Sportico: Brooklyn Nets now worth $3.86B, sixth in the league. Does BSE Global (Barclays Center operating company, mostly) really contribute $980M to value?

Yes, NBA team values keep rising, even as the stock market falls, as Sportico reported 12/13/22, "NBA VALUATIONS: WARRIORS TOP $7.6 BILLION AS TEAMS AVERAGE $3 BILLION."

From the article:

The average is boosted by a top-heavy distribution of team values, with the Golden State Warriors ($7.56 billion), New York Knicks ($6.58 billion) and Los Angeles Lakers ($6.44 billion) all worth at least $2 billion more than fourth-ranked Chicago Bulls ($4.09 billion). The median NBA franchise is worth $2.38 billion.

The Brooklyn Nets (and associated properties), as shown in Sportico's chart, have risen in value "only" 7%, to a total of $3.86 billion, which means they've actually dropped two spots from Sportico's 2021 ranking.

Among the contributions to rising values, Sportico's Kurt Badenhausen wrote, are "new revenue streams from gambling, jersey patches, and international sponsorships." 

Of the latter, the Golden State Warriors gain an estimated $45 million a year from Rakuten, while the Nets are second, earning $30 million a year from WeBull. (Note that CNBC's 9/27/21 report was more vaguely sourced, stating "people familiar with the agreement told CNBC it’s a multiyear pact that pays the Nets roughly $30 million per year.")

Even if "roughly $30 million" translates to $27 million, how is it that the arena sponsor, Barclays Capital, is only paying $10 million a year through 2032? Again, that seems ripe for renegotiation and/or a buyout.

Sportico notes that the NBA is expected to double its national TV deal, currently worth $2.7 billion a year, which is revenue that teams share.

Arbitrary valuations

I think these valuations are somewhat arbitrary. Note that Sportico attributes $980 million of the Nets' value to the arena company and associated holdings within BSE Global, like the New York Liberty, which places the Nets second in the league on that metric.

By contrast, Forbes, while in October valued the team and arena at $3.5 billion, attributed $673 million to the arena, after attributing just $31 million in value to the arena in 2021. Sportico in 2021 attributed $950 million of the Nets' value to the arena company and associated holdings.

Sportico bases its value on the metrics behind team transactions, including "aggregating local and national revenues and factoring in a team-specific multiplier." 

That's not unreasonable, but to me it also means the numbers are arbitrary and the portion attributable to the arena is inherently tied to the team.

After all, Barclays Center revenues can't currently cover bond payments, much less deliver profit. But the existence/presence of the Brooklyn arena positions the Nets for all the revenue streams that are accelerated by the team's location in the nation's largest city and media capital.

So it's odd to me that the New York Knicks, valued at $6.5 billion, get only $465 million attributed to team-related businesses and real estate. 

Sportico cites a complicated financial structure involving different (though related) ownership of team and arena, saying that the value was "reduced proportionally to account for business segments related to the basketball team." That's not implausible, but the Knicks' presence at a Manhattaan transit hub surely contributes enormously to the team's value.

Revenue breakdown & Tsai's bottom line

Note that the Nets are said to have raised annual revenue to $370 million, but there's no reference to the bottom line. 

Forbes, by contrast, calculated $405 million in revenue but an operating loss, inclusive of arena debt service, of $34 million.

So if team/arena company owner Joe Tsai could presumably sell the combo for more than the $3.3 billion he reportedly paid, it's unclear whether the losses he's absorbed on the arena and team make it closer to a wash.

Also unclear: whether the tax benefits of such losses, which would exist on paper (thanks to depreciation and amortization) even in a revenue-positive year, bolster the overall investment beyond that wash, given tax deductions.

Screenshots from Sportico

Sportico: overall value for Nets

Sportico: overall value for Knicks

Sportico: Nets are second in league in team-related business and real estate