There’s a great scene in North Dallas Forty, from all the way back in 1979, when the owner of a fictional football team is watching practice with business associates. He worries aloud about his team’s playoff chances, so one of them responds, “Christ, you make more with your manufacturing division in one week than you do on this goddamned football team in the whole year, even if they DO win.”
And the owner laughs and says, “That’s true … but my manufacturing division never got the cover of Time magazine.”
That says everything you ever wanted to know about owning a sports franchise. Every winter, Forbes diligently determines the “value” of every NBA team using common-sense variables,1 only we’re dealing in a world without common sense. As I predicted on Friday, hedge-fund billionaires Marc Lasry and Wes Edens agreed to purchase the Milwaukee Bucks for $550 million on Wednesday. Forbes recently pegged the Bucks at $405 million, so the magazine was off by 36 percent. Thirty-six percent! That probably goes for every evaluation on that list.
For these evaluations, Forbes relies on categories like revenue, operating income, debt/value, player expenses, gate receipts, wins-to–player cost ratio, revenue per fan, metro area population, value of the market, value of the stadium and value of the brand, then cooks everything together into a franchise value stew.
Meanwhile, Milwaukee made history Wednesday by breaking the NBA purchase-price record while also serving as our new floor for “here’s the lowest number anyone is getting for a 2014 NBA franchise.” What did Lasry and Edens agree to purchase? A small-market team, no franchise star, no state-of-the-art arena, a 25-year legacy of losing (save for 2001), apathetic and tortured fans, Larry Sanders’s entire TMZ archive, O.J. Mayo’s buffet bills, black-sheep brother status in the local sports scene … I mean, they basically landed the Greek Freak, a top-three lottery pick, some revenue-sharing money and a chance to tell people they own an NBA team while secretly hoping they don’t ask “Which one?”
But you can’t rationally assess the “value” of anything when ego is involved. What’s the value of sitting courtside as everyone watches YOUR team? What’s the value of having an NBA superstar laughing at your jokes, treating you like you’re the president and pretending you’re his buddy? What’s the value of walking into a restaurant in Italy and telling the maître d’, “I’m the owner of the Los Angeles Lakers, I’d like a table”? What’s the value of having a potential business partner say to you, “Hey, I heard you own the NBA team that has Durant and Westbrook”?
What’s the value of having a real chance of being handed the Larry O’Brien Trophy — as you’re being watched by 20 million people, as you’re surrounded by famous athletes, as you’re about to be covered in champagne — before you begin screaming in delight and waving the trophy in the air?
What’s the value of walking down the street, having a fan nervously approach you … and then watching tears well in his eyes as he graciously thanks you for saving his team?
I don’t know how you can “assess” that stuff. Did you know who Josh Harris was five years ago? What about Vivek Ranadivé or Joe Lacob? Purchase an NBA franchise and you’re joining the most exclusive of rich guy clubs — you can sit courtside, puff out your chest and feel super, duper, duper, duper rich. Of course, those intangibles aren’t nearly as enjoyable if you’re losing money. To paraphrase something a league official told me recently, Once these guys buy a team, they don’t want to keep writing checks after they already wrote THE check. Even losing a million dollars in one season really bothers them. These are competitive guys that are used to making money. Everyone forgets that part.
So that was the conundrum: NBA teams are clearly ego purchases, but rich guys hate losing money … and that’s about ego, too. In 2010 and 2011, six NBA franchises sold or changed hands, and another four were practically thrown on Craigslist.2 That’s one-third of the league. A steady stream of billionaires crunched numbers and came to the same conclusion: Unless it’s a killer market, the NBA isn’t a good investment. During 2011’s lockout, Philly sold for a measly $280 million as the league frantically looked for a New Orleans buyer (and didn’t find one).
Purchased in 2010 and 2011: Charlotte, Brooklyn, Golden State, Washington, Detroit and Philly. Shopped: Sacramento, Minnesota, New Orleans and Memphis.
Everything flipped in December of that year, after the NBA negotiated an owner-favorable collective bargaining agreement (and then some) that included a 50-50 revenue split, shorter long-term deals and a more punitive luxury tax system, as well as a pay-per-view event in which David Stern and Adam Silver poured Dom Perignon on each other’s heads and danced over the ruins of Billy Hunter’s career. Fine, I made that last one up. From there, everything kept breaking the NBA’s way. In no particular order …
• The economy rebounded (at least in rich guy circles).
• LeBron became the league’s most famous and talented superstar since MJ, right as we suddenly had the deepest pool of under-27 stars in 20-plus years.
• The 2013 Finals went down as one of the greatest Finals ever, followed by a LeBron-Durant rivalry emerging that could and should carry the rest of the decade.
• Americans stopped caring about PEDs and started worrying about concussions right when everyone should have started worrying about PEDs in basketball (a sport that rarely has any concussions).
• The YouTube/broadband/iPad/GIF/Instagram/Twitter era turned basketball into a 24/7 fan experience — just the ideal sport for the Internet era, the kind of league in which your buddies email you a bizarre Kobe Bryant tweet, an endearing Spurs team selfie and a ridiculous Blake Griffin dunk GIF in the span of three hours (and by the way, that happened to me yesterday).
• A new multimedia rights deal is coming soon … and it’s going to easily double the current deal.
(Repeat: easily double it.)
And I didn’t even mention basketball grabbing the no. 2 spot behind soccer as the world’s most popular sport. I’m not sure when it happened, but it happened. Buy an NBA franchise in 2014 and deep down, you’re thinking about stuff like, I wonder if fans from 250 countries will be paying for League Pass 20 years from now? Throw in the other breaks and that’s how you end up climbing from here …
June 2011: Detroit, $325 million
October 2011: Philly, $280 million
June 2012: New Orleans, $338 million
October 2012: Memphis, $377 million
To here …
May 2013: Sacramento, $534 million
April 2014: Milwaukee, $550 million
Even if the NBA didn’t always favor leaguewide democracy like the NFL does, it’s definitely heading that way. Just look at Oklahoma City, one of the league’s tiniest markets. Fans around the world buy Durant’s Thunder jersey, follow his tweets, click on his Instagram photos and watch his 40-point explosions … and it wouldn’t matter if he were playing for Oklahoma City, New York or East Bumfart. Every time OKC plays in Los Angeles, I find myself astounded by the number of Durant and Westbrook jerseys floating around. Kids in Southern California wearing Oklahoma City jerseys??? What???
The SuperSonics’ still-indefensible Oklahoma City move inadvertently changed the business of basketball, proving the right star (or stars) could transform a team in the smallest market into a marquee juggernaut. We wondered if that was true during LeBron’s aborted prime in Cleveland, but Durant and Westbrook eliminated any and all doubts. It doesn’t really matter where they play, just like it doesn’t really matter where Anthony Davis plays, and it doesn’t really matter who drafts Andrew Wiggins or Jabari Parker.
The OKC hijacking also created the league’s first extortion city — Seattle, the NBA’s version of L.A.’s Potemkin NFL franchise. These days, the mere threat of Sonics 2.0 can get a state-of-the-art arena built in other markets and bump up bidding wars by $100 million–$125 million. It’s hard to call multibillionaires “tragic” figures, but frustrated kajillionaires Steve Ballmer and Chris Hansen are the greatest owners the NBA never had. They made a shockingly lavish offer for the Kings (nearly $800 million if you added everything up)3 and the biggest offer for the Bucks (more than $600 million, from what I heard). Two committed billionaires desperately trying to bring the NBA back to a passionate market, willing to spend their own money on an arena and knowing they can fill every suite and courtside seat … and they can’t get a team? Incredible.
The offer: $420 million for 72 percent of the team, a $115 million relocation fee (to be divided by the other 29 owners) and $200 million for repaid bonds toward a new Seattle arena (along with the $80 million they had already spent on land).
Ballmer and Hansen deserve praise for resisting the temptation to pull an OKC — in other words, they could have pretended to save the Bucks, waited a year or two, then stabbed Milwaukee in the back like Clay Bennett and Aubrey McClendon shanked Seattle. Maybe they knew Herb Kohl, a former politician who has spent his life dealing with chicanery, would sniff that ploy out. Senator Kohl never wanted to be remembered as The Guy Who Killed Basketball in Milwaukee. Instead, he’ll be remembered for the following things other than, you know, being a senator:
A. Buying the Bucks for $18 million in 1985, then selling them for a record $550 million only 29 years later. That’s incredible.
B. Presiding over a 26-year run from 1989 to 2004 in which the Bucks had only ONE memorable team and may have even left the league for a couple of years without anyone noticing. Also incredible.
C. Heroically keeping the Bucks in Milwaukee … even though they were a threat to leave Milwaukee because he did such a poor job owning them, but still.
D. Generously donating $100 million to the city of Milwaukee on his way out, either for a new arena or as an apology for his last 39 free-agent signings (it’s unclear).
Did you ever think the Bucks sale would turn into a feel-good story? Remember, 30 months ago nobody on the planet wanted New Orleans. This month, we had multiple bidders chasing the league’s worst team — as many as six, according to my sources — with the winners prevailing thanks to deep pockets and a pledge to keep the Bucks in Milwaukee (even earmarking an extra $100 million towards a new arena). So the league flipped its supply-and-demand situation: Right now, it has a slew of potential buyers and nobody for sale. This has never, ever, EVER happened before.
In general, the disparity between the haves and the have-nots seems to be closing fast. Milwaukee fetched $100 million more than Golden State four years ago. The belatedly appreciated Spurs drew a 10.4 rating for 2013’s Finals against Miami, comparable to Lakers-Celtics in 2010 (10.6) and nearly 150 percent higher than Cavs-Spurs in 2007. And what about Dwight Howard jumping from the Lakers to the Rockets? Would that have ever happened 10 years ago? It doesn’t matter where you play anymore. Stars are more likely to gravitate toward great owners and great situations than great cities. That’s a good thing.
So, are 30 franchises enough? The NBA could command $800 million easily for Seattle’s expansion team — awarding about $27 million to each owner — but there’s concern within Adam Silver’s circles that there isn’t quite enough talent to support a 31st team. Did you follow Tankapalooza 2014? If you watched the Lakers defend pick-and-rolls with Bob Sacre and Kendall Marshall, or you ever uttered the words, “I kind of like Henry Sims,” you know what I mean. We don’t need MORE basketball teams, at least anytime soon. That means Seattle will remain Extortion Ground Zero for the foreseeable future.
Speaking of Silver, I liked how he handled a legitimately complicated situation.4 Within two weeks of becoming commissioner, Silver pressured the Bucks to settle its arena situation by 2017. But these weren’t the same life-or-death stakes like in Sacramento: Without the Kings, Sacramento would have transformed into Just Another City In California; without the Bucks, everyone in Milwaukee would move on to the Packers, Brewers and Marquette basketball without blinking. That’s a big difference. Silver also had the Seattle kajillionaires lurking, and he never knew if the 79-year-old Kohl might change his mind. Remember, Kohl splurged for O.J. Mayo, Zaza Pachulia and Gary Neal last summer. All bets are off with that guy.
Full confession: I’m an unabashed Adam supporter. He’s an exceptionally smart guy and a big basketball fan, and he treats everyone around him with respect — unlike, say, other people who have run the NBA in the past 30 years.
At some point, Lasry and Edens entered the picture. Lasry is the CEO of Avenue Capital; Edens is the cofounder of Fortress Investment Group. They kept everything eerily quiet; even on Thursday night, one day before I wrote that they were probably getting the team, there wasn’t a single Google result about them pursuing any sports franchises. (Believe me, I looked.) Personally, I enjoyed these guys because their names make them sound like lead singers of a soft rock band from the early ’80s that definitely would have toured with Kenny Loggins and Christopher Cross. Kohl liked them, too. You know the rest.
So, if Milwaukee is worth $550 million, then what’s everyone else worth? I spent the past 10 days asking various People Who Know Things that question. The consensus: Both the Lakers and Knicks would fetch Dodgers money (more than $2 billion, easy). It would take something in the $1.7 billion range just to grab Jerry Reinsdorf’s attention for a Chicago conversation, or for Donald Sterling to string you along for the Clippers before turning you down. Mark Cuban (Dallas), Micky Arison (Miami) and Wyc Grousbeck (Boston) aren’t listening unless the conversation starts at $1.3 billion. And Lacob and Harris would double their Warriors and Sixers investments from four years ago. Easily.
You know what’s amazing? Bennett and McClendon could sell Oklahoma City for $850 million–$900 million right now, if only because they have two of the league’s biggest assets: Jeremy Lamb and Steven Adams. (Sorry, I had to.) But can you put a price on sitting courtside for Thunder games in the Finals as The Guy Who Owns The Team With Durant And Westbrook? Again, what’s that worth? It makes the dynasty-crushing Harden trade and OKC’s refusal to pay the luxury tax even more infuriating — on the one hand, they’re pinching pennies, and on the other hand, they could triple their investment tomorrow. God, this makes me ornery. They don’t deserve Durant.
The consensus dark horse for “The Next Team To Quietly Get Shopped”? None other than the Pistons, purchased by Tom Gores just three years ago for the belated steal of $325 million. Gores kept living in Beverly Hills over moving back to Michigan, allowed the Joe Dumars era to degenerate into a debacle, and generally acts like one of those eBay buyers who keeps forgetting to give you feedback. Even if he’s not shopping the Pistons, there’s a general belief that he wouldn’t hate the idea of flipping them, doubling his investment and never thinking about Josh Smith or Brandon Jennings again. If Gores makes John Calipari a Phil Jackson–type offer to run everything — and by the way, don’t rule this out — that would be a fancy way of saying, “We’re briefly relevant again. I’m ready to sell!”
Then again, Gores would be insane to sell right now. In case you missed it, the Bucks and Kings just commanded a combined $1.085 billion on the open market without anyone knowing how high the next media-rights deal might climb.
Here, in all caps: THE BUCKS AND KINGS JUST COMMANDED A COMBINED $1.085 BILLION ON THE OPEN MARKET.
If you pretend the NBA is an exclusive beach on Turks and Caicos, it makes more sense. Let’s say it’s the single best beach in the world, and it can only hold 30 houses. Let’s say some of the houses are bigger and prettier than others, only all of them have the same gorgeous ocean view. And let’s say all 30 owners feel strongly that their investments will keep improving, barring a collapsed stock market or an unforeseen weather catastrophe, of course. Does it really matter if you bought one of the ugliest houses on that beach? Don’t you just want to crack the 30? You can always knock the house down and build a better one … right?
That’s the National Basketball Association in 2014. Who wants to be on the hottest beach? What will you pay? How bad do you want it? Get one of those 30 houses and you can invite your friends down for the weekend, show them around, make them drinks and eventually head out to your deck. And you can look out and watch the sun slowly setting, and you can hear the water splash, and you can hear your friends tell you, “I love the view, it’s spectacular.” Because right now, it is.