NBA TV Deal Will Alter the Financial Landscape of the League

[Durins Baynes]

No. YOU need to read more on the matter. There is a standing offer of $625MM from Seattle to buy an NBA franchise. Yet none of the 24 teams "worth less" were even willing to open up a dialog with them. Not even the ones worth <50% of that amount. In fact, all of those valuations are so drastically skewed from what the actual purchase prices have been as to completely negate the "valuations". In 2010 Forbes said the GSW were worth ~350M. They ended up selling for $555M. People thought it was an insane price. One of the minority owners of the GSW bought the majority share of the Kings and had to liquidate his Warriors shares. They were bought up by Mark Stevens at a level that would put the valuation at $800M. And thats without controlling rights.

This is sad. Yes, there was a huge offer to buy Seattle's team (technically not that much given they weren't buying 100% of it, but never mind that), because they were so desperate to get a team in Seattle they were willing to massively overpay. Nobody thought that bid accurately reflected the value (or profitability) of the Kings, only what the Seattle owners would pay to bring a team there. Nobody is offering to sell because a) the owners quite like their teams (and expect much more profit now that the CBA has been fixed), and b) because they know the offer is to move to Seattle, and the NBA won't approve it.

Anyone suggesting they lost money in a cash industry that also refuses to open their books is a liar. Even if they open their books they are probably fudging.

This is just ignorant. Shinn was forced to sell, because he ran out of money. He didn't even have time to find a buyer, the NBA bought it from him. Bob Johnson, owner of the Bobcats, was in much the same position. He wasn't keen to sell to Jordan, he just lost so much money he had no leverage left. There's a reason Jordan was in the camp wanting a hard cap in the last round of CBA negotiations- his team is bleeding money. Long term they should be ok though, thanks in large part to the new CBA arrangements.

The Bobcats were sold at a discount so the NBA could leverage the star power of Michael Jordan. The team never went on sale and the backroom dealings were significant. Most people believe the NBA subsidized the sale.

Utterly false. Jordan was a minority owner already, but he was able to get the team so cheap because a) no other buyers wanted to keep them in Charlotte, and b) the low price factored in the debt he'd be taking on as owner (huge). The NBA had nothing to do with it.

And IF, and thats a big IF, some teams are losing money it is almost entirely because they got completely bamboozled by their media deals. No NFL or MLB TV deal was ever as bad as the current NBA deal. The drastic rise in values is largely because new deals are on the horizon. And that is 100% on ownership.

Let's call a spade a spade. You claimed only 1 owner in NBA history had ever lost money. That was an absurd, obviously ahistorical claim, from which you're now trying to backtrack.

[HurricaneKid]

No. YOU need to read more on the matter. There is a standing offer of $625MM from Seattle to buy an NBA franchise. Yet none of the 24 teams "worth less" were even willing to open up a dialog with them. Not even the ones worth <50% of that amount. In fact, all of those valuations are so drastically skewed from what the actual purchase prices have been as to completely negate the "valuations". In 2010 Forbes said the GSW were worth ~350M. They ended up selling for $555M. People thought it was an insane price. One of the minority owners of the GSW bought the majority share of the Kings and had to liquidate his Warriors shares. They were bought up by Mark Stevens at a level that would put the valuation at $800M. And thats without controlling rights.

This is sad. Yes, there was a huge offer to buy Seattle's team (technically not that much given they weren't buying 100% of it, but never mind that), because they were so desperate to get a team in Seattle they were willing to massively overpay. Nobody thought that bid accurately reflected the value (or profitability) of the Kings, only what the Seattle owners would pay to bring a team there. Nobody is offering to sell because a) the owners quite like their teams (and expect much more profit now that the CBA has been fixed), and b) because they know the offer is to move to Seattle, and the NBA won't approve it.

Its not massively overpaying if you can't buy something AT THAT PRICE. And since Sac found someone willing to pay $572MM for 72% of the ownership so its absurd to call Seattle's much lower price overpaying. Thats the market. And the NBA would LOVE Milw, Char, or whomever to move to Seattle. There will be a team in Seattle by 2020.

This is just ignorant. Shinn was forced to sell, because he ran out of money. He didn't even have time to find a buyer, the NBA bought it from him. Bob Johnson, owner of the Bobcats, was in much the same position. He wasn't keen to sell to Jordan, he just lost so much money he had no leverage left. There's a reason Jordan was in the camp wanting a hard cap in the last round of CBA negotiations- his team is bleeding money. Long term they should be ok though, thanks in large part to the new CBA arrangements.

Shinn was "forced to sell" the Hornets for $300M. He paid 32.5M. Tell me again how he lost a ton of money. Bob Johnson was the one person I acknowledged lost money. And it wasn't even that bad at the end of the day (paid 300M, sold for 275M). And frankly, there wasn't a business owner in the country that wasn't in some trouble at that time (08-09). Most took far worse baths than he did (as a % of value).


You have given me two names of owners that you believed had lost money through NBA ownership. One of them made 10X his investment and the other was the person I acknowledged lost money. Sounds like I am right and you are wrong right now. But I'll give you another chance to find another name for me.

[Durins Baynes]

Its not massively overpaying if you can't buy something AT THAT PRICE. And since Sac found someone willing to pay $572MM for 72% of the ownership so its absurd to call Seattle's much lower price overpaying. Thats the market. And the NBA would LOVE Milw, Char, or whomever to move to Seattle. There will be a team in Seattle by 2020.

The Seattle sale is a one off thing. That one group was willing to massively overpay in order to move a team to Seattle. But we shouldn't infer from that the new baseline price of a team is $572 mill. That's a one off. Others would not have paid that price, and once Seattle gets their team, there will no longer be that one bidder artificially jacking things up. And let's remember, if Seattle gets an expansion franchise they'll likely pay much less than that given historical precedent.

Take the Bucks- Seattle would like to pay $572 for the Bucks, but it won't happen because the NBA would have to approve the deal, and they likely don't want the Bucks moving anytime soon. It doesn't make the Bucks worth $572 mill because that's purely hypothetical as a price- it can't actually happen, and once Seattle gets a team nobody else will pay it (certainly not to stay in Milwaukee). You claim the NBA wants those teams to move to Milwaukee, but you're wrong. The NBA is very conservative about franchises moving when they don't need to- we just saw that with the Kings fiasco. Owners are sympathetic when you lose money, but not moving on a whim, and not if the city will pony up (it sets a bad precedent to have a city pony up, and then tell them "oh, you're still not keeping the team though"). Milwaukee has years to work something out, and the TV deal will be long done by then, meaning expansion to Seattle can happen. Charlotte's contract with the city makes it unmoveable basically.

Shinn was "forced to sell" the Hornets for $300M. He paid 32.5M. Tell me again how he lost a ton of money. Bob Johnson was the one person I acknowledged lost money. And it wasn't even that bad at the end of the day (paid 300M, sold for 275M). And frankly, there wasn't a business owner in the country that wasn't in some trouble at that time (08-09). Most took far worse baths than he did (as a % of value).

Go to google. Any search will confirm what I said about Shinn. He was forced to sell because he ran out of money to keep running the team. You're looking at this from a ridiculous perspective- i.e "value change of franchise" (technically the price he paid is $66 mill in today's money btw with inflation). That doesn't take into account the money he gradually lost in the process over the years, or the debt the franchise got into. If the Hornets were a profit making entity, or even breaking even, Shinn would not have been compelled to sell them, because they would have been an asset to him recovering his financial losses. Selling them was proof that they were a money loser for him. And Forbes backs that up- Shinn had lost money the previous 3 years (prior to the new CBA, after which the new owner made a small profit). All NBA teams should be able to generate a profit, especially low spending ones like Shinn's.

I didn't realise Bob Johnson was the 1 guy you admit lost money, so let's move on to someone else who unquestionably lost money- Bruce Ratner. Like Shinn, Ratner fared so badly, he was forced to sell (to a Russian Billionaire as it happens), keeping a minority stake (in the hopes of future profitability with the Brooklyn move). There's no question whatever the guy lost money, otherwise he wouldn't sell something that was going to be valuable in the future (once it went to NY). But he was forced to, because of bleeding money every year:
http://www.forbes.com/teams/brooklyn-nets/
Forbes records the Nets losing money over the last 10 years (all 10 of the years Ratner owned it). He bought them for $300 mill in 2004, and sold for $365 mill in 2012, so on inflation alone he lost $7mill even on your metric. But of course, he lost more than that, because of the losses he experienced each and every year. Over the last 10 years he lost cumulatively $89mill, not including interest from loans he's taking each year (something Shinn no doubt faced), and not including the debt. Ratner is just one of a long list of owners to lose money over the years. Howard Shultz sold the Sonics precisely because he knew he was losing money, and going to keep losing money in Seattle, and after trying to find a local owner he gave up (knowing the new owners would move out of Seattle ASAP, and he'd get some of the blame). The Hawks ownership has unquestionably lost money (they paid $257 in today's dollars, but are valued at $316. Now factor in all the debt- 75%!, massive losses over the years, etc. No way they've made money, they've lost it). Paul Allen has also lost a tonne of money (mostly his own doing of course), but he springs to mind as another pretty indisputable example. The Mavs are another team who has lost a tonne of money since Perot sold the majority stake to Cuban- that's why Perot sued him. Again, much of it by choice (or to build the brand), but Cuban has still plainly lost money.

[HurricaneKid]

Its not massively overpaying if you can't buy something AT THAT PRICE. And since Sac found someone willing to pay $572MM for 72% of the ownership so its absurd to call Seattle's much lower price overpaying. Thats the market. And the NBA would LOVE Milw, Char, or whomever to move to Seattle. There will be a team in Seattle by 2020.

The Seattle sale is a one off thing. That one group was willing to massively overpay in order to move a team to Seattle. But we shouldn't infer from that the new baseline price of a team is $572 mill. That's a one off. Others would not have paid that price, and once Seattle gets their team, there will no longer be that one bidder artificially jacking things up. And let's remember, if Seattle gets an expansion franchise they'll likely pay much less than that given historical precedent.

Take the Bucks- Seattle would like to pay $572 for the Bucks, but it won't happen because the NBA would have to approve the deal, and they likely don't want the Bucks moving anytime soon. It doesn't make the Bucks worth $572 mill because that's purely hypothetical as a price- it can't actually happen, and once Seattle gets a team nobody else will pay it (certainly not to stay in Milwaukee). You claim the NBA wants those teams to move to Milwaukee, but you're wrong. The NBA is very conservative about franchises moving when they don't need to- we just saw that with the Kings fiasco. Owners are sympathetic when you lose money, but not moving on a whim, and not if the city will pony up (it sets a bad precedent to have a city pony up, and then tell them "oh, you're still not keeping the team though"). Milwaukee has years to work something out, and the TV deal will be long done by then, meaning expansion to Seattle can happen. Charlotte's contract with the city makes it unmoveable basically.

Shinn was "forced to sell" the Hornets for $300M. He paid 32.5M. Tell me again how he lost a ton of money. Bob Johnson was the one person I acknowledged lost money. And it wasn't even that bad at the end of the day (paid 300M, sold for 275M). And frankly, there wasn't a business owner in the country that wasn't in some trouble at that time (08-09). Most took far worse baths than he did (as a % of value).

Go to google. Any search will confirm what I said about Shinn. He was forced to sell because he ran out of money to keep running the team. You're looking at this from a ridiculous perspective- i.e "value change of franchise" (technically the price he paid is $66 mill in today's money btw with inflation). That doesn't take into account the money he gradually lost in the process over the years, or the debt the franchise got into. If the Hornets were a profit making entity, or even breaking even, Shinn would not have been compelled to sell them, because they would have been an asset to him recovering his financial losses. Selling them was proof that they were a money loser for him. And Forbes backs that up- Shinn had lost money the previous 3 years (prior to the new CBA, after which the new owner made a small profit). All NBA teams should be able to generate a profit, especially low spending ones like Shinn's.

I didn't realise Bob Johnson was the 1 guy you admit lost money, so let's move on to someone else who unquestionably lost money- Bruce Ratner. Like Shinn, Ratner fared so badly, he was forced to sell (to a Russian Billionaire as it happens), keeping a minority stake (in the hopes of future profitability with the Brooklyn move). There's no question whatever the guy lost money, otherwise he wouldn't sell something that was going to be valuable in the future (once it went to NY). But he was forced to, because of bleeding money every year:
http://www.forbes.com/teams/brooklyn-nets/
Forbes records the Nets losing money over the last 10 years (all 10 of the years Ratner owned it). He bought them for $300 mill in 2004, and sold for $365 mill in 2012, so on inflation alone he lost $7mill even on your metric. But of course, he lost more than that, because of the losses he experienced each and every year. Over the last 10 years he lost cumulatively $89mill, not including interest from loans he's taking each year (something Shinn no doubt faced), and not including the debt. Ratner is just one of a long list of owners to lose money over the years. Howard Shultz sold the Sonics precisely because he knew he was losing money, and going to keep losing money in Seattle, and after trying to find a local owner he gave up (knowing the new owners would move out of Seattle ASAP, and he'd get some of the blame). The Hawks ownership has unquestionably lost money (they paid $257 in today's dollars, but are valued at $316. Now factor in all the debt- 75%!, massive losses over the years, etc. No way they've made money, they've lost it). Paul Allen has also lost a tonne of money (mostly his own doing of course), but he springs to mind as another pretty indisputable example. The Mavs are another team who has lost a tonne of money since Perot sold the majority stake to Cuban- that's why Perot sued him. Again, much of it by choice (or to build the brand), but Cuban has still plainly lost money.

If you own a widget and can sell that widget for $6 it doesn't matter if the next guy that has a widget can only get $5. The fact that there is a city out there that will pay $625 for a team and can't buy one should tell you all you need to know about the Forbes valuations, especially considering the last several teams/portions of teams that have sold were sold for ~150-170% of those valuations.

As far as the Bucks, well as a Bucks fan I can tell you you have gone off the deep end. Silver JUST came out and said the BC was UNFIT for the NBA and that a new arena was needed http://www.bizjournals.com/milwaukee/bl ... -nbas.html . Just last year the Bucks were able to get naming rights on the BC sold for the next 4 years and put the money towards improvements but even that was difficult to get past the other owners who have demanded Milw get a new arena for years. And there is a zero % chance there is ANY funding for a new arena as those that voted for it for the Brewers (which was an enormous success) were largely either recalled or lost their seats soon thereafter. There is not a single elected official in support of funding a new arena. So if you don't think the NBA would prefer to move to a larger market with a state of the art facility rather than deal with the mess in Milwaukee you are crazy. The only thing keeping the Bucks in Milwaukee is the fact that it is owned by fmr Senator Herb Kohl who has no heirs. And even that is unlikely to matter a whole lot in a few years.

You seem wholely oblivious to how teams are funded assets borrowed against. This is my profession. Shinn openly bragged about how much money he made when he sold the Hornets (again, saying someone lost money when they bought an asset for 32.5M and sold it for 318M is laughable). The reason the league took it over is because they wanted to keep the team in NO and the presumed buyer had informed the league he wanted to move the team. Rather than give the NBA a black eye for pulling out of NO in their time of need they paid 318M and sold it for the same to Benson a year later.

Did McCourt lose money when MLB forced him to sell the Dodgers? No. Of course not. He bought the team almost exclusively on credit, using his parking lots in Boston as collateral, for 430M. He used the team as his toybox, putting 27 friends and family on the payroll. He borrowed against it to buy 4 homes in the LA area, the largest one for 15M that was never used outside of his wife periodically using the pool. Hell, he even declared bankruptcy. He still pocketed over a billion dollars. Shinn wasn't quite so lucky but he did put >180M in his pocket when he sold the Hornets. And who knows where the debt came from. It was likely used to help his many other business ventures through some really rough times. Yet you use that debt, much of which has nothing to do with the teams, as evidence of the business doing poorly.

Cuban has lost money on the Mavs? GTFO. Seriously. Your evidence is a nuisance lawsuit that was thrown out? The Mavs are conservatively worth 700M. He paid 300. GTFO NOW.

Your understanding of business is subpar. You can't continue to use debt service AND inflation and its absurd to do so. When you finance the purchase of a franchise you use the low loan rates partly as a hedge against inflation. Someone else (the bank) is taking those risks.

As for Ratner, he bought the team so he could build the Barclay center. And he made plenty off the $1B building to more than offset any perceived inflationary (read: non-existent) losses.

[Durins Baynes]

If you own a widget and can sell that widget for $6 it doesn't matter if the next guy that has a widget can only get $5.

1) It does, because it's a distortion. 1 guy can get $6, everyone else can only get 3-5 for it.
2) It's a theoretical $6, because to get the above market value the NBA has to let you do so (and they won't)

The fact that there is a city out there that will pay $625 for a team and can't buy one should tell you all you need to know about the Forbes valuations, especially considering the last several teams/portions of teams that have sold were sold for ~150-170% of those valuations.

The new CBA is increasing values, because teams are now more easily to be profitable. This trend should continue (though inflation is a factor too). But it was only a few years ago teams were selling for less than 300 mill, good solid franchises like the 76ers.

As far as the Bucks, well as a Bucks fan I can tell you you have gone off the deep end.

The NBA is definitely going to push Milwaukee to play ball, everyone knows this, and long term if the Kings can get their act together the Bucks likely will too... but the timeframe for doing this is still years away. Kohl is still owner for a while, and says he won't sell to an owner who will move the team, and the NBA doesn't want to approve such an action until the city gets a chance to play ball. That takes years and years (and the process has barely started), whereas Seattle expansion is something that will likely start moving as soon as the TV deal is done. It's not like the NBA can't find alternative cities to use as leverage against Milwaukee- San Jose for example. But San Jose or other cities won't be bidding so far above market, because they're not as desperate (or rich) as the guys who want a team back in Seattle.

You seem wholely oblivious to how teams are funded assets borrowed against. This is my profession. Shinn openly bragged about how much money he made when he sold the Hornets (again, saying someone lost money when they bought an asset for 32.5M and sold it for 318M is laughable). The reason the league took it over is because they wanted to keep the team in NO and the presumed buyer had informed the league he wanted to move the team. Rather than give the NBA a black eye for pulling out of NO in their time of need they paid 318M and sold it for the same to Benson a year later.

Feel free to link me to Shinn's bragging. I'm going off the widely reported coverage of Shinn having run out of money and being unable to keep managing a pro basketball team. Which makes sense, because if the team was profitable, he'd have hung on to it to help improve his sinking fortunes, and held protracted negotiations to bid the price up.
http://m.espn.go.com/nba/story?storyId=5887687&lang=ES

After the long-stalled sale of the Hornets from longtime owner George Shinn to minority partner Gary Chouest collapsed for good in recent days, NBA officials moved forward with their proposal to purchase operational control of the team. The reason that the NBA felt the need to take this Expos-style step for the first time, sources said, is that the cash-strapped Shinn can no longer afford to run the team but also can't find a buyer.

If the Hornets were making money, Shinn would have had no need to sell them, would he?

And who knows where the debt came from. It was likely used to help his many other business ventures through some really rough times. Yet you use that debt, much of which has nothing to do with the teams, as evidence of the business doing poorly.

The bolded part is the bit that matters- you just don't know about the specifics. But clearly logic tells us Shinn would have had a buyer if the team was profitable (and wouldn't have been forced to sell so suddenly).

Cuban has lost money on the Mavs? GTFO. Seriously. Your evidence is a nuisance lawsuit that was thrown out? The Mavs are conservatively worth 700M. He paid 300. GTFO NOW.

The team is more valuable now than the $421 mill (inflation adjusted) he paid for it (Forbes estimates 685 mill), but on the other hand the team has lost money nearly every year he's owned it, which is why Perot sued him. Like I said, it's by design, he's got a plausible business rationale for doing it, but there is no question the way he has run it has lost money consistently, and not small amounts. The Mavs lost $125 mill in the last 10 years (more if we excluded last years $13mill profit), and the extra cost of things like debt, other expenses, tax, etc, would make that number even bigger. Losing money and value is not the same thing. NBA team should be able to make money, as well as add value.

Your understanding of business is subpar. You can't continue to use debt service AND inflation and its absurd to do so. When you finance the purchase of a franchise you use the low loan rates partly as a hedge against inflation. Someone else (the bank) is taking those risks.

Inflation isn't always separate to loans actually, in some cases interest rates are variable. Do you have evidence Cuban is using only non-variable loans? No? Didn't think so. Also, let's remember that inflation is separate from debt, because the inflation is being used to calculate the difference in things like purchase price which you misleadingly cite only in dollars, and not in adjusted dollars (to reflect the different value those dollars had at the time).

As for Ratner, he bought the team so he could build the Barclay center. And he made plenty off the $1B building to more than offset any perceived inflationary (read: non-existent) losses.

You've just ignored what I wrote. Ratner was in desperate straights, and was forced to sell 80% of his share of the team to get out of trouble. He clearly lost a tonne of money with the Nets, which I broke down for you. The others you ignore (of course). The reality is multiple owners have lost money, not "one ever" as you claimed.