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Sportico: Brooklyn Nets’ valuation keeps rising, but not as much as before ‘Big Three’ dream died

The Brooklyn Nets, like the rest of the NBA, are a very impressive property, now worth nearly $4 billion, per Sportico. Valuations across the NBA are rising and while the value of the franchise is up almost a billion dollars since Joe and Clara Wu Tsai bought in during the summer of 2019, the Nets aren’t growing as fast as the rest of the NBA, the sports financial site reported this week.

And the reason is likely that James Harden, Kyrie Irving and Kevin Durant all wanted out and a rebuild was underway. (18:31 in.)

“The valuation” as the report’s author, Kurt Badenhausen said on a Sportico podcast, “probably got a little bit ahead of itself. All the excitement around the superstars coming to Brooklyn. Tickets were going crazy, the sponsors were beating down the door seeking sponsorships. Revenue is going through the roof ... and then the bottom fell out.”

Specifically, the Nets are valued at $3.98 billion, up from the $3.2 billion the Tsais reportedly paid in 2019 and $3.5 billion estimated by Forbes a year ago. That puts them at No. 13 on the Sportico list. Still, Sportico notes that of all 30 NBA teams, the Nets increase of 17% since 2020 — roughly three percent per year — ranks as the lowest and is well off the league average of 70%. The Nets have also dropped in valuation ranking, going from sixth in 2021 to 13th. (The biggest increase in valuation, per Sportico, is that of the Phoenix Suns, whose value has shot up by 144%, largely because of what Matt Ishbia paid Robert Sarver of the team in February of last year. Just behind the Nets in smallest increases is the New York Knicks, up only 37%.)

Badenhauser also reported in the podcast that there has been a drop in ticket revenues, but doesn’t provide details. Per the Nets are 21st in the league this season so far at 17,418 a game or if you prefer to measure attendance by percentage of seats sold, 19th with 98.2% of Barclays Center sold out on average. That’s down from 16th and 11th respectively last season. In recent games, the Nets attendance has tailed off a bit, but insiders suggest that’s not a big concern ... and obviously, it was expected to some extent. (YES Network rating are also reportedly down, but early season numbers usually are.)

Norman Oder, the chronicler and critic of the larger Atlantic Yards project, noted that the Nets aren’t making a profit. He noted a report by the New York Post from last year that suggested big losses.

In the 2021-22 season, two fiscal years ago, the New York Post reported, the arena and team had lost between $50 million and $100 million.

He pointed as well to his own reporting on Barclays Center revenues.

[T]he team and arena have struggled, with Tsai most recently having to kick in $18 million to support arena operations in the most recent fiscal year. (In previous years, he contributed $38 million and $52 million.).

Around the same time, Joe Tsai told NetsDaily that the team would be profitable if it didn’t pay luxury taxes. Tsai has paid out $323 million in luxury taxes since he bought a 49% stake in the Nets back in late 2017.

“When you look at an NBA team, the cost is the cost, right? It’s the players salaries

“You have have a set of P&L (profit and loss) that’s before you pay the tax and a set of P&L that’s post-luxury tax. At least on a pre-luxury tax basis, we’re making money.”

Barring a surprise or a series of surprises between now and the trade deadline, Tsai is not expected to pay any luxury tax for this season. Brooklyn wants to stay below the luxury tax threshold this season and next so it can go into the 2025 free agency without fearing the repeater tax or other flexibility issues brought on by the new CBA.

One key indicator of the franchise’s health could come in how well it does in retaining and adding new sponsorship. Badenhauser noted that the Nets 2021 jersey sales deal. WeBull, the Chinese-owned financial site, is paying BSE Global, the Nets and Liberty parent company, $30 million a year for jersey rights. Will the Nets be able to get that bounce now that the “Big Three” are gone?

“When that deal was done,” Badenhausen said of WeBull, “the anticipation was this is a team that is going to be challenging for the NBA Finals every year, with the most, one of the most, high-profile teams in the league.”

Long playoff runs lead to a lot of exposure for sponsors (as well as big revenue streams for the franchise making the run.)

Oder also noted that the Tsais could cash out by selling up to a 20% minority stake to a private equity fund, so-called “family offices” which invest for billionaire, or sovereign wealth fund controlled by foreign governments. Qatar’s aggressive sports investment group, has agreed to buy a five percent stake in Monumental Sports, owner of the Washington Wizards and the WNBA’s Washington Mystics.

Overall, Sportico noted that the biggest growth in valuations, at least percentage-wise, is coming in some of the league’s smaller markets.

Not surprisingly, the Golden State Warriors with the big market, a likeable megastar in Steph Curry, and four NBA titles in the last nine seasons, top the Sportico estimate at $8.28 billion, followed by the Knicks and Lakers at $7.43 billion and $7.34 billion, respectively.