The value of NBA franchises rose sharply in the past few years, as evidenced by the recent sale of the Atlanta Hawks. Some analysts thought that the market had become somewhat stagnant. That all changed when Steve Ballmer bought the Los Angeles Clippers in 2014 for over $1 billion. His investment breathed new life into the valuations of all NBA franchises. In 2013, the Atlanta Hawks were valued at $425 million. By the time the sold earlier this year, the price had risen to $850 million. That quick climb in price can be attributed to the effect the sale of the Clippers had on the NBA.
Bruce Levenson and his team at Atlanta Spirit LLC bought the Clippers in 2004. During their tenure with the team, they improved attendance but were never able to crack the top fifteen in attendance. Part of the reason was the team’s winning record. As that improved in the last few seasons the attendance went up steadily. Attendance is generally associated with on-the-court performance so this action was expected. The new owners, led by Grant Hill and Tony Ressler, saw sellout games as the Hawks made the NBA Playoffs.
So far this bump in valuation has not created a massive selloff of teams. It’s possible that could happen now that the average valuation has risen above $1 billion. Three NBA teams are now valued over $2 billion, with the Los Angeles Lakers leading the brigade at $2.6 billion. Not surprisingly, the three with the richest valuations are in the three largest media markets of the U.S of Chicago, New York, and Los Angeles. Team owners who bought it at much lower prices could be tempted to get their piece of the pie at a time when NBA attendance has hit an all-time record. Owning an NBA franchise has long been the past time of super-rich individuals who arguably might not need the money. That can always change in the event of estate planning or an illness. Right now there does not seem to be any signs that turnover is on the rise, but the valuations and the historical highs in attendance are probably tempting to owners in middle markets.
Middle markets generally have a tougher time drawing consistent attendance. In the event, they can land a superstar player like Lebron James, that can change. James’ stay in Miami helped pushed that team into the top 10 in terms of valuation and it’s likely the same could happen to the Cavaliers. The Cavs finished second in attendance in the league just behind the Chicago Bulls. That could push the valuation of the Cavs sky high in the next few years, especially if the performance were to improve.