What is “value” in the NBA? Is it wins? Is it bang-for-the-buck? Is it rooted in absurd television deals? Well, Forbes announced its annual valuations of the National Basketball Association’s 30 teams, naming—surprise!— the usually hapless New York Knicks as the most valuable team worth $1.4 billion, up 27 percent over last season. The Cleveland Cavaliers are slotted 19th overall, coming in at $515 million, a 19 percent jump over last year’s valuation1.
Over the course of 2013, Forbes forecasts that the Cavaliers pulled in $145 million in revenue, good enough to be among the top 12 in the league. Their operating income, however, as categorized as their earnings before interest, taxes, depreciation and amortization, slots in at $10.8 million—better than just eight other NBA franchises. Worse, the Cavaliers are ranked as one of the league’s worst teams for the money (29th overall), having average player expenses (salaries, benefits and bonuses) of $63 million and just 64 wins over the last three seasons with nothing in the way of playoff appearances.
So how’d the Knicks do it? A three-year, $1 billion renovation of Madison Square Garden certainly helps—it pushed the Knicks’ revenue to $287 million, net of revenue sharing. The Knicks’ average TV rating on the MSG Network experienced a 71 percent jump from the previous season, as they made the second round of the playoffs for the first time since 2000. The playoff run and arena renovation helped the Knicks generate operating income of $96 million–reportedly a record for an NBA franchise. For more evidence of the large-market television deals playing a role in a way that would make baseball fans blush, cable money pushed the Lakers’ revenue to a record $295 million, net of revenue sharing2. (The Lake Show’s revenue sharing bill is roughly twice the size of the tab for the Knicks, but the Knicks get a break due to their $1 billion investment in Madison Square Garden.) More proof that TV rules the roost: Even with revenue sharing and a $29.3 million luxury tax bill that comes with the territory of having the NBA’s highest payroll, the Lakers turned an operating profit of $66 million, second highest in the NBA, roughly six times that of the Cavaliers.
For those wondering, the Cavs do have the seventh-best television deal in the league, one which nets the team an average of $25 million per season, but one that is also up at the end of the 2015-16 NBA season—the very season All-Star point guard Kyrie Irving has a $9.2 million qualifying offer with the team.
(AP Photo/Jason Miller)
- Per Forbes, the average NBA team is now worth $634 million, 25 percent more than a year ago. [↩]
- The Lakers inked a 20-year deal with Time Warner Cable for the creation of two new RSNs — one in English and one in Spanish — worth $200 million annually beginning with the 2012-13 season. Last season the team received $122 million, more than 3.5 times more than what the team received from its share of revenue from the NBA’s national television rights partners ESPN/ABC and TNT. [↩]