When former Microsoft head, and one-time Sonics revival investor, Steve Ballmer jumped at the rare opportunity to purchase the Los Angeles Clippers, I declared that his record-setting purchase was an anomaly, an outlier unlikely to have a significant effect on overall NBA team values. I was wrong.
Forbes released its annual team valuation list today and Ballmer's purchase has, indeed, raised all ships.
According to the financial outlet, the average NBA team is now valued at $1.1 billion, an astounding 74% increase over last year. The Lakers lead the pack at a $2.6B valuation, a nigh-inconceivable jump of 93% over their 2014 worth. The Milwaukee Bucks bring up the rear, moving from $425M to $600M. The team was purchased for a then-record $550M last year, and arena issues are likely keeping the valuation down.
So, what does this mean for the Seattle effort to get a team back?
A year ago, the number for potential expansion was anecdotally set at $1B, a number many of us thought was a stiff reach. Then, teams started selling like a fire sale and values have skyrocketed. Ballmer's purchase plays a substantial role in that, yet the potential of the NBA's pending $2.6B a year television and digital rights package is not only making itself known, it is the biggest factor here and will be for years to come.
One of the most salient aspects of the Forbes piece is the following:
The collective bargaining agreement signed between players and owners in 2011 has nearly eliminated money-losing teams, barring wild spending sprees on players (see Brooklyn Nets). Under the CBA, the players’ share of basketball related income was reduced from 57% to 50% (it is only around 47% of total revenue when you include all arena revenue streams). Revenue sharing to prop up the low revenue teams more than tripled from $55 million under the old CBA to $232 million last year. The result: the Nets were the only NBA team to lose money last season on an operating basis if you include all arena revenue.
Nets owner Mikhail Prokhorov is currently entertaining offers to purchase the team. Profitability has long been the ace in the league's public counter to expansion talk. Players and owners gain the ability to opt-out of the current CBA in 2017, a move that is expected, so this could potentially shift. For now, though, the argument is off the table.
Sonics Rising has heard that expansion has been discussed. That, of course, is by no means a guarantee that it will happen. Still, the various hurdles to expansion continue to fall by the wayside.
If the Bucks can solve their arena issue this year, there is little standing in the way of expansion aside from the will and desire of the league owners. That's not a molehill of an obstacle, to be sure, but neither is it insurmountable. It's a much favorable discussion to have because it's one Seattle can actually participate in.
It's no doubt that the baseline for expansion has now moved, likely to at least $1.5B, if not higher. At one point, it seemed like that would price anyone out of consideration. Just two years ago, Ballmer and Chris Hansen made shockwaves by daring to pay for the Sacramento Kings on a valuation of $525M, a premium of $225M above the team's perceived worth at the time.
My, how times have changed.