As Forbes ranks Brooklyn Nets #7 in NBA value, team operating income ranks #25 and revenue/fan #29 (but says arena drags down value)

Update 8/2/20: I missed this key piece of small print, in the main article: "Our appraisals are what we think the team would sell for. So while Tsai paid $3.3 billion for the Nets, we think the team is worth more like $2.5 billion because he paid around $1 billion for a money-losing arena business."

In NBA Team Values 2020: Lakers And Warriors Join Knicks In Rarefied $4 Billion Club, Forbes reported 2/11/20, that, despite problems like a lousy Knicks team and geopolitical tensions from China, "NBA franchise values continue to soar, up 14% in the past year to an average of $2.12 billion." That outpaces football and baseball.

And the Brooklyn Nets, the league's seventh most valuable team, are going gangbusters. Forbes's Kurt Badenhausen, Michael Ozanian and Christina Settimi cite the recent transaction:

Alibaba cofounder Joseph Tsai agreed in 2018 to buy the Brooklyn Nets over three years for $2.35 billion, but he accelerated the purchase in August and added the operating rights to the Barclay’s Center in a deal worth $3.3 billion for the team and arena.

Forbes now values the Nets at $2.5 billion, a 6% rise, perhaps accounting for the potential of the Kevin Durant and Kyrie Irving pairing in the 2020-21 season.

Value ≠ income

The value of the Nets seems partly based on trophy value, the New York City market, and future success. After all, according to another Forbes chart of team valuations, the Brooklyn Nets had only $42 million in operating income last season, ranked #25 in the league, and matched by or more than only five teams, all worth far less:

• Phoenix Suns, $42 million (#17, $1.625B),
• Oklahoma City Thunder, -$23 million (#20, $1.575B)
• Cleveland Cavaliers, $39 million (#24, $1.51B)
• Charlotte Hornets, $39 million (#25, $1.5B)
• Memphis Grizzlies, $24 million (#30, $1.3B)

Presumably this rebuilding year, with Irving leading a stronger team, will deliver more income, and next year will be better.

Low revenue per fan

Also, despite relatively high ticket prices, the Nets were near the bottom of the league in revenue per fan. Forbes marks the Nets at $19 per fan, ahead of only lowly Atlanta. That too is likely to improve this season and next.

From Forbes

The rise in team values

The authors explain why teams are worth so much more:

Those owners who bought in 10 years ago had fortuitous timing... They benefited from the NBA’s $24 billion TV contract with TNT and ESPN, which kicked off in the 2016-17 season and is shared equally among the 30 teams. Another boost: the collective-bargaining agreement signed in late 2011. It cut the percentage of basketball-related income going to the players from 57% to 51%, boosting profits across the board. Operating profits were a record $70 million per team last season, up 15%. A half-dozen teams had profits of at least $100 million, while the Oklahoma City Thunder was the lone team to have an operating loss ($23 million) last season, due to the $61 million luxury tax bill on their massive payroll.

About the Nets

Here's Forbes's page on the Nets:

Joseph Tsai bought 49.9% of the Nets from Mikhail Prokhorov in April 2018 with the idea of buying the rest of the team in three years. He accelerated the timeline to buy the team in September 2019. Tsai and also acquired the operating company for the Barclays Center as part of the deal. The total enterprise value for the team and arena business was $3.3 billion. Our valuation for the Nets includes the economics of the Barclays Center, but not the value of the real estate, which is owned by the state of New York. In conjunction with his acquisition, Tsai signed an operating support agreement, whereby he unconditionally and irrevocably agreed to provide the arena with all amounts necessary for the arena to meet its expenses and payment obligations, which includes PILOT bond payments ($37 million for the fiscal year ending June 2019). In addition, Tsai signed an operating support agreement with the NBA whereby he is obligated to provide the Nets with all amounts necessary for the team to meet its expenses and payment obligations. The Nets fortunes should improve after the 2020-21 season when the NHL's New York Islanders, who currently play 20 games at the Barclays Center, move into their own arena. The Nets current deal with the Islanders has been a money-losing proposition for the basketball team because hockey-related revenue at the arena has been less than the $55 million payment the Islanders are guaranteed from the Nets.

Note that the payment guarantee for the Islanders has been modified; also, it's not the Nets that have the deal with the Islanders but rather the arena operator, now controlled by Tsai.

Looking at the valuation breakdown

Forbes, 2020

Forbes, 2019

Note that Forbes attributes $929 million of the Nets' value to the sport, $743 million to the market, $607 million to the arena, and $221 million to the brand.

Last year, as shown in the screenshot at right, Forbes attributed $830 million of the Nets value to the sport, $732 million to the market, $577 million to the arena, and $211 million to the brand.

In other words, the biggest jump came from the sport itself. Basketball's hot.