The NBA: Sporting goldmine of America

Sport team owners in America are becoming wealthier by the year due to the soaring values of their franchises, which are funded by enormous amounts of money from television-rights deals.

The NFL(National Football League), NBA (National Basketball Association) and MLB (Major League Baseball) all signed new national TV deals last year worth a combined $90 billion, as the live sport realm has a proven record of audience retention. Advertisements come at a premium and this is how sport franchises make their money and grow.

Looking at basketball, the average NBA team is now worth a staggering $1.1 billion(per Forbes.com). That figure is up 74% from last season alone and sees for the first time ever, the average rise above the $1 billion mark. Let’s take the most valuable franchise in the NBA, the Los Angeles Lakers, who currently sit atop the rankings at $2.6 billion. The Lakers are a hallmark of the NBA with countless legends like Kobe Bryant having played for the fabled purple and gold. The Lakers are the famous team, with the famous players in the famous city and by far boast the largest market. This helps enormously when major rival cities like New York and Chicago have NFL teams, and L.A do not.

The Lakers have an estimated operating income of $104 million and annual revenue of $293 million which puts them clearly on top(per Forbes.com). To put things into perspective, the Milwaukee Bucks had the lowest annual revenue in the league with $110 million, less than half of what the Lakers made.

The growth of some teams in the league is quite simply staggering. While the Lakers rose 93% in value over the past year alone which is a feat in itself considering the team suffered it’s worst season ever (finishing with a dismal 21 wins and 61losses), cross town rivals the Los Angeles Clippers rose an unprecedented 178% in value over the past 12-months. This was largely due to new owner Steve Ballmer who purchased the Clippers for a record $2billion, $400 million more than any other offer. The next biggest rise came from fellow large market city Chicago (%100).

What puts the Lakers on top in terms of overall worth is the fact that the team is aided financially by having the largest TV-rights deal in the NBA with their local provider, Time Warner, that began their partnership in 2012. The contract is worth an absurd $4 billion over 20 years. Television ratings for Laker games plummeted last season, dropping over 50%, yet the Lakers still managed to pocket over $125 million from Time Warner. And this is what allows a team like the Lakers to continue to prosper.

The substantial growth is coming from more than just large cities like New York, Chicago and Los Angeles though. The collective bargaining agreement signed between players and owners in 2011 basically eliminated money-losing teams with a revenue sharing system. Well that is except when foreign owners try and buy themselves a championship while also ignoring the salary cap*cough Brooklyn cough*. Revenue sharing helps to prop up the low revenue teams like a crutch, but even that more than tripled from $55 million under the old CBA to $232 million last year. The end result speaks for itself as other than the crazy Nets, no team in the NBA lost money last season on an operating basis if you include all arena revenue.

The fact that even teams with horrible performances are still making money is a credit to no only the popularity of the league in America, but around the world. The real positives are revealed when looking at the league as a whole.

The average NBA team had an operating profit of $23.1 million last season, slightly lower than last year’s record tally of $23.7 million(per Forbes.com). Operating profit is the amount of money a team makes after all expenses are included. In the larger scale of things, total league-wide revenue, which is the amount of money a team makes not including expenses hit $4.8 billion, or $160 million per team, up 5% from last season.

One of the main reasons for the NBA’s continued growth at such record speed is because the league is considered to have the most international potential of all leagues in America. There were 101 foreign players from 37 countries on opening day rosters last season and while none of them are from Asia, basketball remains one of the continent’s most played sports. The NBA’s international revenues were $350 million last year and have grown at 18% annually (per N.Y Times). NBA Commissioner Adam Silver wants to launch four franchises in Europe, where basketball is already quite popular. The video below explains:

https://www.youtube.com/watch?v=apsAIvL7UGw

Each year, the league is expanding and it seems at a rate that competitors like the NFL and NHL are not able to keep up with.

With continued growth expected, how far the league can go is anybodies guess. But one can only imagine that a time is coming, not too long from now, where the NBA and basketball overtakes soccer and becomes truly, the world’s game.

By Ryan Tennison