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Joe Tsai speak to brave new world of sports betting, crypto, international media ... winning

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2021 NBA Playoffs - Milwaukee Bucks v Brooklyn Nets Photo by Nathaniel S. Butler/NBAE via Getty Images

In an interview with Sportico’s Brendan Coffey, Nets governor Joe Tsai talks about how he sees the Nets business future — as well as about what he sees on the court — and how the two mesh.

Bottom line in the wide-ranging interview, Tsai tells Coffey that there’s a lot more value that can be extracted from the Nets but that the key is winning.

“We need to win a championship,” said Tsai.

In sports, winning is key to adding value to media, betting and blockchain efforts down the road, Coffey quotes Tsai as saying.

“Media, sports betting, crypto—we see all those things converging a little bit,” Tsai explained. “You can’t talk about sports betting these days without thinking how that affects your media rights. And maybe, for the betting fan base, injecting a little bit of crypto will be interesting.”

And he notes, “Sports sits in the middle of this because we own the intellectual property. Without the IP (the intellectual property, that is the team), no one can do anything. Having that is almost priceless.”

Indeed, the Nets’ value has risen not just among NBA teams, but across the world of pro sports. In the period between 2010 and 2020, the value of the franchise grew by 773 percent, third among all professional sports teams, behind only the Warriors and Paris Saint Germain, the French soccer team that’s following the Nets model by signing every possible superstar. Sportico’s latest valuation of the Nets puts the franchise at $3.4 billion, fourth in the NBA.

Although Tsai believes he paid full value for the franchise when he took control two years ago, he also believes that he and his team saw value that others might not have in international media rights, particularly in the Asia market ... and not just China where games still are blacked out.

Coffey quotes Rich Tao, who is part of Tsai’s so-called “rag tag team” that manages his sports investments...

It’s not news that China is a massive market—its basketball fan base is estimated to be the size of the entire U.S. population—but Tsai’s team believed international media rights were far undervalued based on domestic contracts.

Roughly speaking, Tao said, Chinese media was generating viewership and engagement numbers similar to the U.S., but they were paying fees perhaps one-twentieth of the multi-billion-dollar U.S. media deals the NBA had at the time. While American consumers are wealthier than Chinese ones, the disparity still implies foreign rights are deeply discounted. “Our instinct is that the rights and value… in Asia are going to go up substantially,” said Tao.

They’re not just talking about China. Tsai says data shows southeast Asian countries are hotbeds of NBA interest. “Indonesia, the Philippines—those are potentially big markets the NBA can enter,” he said. The Philippines, for example, generates some of the largest web traffic and Facebook engagement for the NBA.

(Indeed, the English-speaking Philippines provides a lot of web traffic for NetsDaily as well, more in fact that China.)

Tsai, most of whose wealth derives from Chinese e-commerce giant Alibaba, has gone beyond the Nets and Barclays in his sports investing. He has a minority stake in the Premier Lacrosse League, as well as minority stakes in L.A.F.C. and G2 eSports plus two franchises in the National Lacrosse league. Still, he says, the Nets remain the centerpiece of his sports investing ... and he doesn’t plan to make any other big investments until the Nets “show some progress” by winning a championship.

Coffey also writes that Mikhail Prokhorov and Dmitry Razumov sought out Tsai in 2017. not the other way around. Initially, Coffey says, Tsai wasn’t that interested in just a minority stake, particularly when he saw the details of the proposed sale of 49 percent.

“I was putting up half the money [of the team’s value], and then I got a term sheet, and I’m treated like I own one percent. I’m like, ‘C’mon, I’m a lawyer. I know how to read term sheets, this doesn’t give me any rights,’” Tsai recalled to Coffey.

Eventually, things changed and Prokhorov agreed to sell majority control to Tsai, then moved things up from January 2021 to October 2019.