We recently took a look at how the sale of Los Angeles Clippers is going to change how pro teams’ valuations are calculated based on how out-of-whack the $US2 billion price tag was compared to the previously perceived value.
Prior to the proposed Clippers sale to Steve Ballmer, the New York Knicks were considered the most valuable team in the NBA at $US1.4 billion, according to Forbes. Meanwhile, the Clippers were considered just the 13th most valuable team with a valuation of $US575 million.
The overriding implication is that NBA teams in general are worth a lot more than we thought.
To get a sense of how much teams might be worth, here is each team’s most recent valuation as well as the value of the team if raised by the same multiple as the Clippers’ sale price, which is 3.48 times bigger (cont. below).
Instead of $US1.4 billion, the New York Knicks are suddenly worth closer to $US5 billion, the Lakers may be worth $US4.7 billion, and the average team would be worth $US2.2 billion instead of $US634 million.
Of course, this is the extreme case and it is quite possible Ballmer overpaid just because he desperately wanted to own a team.
However, there are several reasons to believe the potential value of the franchise is much greater than the current value of $US575 million, including a new television contract in the next few years and a current operating income ($15.0 million in 2013) that is actually below average ($23.7 million) despite being in the huge Los Angeles market.
This sale also has the potential to impact franchise values in other sports.
Things really start look crazy if we consider the value of NFL franchises and if they are actually worth 3.48 times as much as their calculated Forbes.com value.
The Dallas Cowboys might actually be worth $US8.0 billion instead of their Forbes.com value of $US2.3 billion.
Of course, the Cowboys only play eight home games instead of 41 and they cannot sell their own television rights the way the Clippers can. But if there was open bidding for the Cowboys, $US8 billion may not be that far-fetched.
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