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How much is basketball worth


How The NBA Makes Money: Television, Merchandising, Ticket Sales

How the NBA Makes Money

The National Basketball Association has a reputation for being the most innovative of the major professional North American sports leagues, earning money from a combination of sources, including television rights, merchandising, and ticket sales.

Because it is not a public company, the NBA does not release detailed financial reports to the public. However, according to Forbes, which regularly compiles valuations of the 30 teams of the NBA, total revenue across the organization reached $8.76 billion in the 2018-19 season. Each one of the teams is worth at least $1 billion, and a team is worth on average $2.12 billion—about 14% higher than the 2017–18 season.

Key Takeaways

  • The NBA makes money primarily through television, merchandising, sponsorships, and tickets.
  • The 30 teams making up the NBA had an average valuation of $2.12 billion each in the 2018-19 season.
  • Across the 2018-19 season, the NBA generated about $8.76 billion in revenue.

Understanding the NBA

The NBA was founded after the other sports leagues (in 1946) and had to spend decades catching up to its entrenched counterparts in baseball and football. It was the first league to turn its all-star game into a three-day weekend loaded with events, the first to draw a significant portion of its revenues through merchandising.

The NBA is also the first to consciously develop its most marketable players into global media superstars, which has boosted popularity for the league overseas. The NBA broadcasts to every populated continent. While in the 1970s, rosters were almost uniformly American, at the start of the 2019-20 season, 108 out of 450 players on NBA rosters were from outside the United States, hailing from 38 countries.  

In North America, the NBA flourishes but does not dominate. Revenues are about half those of the highest-grossing sports league in the world, the National Football League, not that the two leagues are necessarily in competition.  Still, one of the largest differences between the leagues is the origin of the NBA's diverse revenue stream, which includes television, merchandising, sponsorships, and tickets.

The NBA has grown in popularity in the U.S. with the league moving past Major League Baseball as the second-most popular sport in the United States. However, with average TV ratings under 4.0, pro basketball still has plenty of room to grow domestically.

NBA's Television Revenue

Like other major sports leagues, television comprises a key part of the NBA’s business strategy. TV is an attractive option for many NBA fans since they can watch the game for free, minus the cost of their cable provider or TV service. Live sporting events remain popular despite the increasing trend of streaming TV programs and the widespread use of DVRs.

Between the cost of tickets to a live event, parking, and food, many fans opt to stay home to watch NBA games, which is a key reason why the NBA's advertising revenue and television contracts have increased over the years.

While the NFL’s television contracts are famously lucrative and are signed exclusively with national networks, the NBA broadcasted 277 regular-season games nationally in 2017-18—plus 90 or so playoff games. In the 2017-2018 season, NBA TV aired the most regular-season games with 106 followed by Disney's (DIS) ESPN (87), Warner Media's (TWX) TNT (67), and ABC (17). 

TV accounts for most of the NBA’s revenue. For the 2016-2017 season, TNT and ESPN re-upped their contracts to an estimated $24 billion in total. The nine-year deal earns the NBA approximately $2.6 billion per year. Even with a total of 400-odd active players making an average of close to $6.7 million annually (as of 2019-20), national TV contracts generate enough revenue to cover salaries and then some.

However, those national contracts still have almost 1,000 regular-season games unaccounted for. Filling in that gap, local TV contracts can gross between $9.4 million and $149 million annually per team (as of 2017).

NBA's Merchandise Deals

There’s another major contributor to the NBA revenue, and unlike the others, this one corresponds to something tangible. Merchandise accounts for well over a billion dollars annually, and in the 2017-2018 season, for the first time in the NBA's history, teams wore advertisements on their jerseys.

Jersey Patch Revenue

The jersey patch program was launched in 2016, and on average, the advertisements on the jerseys have netted teams $9.3 million annually. The early success led the NBA to extend the program in early 2019. Up to that point, the NBA had earned in excess of $150 million in new revenue.

Some of the advertisers include General Electric, Walt Disney Company, and Rakuten, which is a Japanese e-commerce company. The teams benefit as well; the Golden State Warriors, for example, have received an estimated amount of $20 million annually from Rakuten.

Sponsorships

A related component of the NBA's merchandising business has to do with sponsorships. As an example, in 2018 the Milwaukee Bucks opened a $524 million arena, Fiserv Forum, which has generated ample opportunity for sponsorships, premium seating, and more.

In June 2015, the NBA ended its long-standing partnership with Adidas and signed an eight-year, $1 billion contract with Nike (NKE). In all, this constituted a 245% increase per year over the previous deal.

NBA's Ticketing Business

You may be surprised that ticketing is actually not one of the primary sources of revenue for the NBA. It tends to lag behind some of the other revenue streams mentioned above. However, that's not to say that ticketing doesn't contribute at all.

According to ESPN, for the 2018-2019 season, teams saw an average of anywhere from just under 15,000 to just over 20,000 fans attend per home game. With tickets costing close to $74 on average (in the 2018-19 season), the money earned from ticket sales adds up quickly. Along with tickets, additional Basketball Related Income (BRI) includes concessions and other sales.

International Revenue

The NBA has been expanding internationally for many years, and it has become a key revenue source—especially China. It's estimated that China generates $500 million dollars in revenue annually. Part of that revenue includes the Chinese technology giant, Tencent's $1.5 billion deal to be the NBA exclusive digital partner.

With greater international appeal also comes international investors as well. For instance, Alibaba (BABA) Joe Tsai purchased a 49% stake in the Brooklyn Nets last year for a rumored $1.15 billion.

The international revenue stream is also tied to the NBA's decision to loosen its marketing rules surrounding putting advertising logos on jerseys. As a result, many international companies can now advertise with the NBA through the jersey patch program as well as other marketing initiatives. The expansion into China and throughout the globe is a strategic one and is likely to generate an increasingly larger share of the NBA's overall revenue for years to come.

Team Values

As the NBA’s popularity increases, team values grow far out of proportion. NBA teams are not sold that frequently, but when they are, records break every time. Over the last decade, the average sale price of a team has tripled.

Granted, that’s largely due to a single outlier: the 2014 sale of the Los Angeles Clippers, who went for an unprecedented $2 billion. Even discounting that sale, the remaining prices show that NBA owners and prospective owners clearly expect revenues to augment even further in the next few years.

Future Challenges

There are a number of key challenges facing the NBA, even as professional basketball continues to grow in popularity in the U.S. and elsewhere around the world—and as individual teams balloon in value. For one thing, not every team is equally valuable or profitable. Last year, the Cleveland Cavaliers lost money on an operating basis and declined by about 4% in value to $1.28 billion, per Forbes.

Multiple Revenue Challenges

Another important component of the NBA's finances is its revenue-sharing system. Like other major sports leagues, the NBA shares non-basketball related revenue between teams in order to address inequalities across different markets around the country. All teams pool their eligible revenue together to redistribute it from teams with higher revenues to those with lower. Each team then receives revenue equal to the salary cap for that year.

Other challenges to the NBA's revenue may include the continuing trend away from television viewing as other technologies have grown increasingly popular in recent years. So far, live sports have tended to remain safe from these changes, but that may not last forever.

COVID-19 Impact on the NBA

With the coronavirus pandemic, teams were forced into playing in a bubble to prevent the spread of the virus. Although it has been largely a success with controlling any major coronavirus breakouts, teams and the NBA are expected to take a significant revenue hit in 2020 and 2021. The shortened 72-game season for 2020 has led to less advertising and TV revenue. The loss of ticket sales alone is estimated to cost each team nearly $2 million on average per game.

Although the future is uncertain, any resolution to the pandemic will undoubtedly help the NBA get back to a normal schedule with fans in the stands. Whether normalcy returns in 2021 or 2022, the extent of that normalcy remains uncertain.

What is the NBA worth? Team Values & Revenue

How much is NBA worth?

Introduction

The National Basketball Association (NBA) is the top professional basketball league in the US.

The league was founded in New York City on June 6, 1946, as the Basketball Association of America (BAA).

In 1949, the BAA merged with the National Basketball League (NBL) to form the National Basketball Association.

By the end of the 1970s, the NBA was plagued by money-losing franchises, limited national appeal, declining television ratings, and low attendance. However, the 80s saw the NBA league grow enormously, and a lot of that had to do with the rivalry of Larry Bird and Magic Johnson.

In the 10 seasons of the 1980s, Magic Johnson led the Lakers to five titles, while Larry Bird led the Celtics to three titles.

Jordan entered the league in 1984 with the Chicago Bulls, driving even more interest in the league. MJ led the Bulls to six NBA championships and earned the NBA’s Most Valuable Player Award five times.

In 2014, Michael Jordan became the first billionaire player in NBA history.

© Guliver / Getty Images

How Does The NBA Make Money?

NBA has a reputation for being the most innovative of the major professional North American sports leagues, earning money from a combination of merchandise deals, licensing, and TV deals.

Merchandise Deals

Merchandise accounted for more than $1.1 billion in the 2017-2018 season. That season was the first one in the National Basketball Association’s history when teams were allowed to put advertisements on their jersey.

For the 2018-2019 season, the revenue from merchandise grew by 15.89 percent to 1.29 billion.

Licensing & Sponsorship

In July 2015, the NBA signed an 8-year, $1 billion deal with Nike, which is about a 245% annual increase from the previous deal with Adidas.

Mark Parker, Nike president and CEO, stated: ”We’re excited to bring the full power of our global reach, innovation, and creativity to partner with the NBA and grow the game in a way only Nike can.”

In 2019, Take-Two Interactive Software Inc. signed a deal with NBA for approximately $1.1 billion over 7 years. The National Basketball Association also has a licensing agreement with Electronic Arts for the NBA Live series.

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Television Rights

Basketball is the second most-watched sport in the United States, behind football.

In 2016, the NBA made a deal with ESPN and Turner Sport (a subsidiary of AT&T’s WarnerMedia) worth $2. 6 billion a year, for a total value of $24 billion over nine years.

Ted Leonsis, chairman of the league’s media committee, said at the time:

”There’s never been a better time to be an owner of an NBA franchise – or, frankly, any professional sports team.”

Other Streams Of Revenue
  • a sponsorship deal was agreed between the NBA and Las Vegas casino resort titan MGM to provide sportsbook services;
  • NBA also has a streaming service. NBA TV costs $6.99 per month or $59.99 per year.

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How much is the NBA worth?

NBA brought in $7.4 billion in revenue during 2017, which represents a 25% increase from the previous season. In 2017, the average NBA team was worth a record $1.65 billion. This is the first time in the history of the NBA that every team is worth over $1 billion.

Forbes’ senior editor Kurt Badenhausen said in 2018: ”Investor interest in the NBA is enormous right now, thanks to the league’s strong current economic environment. ” 

In 2018, the NBA generated $8 billion in revenue, with each team awarded $255 million revenue from the league.

In 2019, The NBA’s 30 teams generated a record $8.8 billion in revenue, up 10 percent over the previous year. 

In early 2020, the 30 teams making up the National Basketball Association have an average valuation of $2.12 billion each. The figure rose 14% from 2019, the highest rate among the major four American sports leagues.

The New York Knicks are worth $4.6 billion, up 15 percent from a year ago, due to a blockbuster local TV deal and a renovation of their arena. Owner James Dolan said in a statement: ”I am not selling, but I am determined to find the right leader for the Knicks who will ensure the long-term success of the team.”

© Guliver / Getty Images

In 2020, the Toronto Raptors saw the largest year-over-year increase with their franchise value rising 25 percent to $2.1 billion.

Here is the current value of the top 10 NBA teams:

#10 Toronto Raptors – $2. 48 billion

#9 Dallas Mavericks – $2.7 billion

#8 Houston Rockets – $2.75 billion

#7 Brooklyn Nets – $3.2 billion

#6 Los Angeles Clippers – $2.33 billion

#5 Boston Celtics – $3.55 billion

#4 Chicago Bulls – $3.65 billion

#3 Los Angeles Lakers – $5.5 billion

#2 Golden State Warriors – $5.6 billion

#1 New York Knicks – $5.8 billion

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