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NETS 2021: Financials, Forbes reveal team with rising value, big losses and a ‘billionaire back-up’

Phoenix Mercury v New York Liberty Photo by Steven Freeman/NBAE via Getty Images

The Nets and Barclays Center are in good shape, despite the shortfalls caused by the COVID pandemic. And in large part, that belief is based on having an owner in Joe Tsai who’s been willing to bankroll everything from big contracts to big losses, and an aggressive management.

That’s the bottom line after reviewing a slew of financial data provided by Forbes and Atlantic Yards/ Pacific Report over the past two days. Here’s the details.

Forbes was out Tuesday with its semi-annual NBA team rankings and the Nets are way up — 21 percent, the most of any team — over the past year, now being valued at $3.2 billion, seventh in the NBA, after the Knicks ($5.8B), Warriors ($5.6B), Lakers ($5.5B), Bulls ($3.65B), Celtics ($3.55B), and Clippers ($3.3B), as Norm Oder of Atlantic Yards/Pacific Park Report notes. Part of that is due to the rising tide that is lifting all NBA boats. Forbes noted...

The average NBA team value has risen 13% since February, to $2.48 billion, behind record sponsorship revenue and high expectations for the league’s next media rights deal.

That new rights deal, which would kick in 2025-26 when Kevin Durant is in his final year, may triple the value of North American TV and streaming rights from $2.6 billion a year to around $8 billion, according to more than one analyst. (It was the league’s current TV rights deal that helped limit league revenue losses to 12 percent during the pandemic, per Forbes.)

But there are other more local rationales for the Nets rise, including the team’s on-court prospects. The “basketball” aspect of the team’s valuation has doubled, from $929 million in 2020 to $2.196 billion now, per Forbes’ Mike Ozanian of Forbes.

There’s also the team’s aggressive management that most recently won a record-breaking jersey patch deal. As Ozanian notes in that same analysis, jersey patches are increasingly a big deal and the Nets have the biggest deal.

What began as nickel-and-dime advertising has rapidly increased into lucrative marketing agreements. For example, last month the Brooklyn Nets landed a jersey patch deal reportedly worth an NBA-record $30 million a year, one reason the value of the Nets rose 21% this year—more than any other team—to $3.2 billion.

Norman Oder of Atlantic Yards/Pacific Report also reports we are likely to see changes in the arena naming rights now that the jersey patch deal is set. Indeed, the deal with WeBull, the Chinese-owned online trading app, will pay BSE Global, Joe Tsai’s holding company, roughly three times what Barclays Bank pays annually for arena naming rights, making it “clearly undervalued,” as Oder rights.

Oder also thinks that Forbes undervalues Barclays Center, which is owned by the state but is operated by BSE Global. According to Forbes latest estimate, the arena contributes only $31 million to the team’s valuation!

That to me is somewhat arbitrary, especially since the arena in previous years was said to contribute $607 million and $577 million to the valuation.

Yes, the arena has not been profitable, especially this past year, but... the fact of an arena in Brooklyn, part of the nation’s media capital, gave the Nets an international platform to sell sponsorships, and served as a lure to superstars.

As Oder and Forbes’ Michael Ozanian reported Monday, the arena lost $52 million in the fiscal year that ended June 30. The arena, of course, was shuttered for nearly a year because of the pandemic. All of that loss was covered by Tsai, according to the financials — all public records — that Oder reviewed. That was, as Oder reported, “nearly four times as much as the $13.5 million that he contributed in the previous fiscal year” which was also somewhat effected by the pandemic. (Oder also noted that since the close of the fiscal year, Tsai also covered another $4.5 million in losses.)

Not to worry, notes Oder in his analysis. Tsai will save a lot of taxes because of the nature of the losses and as the financials note, the arena will remain “liquid” because of Tsai’s extraordinary resources —- and his willingness to use them. Call it the billionaire back-up, Oder reported. As the financials state, Barclays “will be able to satisfy its future liquidity needs, based primarily on the fact that a parent company with sufficient liquidity has committed to make any and all capital contributions to the Company as needed.”