I’ve written recently about ownership of professional sports franchises, and how “ownership” shares can or cannot be achieved. As I’ve said and you probably already know, the major sports teams in the U.S. are extraordinarily valuable, running into billions of dollars.

How much each team is worth, though, depends on factors that for the most part don’t affect the valuations of other large, complex businesses. Yes, team and company values change with profits, stock prices, and investor sentiment, but the value of a sports franchise fluctuates according to other factors, too.

For example, teams in large, wealthier markets generally have an advantage when it comes to value. For example, California is the state with the largest population in the U.S. and boasts the most sports teams of any state with a total of 15. Large populations in their respective markets means (usually) more ticket sales, concession sales, etc. Also, the media markets in areas with large populations are much more lucrative for the team. Broadcast fees contribute to the bottom line and team value. For example, in 2020 the top three Major League Baseball in annual broadcast revenue were in large markets: The L.A. Dodgers ($239 million), The L.A. Angels ($138 million), and the Chicago White Sox ($120 million). At the bottom were the smaller market teams, such as the Colorado Rockies ($42 million), Milwaukee Brewers ($28 million), and the Miami Marlins ($20 million).

As for the NBA, which is the main concern of this article, a different team has emerged as the most valuable basketball franchise: The Golden State Warriors. This is the first time in 20 years that a team other than the New York Knicks or the Los Angeles Lakers has topped the list of most valuable NBA franchises. Even with the stock market dropping 15% from one year ago, the average NBA team is now worth $2.86 billion over that same timeframe. The Warriors are now estimated to be worth $7 billion, a 25% premium over its 2021 valuation.

I guess winning a championship has something to do with it. The Warriors won it all in 2022. The NY Knicks team was in the championship series twice – 1970 and 1973 – but lost both times. They have yet to win a championship title. However, the Knicks are in such a huge market. It is a member of the Atlantic Division of the Eastern Conference and plays its home games at Madison Square Garden, an arena they share with the New York Rangers of the National Hockey League. They are one of two NBA teams located in New York City; the other team is the Brooklyn Nets. Again, the larger the market, the more it adds to a team’s worth.

TV accounts for most of the NBA’s revenue. For the 2016-2017 season, TNT and ESPN renewed their contracts for an estimated $24 billion in total. The nine-year deal earns the NBA approximately $2.6 billion per year. The larger the market the team is located in, the more money the team makes. So, it’s only logical that the Warrior’s valuation is higher than most teams’ worth, as California has eight teams in two of the largest markets: Los Angeles (second) and the Bay Area (sixth).

During the 2021-22 season, the Warriors generated the most revenue ($765 million after paying their revenue-sharing check) and the most operating income ($206 million) in NBA history as they won their fourth title in eight years. Market + TV Revenue + Titles = Megabucks.

The future looks even brighter for the NBA. Growth should come from the league’s next national media deal, beginning with the 2025-26 season and should be worth at least double its current $2.66 billion-a-year agreement with ESPN and Turner Sports.

As mentioned, there’s a different formula for sports teams than there is for corporations. A big business can be located in a small market but sell worldwide. Apple Computer, one of the most valuable companies in the world, is located in the Bay Area, but if it decided to move operations to Montana sales would probably not be affected, nor would its valuation. The same could not be said for the Warriors if they moved to Billings.

Those of you who invest or have the entrepreneurial spirit will want to take these factors into consideration. And perhaps it’s the old real estate axiom that decides profitability in the sports world: Location, location, location.

NBA Team Valuations

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