viewers.
Owners retain more of their revenue
NBA teams used to share 57% of their net revenue with their players. A few years ago, they began negotiating more favorable contracts for the owners. Most teams currently pay 49% to 51% of revenue to their players. This has put a lot more money in the pockets of the owners and made it easier for them to reinvest in the team and the league as a whole.
Teams are keeping more money from ticket sales
NBA teams have been paying less money to the box office in recent years. The share of ticket sales they hand over to the league has fallen from 45% to 25%. This has effectively increased their net ticket revenue by 36% before even factoring for higher prices and sales volume.
Ticket price increases
Demand for NBA tickets has surged for most teams. The Cleveland Cavaliers had an average wait list of 36,000 tickets last year. Other teams have experienced similar increases in demand.
Most teams have increased ticket prices by 15% to 25%. Ticket prices may increase further in 2018 if demand continues to rise.
Wealthiest Teams in the NBA
While the revenue and net worth of NBA teams are rising across the board, some teams objectively have more money than others. Let’s take a look at the wealthiest teams and what put them at the top of the list.
New York Knicks
With a net worth of $3.6 billion and annual revenue of $307 million, the New York Knicks are the richest team in the NBA. They are also ranked as the fourth wealthiest team in all U.S. sports league, slightly behind the New England Patriots, Dallas Cowboys and New York Yankees. They recently reclaimed the title from the Los Angeles Lakers.
There are a couple of reasons that the Knicks have become the richest team in the league. They have an understandable geographic advantage, because they operate in a city of 10 million people. However, The New York Knicks have grown their revenue more than many other teams by negotiating highly favorable contracts with local media outlets.
In 2016, the Knicks signed a 20-year contract with MSG regional sports network. The deal generated over $100 million in the first year.
The Knicks may have an advantage by operating out of New York, but their net worth has been rising faster than most other teams. Their value has more than doubled from $1.25 billion between 2016 and 2018.
Los Angeles Lakers
The Los Angeles Lakers have been in a tight race with the Knicks for the title of the most valuable team in the NBA. It is a close call, because the Lakers are valued at $3.3 billion. The Knicks eclipse their Los Angeles rivals by an even narrower margin when it comes to revenue. The Lakers bring in $304 million in revenue each year.
The Lakers’ television deals have helped them earn their spot near the top of the list. While the Knicks may squeeze out a narrow edge with revenue, the Lakers actually have the highest paid media deal in the NBA. Their deal with the Times Warner Company generates the team $122 million a year. That is nearly three times the value of the second most lucrative contract in the NBA, which goes to the Houston Rockets with the CSN Houston.
Golden State Warriors
While the Lakers are eagerly trying to regain their position as the richest team in the NBA, they also risk losing their second place status to the Golden State Warriors. The Warriors are currently worth $3.1 billion. What is more impressive is the Warriors sudden rise in valuation. The team’s value increased by an astounding 19% between 2017 and 2018. The Warriors’ stellar performance last season and the rapidly rising popularity of many players on their bench has played a role. Stephen Curry, Kevin Durant and Clay Thompson have all helped drive the team’s surge in the past year.
The franchise has also made some very lucrative deals with other media outlets. They recently also signed some great sponsorship deals. Rakuten signed a contract with the team for $60 million. This deal increased the team’s revenue by about 20%.
NBA Commissioner Adam Silver spoke highly of the deal and the value it brings to both the Warriors and the NBA as a whole.
“Jersey sponsorships provide deeper engagement, with partners looking to build a unique association with our teams, and the additional investment will help grow the game in exciting new ways,” Silver told reporters at the deal was being finalized. “We’re always thinking about innovative ways the NBA can remain competitive in a global marketplace, and we are excited to see the results of this three-year trial.”
The NBA is On Track to Become the Wealthiest Sports Franchise in the Country
The NFL has traditionally generated more revenue than the NBA and its teams have historically been wealthier. This is changing for a variety of reasons. The NBA has done a better job at maintaining fan loyalty and growing revenue abroad. This is increasing revenue for teams across the league.