Monday, March 24, 2014

The Money of the NBA

Although David Stern may not be the most popular guy to basketball fans, he is certainly leaving the NBA in pretty good shape. Since falling into the hands of Stern in 1984, the NBA has done a lot of growing, both domestically and internationally. In fact, the playoffs are now broadcast live in 215 countries around the world. So, while NBA teams begin to look toward the quickly-approaching playoffs, we can look at the money behind the NBA.

Revenue and Worth

The NBA’s revenues are no longer counted in millions of dollars, like they were when Stern took over. Instead, the revenues totaled $4.6 billion for the 30 teams last year. Altogether, the 30 franchises of the league are worth $19 billion, compared to $400 million for the 23 franchises in 1984. Last season’s gate receipts totaled $1.3 billion around the league and the salary cap has reached the $58 million mark for teams.

As far as operating income goes, which is the amount of profit gained after subtracting operation costs, the NBA saw the highest amount ever last year with an average of $23.7 million. The league’s NBA China venture, which began in 2008 with the help of $253 million in investments from the likes of the Walt Disney Co. and ESPN, is estimated to be worth approximately $1.5 billion.

The CBA and Television

The recent collective bargaining agreement between the NBA owners and players has had a huge impact on where the money of the NBA goes. According to that CBA, the amount of revenue to go to the players decreased from 57 percent to 50 percent. The CBA also had an emphasis on revenue sharing, meaning that the lower revenue teams would be supplemented by the higher revenue ones. There will be an estimated $200 million changing hands this year based on the revenue sharing rules.

With so many experts in fields such as negotiations and business acquisition financing, the NBA is making plenty of money through TV contracts as well. The current set of contracts with TNT and ABC are set to expire after the 2015-2016 season. Those contracts are worth an annual average of $930 million. In local TV, the Lakers are showing that there is money to be made. The Lakers’ deal with Time Warner Cable earned the franchise $122 million last season as the first year of the 20-year, $3.6 billion deal.

Most Valuable Franchises

For the second-straight year, the New York Knicks are the NBA’s most valuable franchise. Up 27 percent from last year, the Knicks are worth $1.4 billion. The $1 billion renovation of Madison Square Garden and longest playoff run in over a dozen years pushed revenue to $287 million. The franchise’ operating income of $96 million last year is a record for an NBA franchise.

The second-highest valued franchise in the NBA is the Los Angeles Lakers, according to Forbes. The current value of the franchise is $1.35 billion with last year’s revenue totaling $295 million for the Lakers. However, the Lakers were charged the highest luxury tax-- $29.3 million—due to a payroll of $100 million last season. The Lakers also turned an operating profit of $66 million last season.

The NBA’s final billion-dollar franchise is the Chicago Bulls with a worth of exactly $1 billion. Thanks to four-straight years of leading the NBA in attendance, the Bulls always turn one of the highest revenues. Last year’s revenue for the Bulls totaled $195 million with an operating profit of $52 million. 

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