Forbes: Nets only NBA team to lose money over last year but valuation rises 9%

There’s good news and bad news from Forbes latest NBA team values. Like the rest of the league, the Nets evaluation has jumped to an estimated $3.5 billion, up around nine percent from the $3.2 billion Joe Tsai paid Mikhail Prokhorov for the team and Barclays Center in October 2019. On the other hand, Forbes estimates that the Nets were the only NBA team to lose money last year, around $34 million.

Here’s the basic breakdown. Forbes has the Brooklyn Nets as the seventh most valuable franchise, behind the Golden State Warriors, at $7.0 billion, the New York Knicks at $6.1 billion, the Los Angeles Lakers at $5.9 billion, the Chicago Bulls at $4.1 billion, the Boston Celtics at $4.0 billion, and the Los Angeles Clippers at $3.9 billion.

The Forbes valuation is in line with a previous assessment of $3.61 billion by Sportico.

Forbes seems to arrive at its number by relying on previous reporting by Josh Kosman and Brian Lewis of the Post and Norman Oder of Atlantic Yards/Pacific Park Report.

Brooklyn’s rough end to the 2021-22 season came with an even harsher financial blow, according to a New York Post report. According to a Post source, the Nets and Barclays Center suffered $50-$100 million losses for the 2021-22 season, despite setting records for attendance, ticket revenue, and sponsorships. On top of the losses, owner Joe Tsai owes $30 million for Barclays’ municipal bonds payments, and about $100 million in luxury taxes for exceeding the NBA’s salary cap.

As Oder writes Friday, this is not “a fully scientific enterprise” with large parts of the analysis based on sketchy reports. As a private entity, the Nets do not have to report much detail on their finances. (The Knicks, which is owned by a publicly traded company, must release much greater financial detail.)

Still, the Nets are benefiting from an overall rise in NBA valuations, as Forbes reported:

The average NBA team is now worth $2.86 billion, 15% more than a year ago, an impressive feat considering the stock market is down more than 15% over the same span. After arena debt service, league-wide revenue and operating income for the 2021-22 season were $10 billion and $2.7 billion, respectively—both record highs. The NBA is back on its pre-Covid growth trajectory, led by aggregate record sponsorship and advertising revenue at the team and league level, which totaled $1.35 billion last season, also an all-time high...

In other words, buying a team today means an owner can quickly begin to pocket cash and never have to put in another dime.

Even some losing teams make big profits, Forbes reported, noting that Tillman Fertitta, the Rockets owner has “pulled out at least $60 million a year, except for the 2020-21 season” which was shortened and otherwise hurt by the COVID-19 pandemic.

The Nets of course have had higher costs than most NBA teams, starting with players salaries, and last year’s disappointment and quick exit from the profitable post-season hurt the bottom line. Earlier this week, Kosman and Lewis wrote that the Nets also rank at the bottom of season ticket renewals.

Oder working with his own numbers as well as Forbes wrote this Friday.

Compared to the previous year, Forbes’ calculation of revenue shoes a jump from $212 million to $405 million, but a cut in the loss from just $80 million to $34 million. Player expenses rose from $156 million to $174 million, and gate receipts from $14 million (COVID) to $76 million.

The long-time critic and chronicler of the Atlantic Yards project also disputes some of the Forbes calculations, particularly when estimating the value of New York City, the nation’s biggest market and “media capital.”

Yes, the arena has not been profitable, 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.

Will the Nets continuing disappointment (on and off the court) hurt Tsai’s stated goal of mimicking the Warriors financial success? The Nets governor told Sportico two weeks before the Kevin Durant trade request last June 30 that he was “confident” annual revenue generated by the Nets and Barclays Center could “get to $500 million over the next two or three years.” Forbes wrote at around the same time that he hoped to get to a billion dollars within seven years. The Nets generated $343 million this past fiscal year, per Sportico.

Tsai has publicly said he will continue to invest in the team and arena and told NetsDaily last October that without luxury tax payments ($98 million for last season), the team would have made a profit. The Nets are on track to pay out about $108 million next season.

• NBA Team Values 2022: For The First Time In Two Decades, The Top Spot Goes To A Franchise That’s Not The Knicks Or Lakers - Mike Ozanian & Justin Teitelbaum - Forbes
• Forbes: despite losses, Brooklyn Nets (with arena company) now worth $3.5B, up 9%; league-wide gains lift all boats. Component values curiously recalculated. - Norman Oder - Atlantic Yards/Pacific Park Report