Sportico: Brooklyn Nets and arena company worth $3.4B, fourth in the league (before Harden trade). Still, revenues only 11th--and paltry past profits ignored.

Three NBA Teams Top $5 Billion in Sportico’s 2021 Franchise Valuations Report, Sportico reported yesterday, with the Brooklyn Nets ranked fourth, at a combined valuation of $3.4 billion for the team and the arena operating company, part of BSE Global, all owned by entities held by Joe Tsai.

That valuation was calculated after last season and before the astonishing trade that brought superstar James Harden, so based on Sportico's metric--and putting aside the relatively small coronavirus-imposed drag on revenues--it presumably would rise, given Harden's arrival.

From Sportico

Reasons for doubt

Then again, there are several reasons for skepticism. 

The Nets are only 11th in reported revenues (both national and local) and Sportico's metric makes no mention of what I'd argue is a more important metric: net income, or profit. (My tweet about this drew no official response, though one respondent, an appraiser, suggested net income could be fungible.)

Last February, according Forbes chart of team valuations, the Brooklyn Nets had only $42 million in operating income last season, ranked #25 in the league, and the Nets were second-to-last in revenue per fan.

Forbes ranked the Nets sixth in the league in value, but was skeptical about the market-setting role of new owner Tsai: "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."

As I wrote last year, "The value of the Nets seems partly based on trophy value, the New York City market, and future success."

I don't know if the Forbes valuation was fully fair, or remains as such, but NBA teams are like "paintings for billionaires," as Jay-Z once said, so if Tsai could find another billionaire, the price might stay high. 

That said, as I wrote last October, the arena operating company balance sheet contains  an enormous $467.6 million for ethereal "Goodwill," the portion of the purchase price higher than the value of assets and liabilities.

And Sportico ignored my report last August that the seeming record price for the Nets deserves a significant asterisk: a rebate of about $300 million paid by seller Mikhail Prokhorov to Tsai.

More from Sportico

The New York Knicks are the most valuable, "at $5.42 billion, despite posting a losing record over 16 of the last 19 seasons," given their history and location.

From Sportico

For certain teams, the valuation depends on performance--the Golden State Warriors rank second, according to the chart--but the Nets' valuation surely relates significantly to its place in the nation's media market.

Sportico noted that "the cumulative revenue for the NBA’s 30 teams, $8.3 billion, was down from the previous, non-COVID-impacted season by nearly 10%," but said national revenues dropped only 2%, thanks to the resumption of the season.

About the Nets

My screenshot of the interactive chart, at right, shows the Nets as fourth in total value, with the team valued at $2.47 million--more than Tsai paid, and seemingly ignoring the rebate--and the arena company at $927 million. 

The arena company value was not specified in the Tsai-Prokhorov transaction, but depending on which unofficial report you trust, could be more or less than the $927 fiture.

The graphic also lists associated sponsors.

More on the project

Sportico definitions: 

Team Value:

NBA franchise valuation, derived from metrics by which basketball team transactions occur, including aggregating local and national revenues and factoring in a team-specific multiplier. This represents the fair-market value of the team itself, excluding related businesses held by its owners.

Team-Related Businesses and Real Estate Holdings:

The value of a franchise or franchise owner's equity in team-related businesses—that is, both those on the team's balance sheet and held in distinct corporate entities—as well as government-assessed real estate related to venue, practice facilities, and adjacent developments. 

Sportico's Fair Market Franchise Valuations relied on not just revenues, interviews with those knowledgeable of team finances, but also a team-specific multiplier, based on multiple factors;

historical sales, market (size, saturation, and interest by prospective owners), strength of brand, on-field performance (historical and recent), terms of facility lease, debt burden, and expected future team and league economics.

In other words, Tsai helped set the market.