What Do Soaring NBA Franchise Values Tel

  • News broke Sunday night that the Maloofs the majority owners of the nation's Basketball A sociations Sacramento Kings agreed to sell their share of the team to Seattle investors, including Microsoft CEO Steve Ballmer and investor Chris Hansen. The Seattle group valued the franchise at $525 million, and agreed to pay $340 million for the Maloof familys 65% stake. Sacramento mayor and former NBA star Kevin Johnson is working to a semble a counter-bid to help keep the team in California while minority investors may sue and claim a breach of the limited-partnership agreement. Quite simply, the $525 million value will probably increase before is done.

    Just days later, Forbes published its annual story on NBA franchise values, and ranked the Kings because the 11th-most-valuable franchise, while using $525 million Air Jordan 8"Chrome" figure from the proposed sale. However the Kings werent the only NBA team to determine its value rise significantly in the past year. For the first time, Forbesvalued two teams at $1 billion or even more the New York Knicks (at $1.1 billion) and also the La Lakers (at $1 billion) and pegged the typical franchise value at $509 million, a 30% increase over 2012.Forbes also reported the average operating income Air Jordan 11 Low"Georgetown" (earnings before taxes, depreciation, etc) for that NBAs 30 teams was $11.9 million, the best since Forbes started tracking the numbers in 1998.

    So whats driving the NBAs financial succe s, and what does it foretell for Major League Baseball teams values whenForbes releases that list in March?

    TheForbes report suggests several key factors; the largest one being the collective bargaining agreement that took effect at the end of December 2011. The owners had locked out the players and several weeks of the 2011-2012 season had been canceled. Not surprisingly, the new agreement led to a substantial transfer of money from the players to the owners. Unlike its MLB counterpart, the NBA collective bargaining agreement mandates a specific division of Basketball Related Income (BRI) between players and owners. BRI include team income generated through ticket sales, local TV deals, sponsorships, arena naming rights, conce sions Air Jordan 6"Cigar" and parking as well asincome generated centrally through NBA Properties and NBA Media. Underneath the previous NBA agreement, owners were guaranteed 43% of BRI, with players getting 57%. Thats now shifted to an almost 50-50 split. Overall NBA earnings are estimated at $5 billion.

    The new agreement also strengthened the revenue-sharing program tax rates considerably for teams spending over the luxury tax threshold. Those changes stabilized small market teams such as the Memphis Grizzlies and the New Orleans Pelicans (nee Hornets) both of which sold last year in exce s of $300 million.

    Another big factor driving up NBA franchise values are lucrative new TV deals, locally and nationally. The Los Angeles Lakers new cope with Time Warner Cable sets the defacto standard (not unlike the Dodgers new local TV deal) and can spend the money for team $180 million per year for 25 years. The Boston Celtics have a new deal, too, that will spend the money for team $70 million per year if this goes into effect in 2017. California Warriors received a $50 million up-front fee in 2011 in its new deal and tripled its yearly rights fee from $9 million to $25 million. On the nation's level, the NBA continues to Air Jordan XX9"RiverWalk" be operating under agreements with ABC/ESPN and TNT that pay a combined $930 million annually, but that fee is expected to greater than double when the current agreement expires after the 2015-2016 season.

    If a shift of money from players to owners, a far more robust revenue-sharing and luxury-tax program, and new, lucrative TV deals are driving up NBA franchise values, then we should expect MLB team values to jump significantly in Forbes March study. While the NBAs money shift toward owners was specifically bargained for, MLB owners have enjoyed a level larger percentage from the overall baseball pie in the past Ten years. I discu sed this a week ago inside a postand included this chart that showed growth in MLB revenue, versus MLB total payrolls from 2000 to 2012.

    What that chart implies, but doesnt explicitly show, is the Air Jordan 11 Low"Citrus" change since 2003 in the ratio of payroll to revenue. In 2003, total MLB payrolls were 62% of total MLB revenue. The next year, time dropped to 49% and it Air Jordan XX9"Blackout" has been falling since. In 2012, payroll was only 42% of revenue. That 58%-42% split for the owners far surpa ses exactly what the NBA owners achieved within the collective bargaining proce s.

    Like the NBA, baseball also strengthened its revenue-sharing and luxury-tax programs in the newest collective bargaining agreement, as Ive explained in several posts. Read those details hereandhere. One key change to MLBs revenue-sharing product is its flexibility to capture big increases in team revenue when a new local TV is signed. I explained how that workshere. We know local TV broadcast fees are skyrocketing, and its not only the Dodgers. The Rangers, Angels, Astros and Padres have new billion-dollar deals. The Phillies, Rockies, Diamondbacks and Mariners are negotiating new deals now. That cash will flow with the revenue-sharing pipeline towards the benefit of small-market teams.

    On the nation's level, MLB will enjoy the fruits of its new contracts earlier than the NBA. Starting in 2014, ESPN, TBS and FOX will pay a combined $1.5 billion per year to the league; thats $25 million in additional revenue for every team within the eight-year life of the contracts.

    NBA franchise values are way up from 2012. That appreciation in value is driven by the structure of the new collective bargaining agreement, the explosion in local TV revenue and also the expected doubling of national TV revenue. Mlb enjoys a similarly-favorable collective bargaining agreement, more new lucrative local TV deals and a new national TV contract set to begin the coming year. Expect to see significant increases in MLB franchise values when Forbes releases its Air Jordan 6"Venom Green" report in March.