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In Sportico's latest NBA valuations, Brooklyn Nets (+ arena company) worth $3.98B, but growth rate lags league. Blame demise of the superteam.

Are the Brooklyn Nets and the Barclays Center arena operating company, both owned by Joe Tsai, doing well as a business?

Sort of. The combo's now valued by the website Sportico at $3.98 billion, which is more than Tsai paid--somewhere north of $3 billion. though compounded by operating losses--but only 13th in the 30-team league. 

That's a decline in rank from 2021 ($3.61 billion, 4th in the league) and 2022 ($3,86 billion, 6th), while other franchises have ballooned in value. 

And the Nets lag the entire league in valuation growth, by far, growing just 17% since 2020, a sign--as noted by a Sportico journalist in the podcast cited below--that the value was juiced by expectations of the superteam that dissolved.

Meanwhile the team and arena have struggled, with Tsai most recently having to kick in $18 million to support arena operations in the most recent fiscal year. (In previous years, he contributed $38 million and $52 million.). 

In the 2021-22 season, two fiscal years ago, the New York Post reported, the arena and team had lost between $50 million and $100 million.

(In November, Forbes valued the team and arena company at $3.85 billion.)

Booming league

Last year, Sportico judged the average NBA team to be valued $3 billion. Now it's $4 billion, an astonishing one-third rise, thanks significantly to increases in the value of the lower-ranked teams. 

The reflects the willingness of new investors to pay more, and revenues expected from media-rights deals and league expansion.
It's worth noting that NBA teams may seem overvalued, given their actual revenues, but that reflects both scarcity and anticipation.
The reason for the boom
What happened to the Nets?

In the Dec. 14, 2023 Sporticast podcast, Editor Scott Soshnick and staffer Eben Novy-Williams spoke with Kurt Badenhausen, Sportico’s valuations expert, about his latest NBA valuations.

At about 18:34, as shown below, Soshnick asked why the Nets had such lackluster growth.

The valuation, Badenhausen responded, "probably got a little bit ahead of itself," given the excitement about the arrival of superstars Kevin Durant and Kyrie Irving (in 2019, with KD injured), and James Harden a year later.

But that superteam dissolved, after injuries and infighting. Now, Badenhausen said, tickets are "certainly not as robust." I assume that refers to ticket revenues, since announced attendance remains high.

 

While Webull in September 2021 paid a reported $30 million a year to sponsor the Nets' jersey patch, the renewal of such a deal is hardly guaranteed, given the Nets' current roster. 

"When that deal was done," Badenhausen said, "the anticipation was this is a team that is going to be challenging for the NBA finals every year, with the most one of the most high-profile teams in the league." That would've meant a lot more TV coverage.

Beyond that, he noted that the Barclays Center is "facing a lot of competition for events right now," presumably a reference to the USB Arena in Nassau County. "The balance sheet doesn't look great when you start looking at the event business and how much money that building is generating," 

That said, the arena's return to Ticketmaster as a ticketing partner may be paying off, given a more robust December schedule than last year, including three nights of Madonna.

The perspective

The Golden State Warriors are valued at $8.28 billion--well, maybe not for long, if they continue to flunder--and the New York Knicks worth $7.43 billion. The Los Angeles Lakers are worth $7.34 billion.

As summarized by Sportico, the action's elsewhere:
Mat Ishbia’s $4 billion purchase of the Phoenix Suns is widely considered to have reset the market for NBA team values, but Badenhausen makes the argument that a different NBA transaction was more impactful. Michael Jordan recently agreed to sell the Charlotte Hornets, one of the league’s least valuable franchises, in a $3 billion deal. That raised the floor for all the bottom teams, Badenhausen says. 
Sportico's Lev Akabas notes that a new TV contract and revenues from two expansion teams will boost the bottom line. He also cited the scarcity of teams.

Note that owners don't want to sell can still cash out based on rising valuations by selling up to 20% of a team to a private equity fund, family office, or sovereign wealth fund. 

Brooklyn Nets owner Tsai doesn't necessarily need the money. Nor is this the right time to sell a share of the Nets. But it's surely on his radar screen.

Badenhausen writes:
Dyal HomeCourt, a fund dedicated to investing in NBA teams, was included in the new Charlotte [Hornets purchase] group. Like fellow institutional investors Arctos Sports Partners and Sixth Street in the NBA, the Dyal Capital-managed firm is focused solely on its financial returns and not the intangible perks that come with sports team ownership. Dyal also has stakes in the Sacramento Kings and Atlanta Hawks, while Arctos is invested in four teams and Sixth Street owns a 20% share of the San Antonio Spurs.
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