Total Value: The sum of the fair-market value of an NBA franchise combined with the value of team-related businesses and real estate holdings.

Team Value: NBA franchise valuation, derived from metrics by which basketball team transactions occur, including aggregating local and national revenues and factoring in a team-specific multiplier. This represents the fair-market value of the team itself, excluding related businesses held by its owners.

Team-Related Businesses and Real Estate Holdings: The value of a franchise or franchise owner's equity in team-related businesses—that is, both those on the team's balance sheet and held in distinct corporate entities—as well as government-assessed real estate related to venue, practice facilities, and adjacent developments. Examples include: the Boston Celtics' 20% interest in NBC Sports Boston, a regional sports network; and the Dallas Mavericks' four subsidiaries which own 11 parcels of land. For franchises that do not own their arenas, the value of a team's lease—often with advantageous terms negotiated with municipal or state authorities—is captured in the Team Value category.

Total Team Revenue: Cumulative amount of National Revenue and Local Revenue.

National Revenue: Each franchise's equal proportion of league-shared revenue, derived predominantly from NBA contracts with media and advertising partners. This consists of:

(i.) National media (broadcast deals with SiriusXM Radio, Walt Disney Company, and WarnerMedia; distributions related to NBA League Pass pay-per-view; sum-total of international and other broadcast agreements).

(ii.) League sponsorship (e.g., Tissot SA, Nike, Inc., State Farm Mutual Automobile Insurance Co., and PepsiCo's Gatorade brand) and licensed merchandise royalties (through league subsidiary NBA Properties, Inc.).

(iii.) Distributions and dividends related to NBA Media Ventures, LLC (the league's digital media arm, which incorporates some retail operations), NBATV (a cable television channel owned by the league and operated by WarnerMedia), and NBA China LP (when applicable, as described further below).

Local Revenue: Revenue generated by each franchise independent of league distributions. This is comprised of:

(i.) Stadium, which includes: ticket sales; premium seating (luxury suite leases and club seating); new personal seat license sales (e.g., Golden State Warriors); deferred and supplemental revenue from personal seat licenses, when applicable; parking; team's share of concessions; and non-basketball ("third-party" or "marquee") events when venue is controlled by team.

(ii.) Sponsorship, which includes: naming rights, advertising, corporate partnerships, and local merchandising (distinct from league licensing royalties in National Revenue).

(iii.) Media, which includes local TV and radio (e.g., for the Brooklyn Nets: YES Network and WFAN-AM/FM).

2019-20 Season: Valuations are based on the NBA's most recently completed, 2019-20 season (which concluded October 11, 2020). However, specific adjustments were made to account for the particularities posed by the pandemic (see, COVID-19 Adjustment, below).

Full Transparency

Sportico is committed to transparency, including provision of detailed methodology and sourcing information below. For any additional questions, please contact senior sports valuations and legal reporter Peter J. Schwartz at pschwartz@sportico.com. Junior sports business reporter Randall Williams assisted in the compilation of this report.


Fair Market Franchise Valuations

To derive the fair market value of the 30 NBA franchises, Sportico calculated each team's revenue relying on publicly available information and financial records—and interviews with those knowledgeable of team finances, including seven sports bankers and attorneys who actively work on NBA transactions. We traded candor for anonymity. This information was vetted by multiple team or parent company CEOs, presidents, chief financial officers, and media relations personnel, as well as industry experts, investors, and sports-focused economists.

Revenue totals were then subject to a team-specific multiplier, which, based on interviews with multiple sports bankers, remains the only reliable manner by which transactions occur, due to dramatic fluctuations of earnings before interest, taxes and amortization (EBITA), year-over-year, based on salary cap spending and special expenses.

The team-specific multipliers were based on multiple factors, including: historical sales, market (size, saturation, and interest by prospective owners), strength of brand, on-field performance (historical and recent), terms of facility lease, debt burden, and expected future team and league economics. These ranges varied from 6.00 times revenue (Memphis Grizzlies and seven other teams) to 9.75 times revenue (Los Angeles Lakers). In 2017, the Houston Rockets sold for approximately 9 times revenue.

Revenue was calculated based on analyses of data from industry sources and reports, as well as interviews with experts and those with knowledge of team and league finances (detailed below); together, this comprised hundreds of inputs of confirmed and estimated information from dozens of sources, which were amalgamated and presented to each team for review and comment.

Given the business disruption posted by the coronavirus pandemic, we calculated revenue for the 2018-19 season (the last to be completed uninterrupted), applied the multiplies to those figures as a baseline, and then made adjustments to factor in effects related to COVID-19 and the strength of each team's 2019-20 operations (for more see, COVID-19 Adjustment, below). Direct multiples of revenue for the 2019-20 season, therefore, were not used.

Sportico's valuations take into account league revenue sharing. In the NBA, ten teams pay into revenue sharing and twenty teams receive payment each year.


Team Review and Comments

Among the 30 NBA franchises, numerous teams participated with Sportico by providing or validating information; in total, 17 teams responded to our inquiries.

Six teams declined to comment: the Atlanta Hawks, Boston Celtics, Charlotte Hornets, Golden State Warriors, Miami Heat, and Orlando Magic. The New York Knicks also declined to comment but answered questions related to the public filings and other releases issued by its parent company, Madison Square Garden Sports Corp.


Financial and Industry Sources

Team and league financial information were derived from the following sources: NBA bond ratings by Fitch Ratings (including for the NBA itself, as well as affiliates Basketball Funding LLC and Hardwood Funding LLC); reports prepared by two separate investment banks for prospective sales by current owners of two separate franchises; Security and Exchange Commission filings for Madison Square Garden Sports Corp. (multiple 10-Ks), as well as those of related entities Madison Square Garden Entertainment (Schedule 14A) and MSG Networks Inc. (Schedule 14A); the 2017 NBA-NBPA Collective Bargaining Agreement, including Appendix J—standard Confidentiality Agreement; and analyses of historical team sales from 1999 to 2019, based on Sportico research.

Industry data sources include: the Association of Luxury Suite Directors (for club and luxury suite capacity, occupancy, and pricing); Team Marketing Report (fan spending and sponsorship information); individual team and sponsor websites; Chris Bigelow of the Bigelow Companies (per capita spending on stadium concessions); S&P Global Market Intelligence (subscriber, revenue, and cash flow data pertaining to six regional sports networks); The Canadian Radio-television and Telecommunications Commission's Discretionary and On-Demand Service data (pertaining to two separate TV outlets owned or partially owned by Toronto Raptors' parent entities); and multiple synopses related to Sinclair Broadcast Group's purchase of 22 sports-specific cable TV outlets in 2019.

Economists and professors who participated in Sportico's valuation reporting include: Dr. Dennis Howard, dean emeritus of Lundquist College of Business and Warsaw Sports Marketing Center, University of Oregon (valuation review); Dr. Daniel A. Rascher, professor at University of San Francisco and Stanford University (valuation methodology and Bay Area market); and David Abrams, professor at the Preston Robert Tisch Institute for Global Sport at New York University (valuations of sports facilities and arena operations companies). See also those listed in COVID-19 Adjustment section, below.

In addition to the sports bankers, team owners, and team executives discussed above, Sportico interviewed multiple hedge fund investors regarding methodology and results, including Max Chen, managing member of Crescent Capital Ventures, who has specialized knowledge of valuations and was a banker in an NBA franchise sale process. Additional interviews related to specific valuations components included Ed Desser of Desser Media, Inc. (to assess regional sports networks); and Marc Ganis of Sportscorp. Ltd. (valuation review, NBA's foreign ventures, and regional sports networks).


Government Sources

To assess team-owned real estate with consistency, Sportico included government property appraisals. Sources included: City and County of Denver Property Appraisal System (Colorado); City of Milwaukee, Property Assessment Database (Wisconsin); City and County of San Francisco, Office of Assessor-Recorder (California); Cook County Assessor's Office (Illinois); Dallas Central Appraisal System (Texas); District of Columbia Office of Tax and Revenue; Hennepin County Property Information (Minnesota); Los Angeles County Property Assessment Informational System (California); Multnomah County Property Value and Tax Graphs (Oregon); Salt Lake County Assessor (Utah); and Toronto Real Estate Board (Ontario).

To review the terms of teams' facility leases with municipal and state authorities, Sportico examined public documents from—or reported information pertaining to—the following entities: the Atlanta Fulton County Recreation Center (Georgia); Bexar County (Texas); City of Charlotte and the Auditorium Coliseum-Convention Center Authority (North Carolina); City of Dallas (Texas); City of Memphis (Tennessee); City of Minneapolis (Minnesota); City of Orlando (Florida); City of Sacramento (California); Downtown Development Authority (Detroit, Michigan); Empire State Development/Brooklyn Arena Local Development Corp. (New York); Gateway Economic Development Corporation of Greater Cleveland (Ohio); Harris County Sports Authority (Houston, Texas); Louisiana Stadium & Exposition District; City of Oklahoma City and Oklahoma City Public Property Authority; Marion County Convention and Recreational Facilities Authority and Capital Improvement Board of Managers of Marion County (Indiana); Miami-Dade County (Florida); Phoenix Arena Development Limited Partnership (Arizona); and Wisconsin Center District; or, summaries thereof from Marquette University Law School.

Sportico obtained additionally relevant information for the valuation of a regional sports network related to the Denver Nuggets from pleadings in Altitude Sports & Entertainment v. Comcast Corp. (U.S. District Court, District of Colorado).


Partial Exclusions

Any distributions from the league's NBA China LP business unit, amounts split with National Basketball Players Association, are accounted for within National Revenue. This applied, to a limited extent, to the 2018-19 season based on Sportico estimates; however, NBA China LP experienced significant business declines in 2019-20. The value of the business, itself, that can be ascribed to the league's ownership and, in turn, allocated to each team on a proportional basis, has not been assessed. The NBA's partners in this joint venture include the family of Hong Kong billionaire Li Ka-shing, Bank of China Group, Lenovo Group (through subsidiary Legend Holding), China Merchant Investments, the Chinese Government, The Coca-Cola Company, and the Walt Disney Company.


Exclusions

Excluded are any revenues derived by teams from the NBA 2K League, an e-gaming joint venture (50/50) between the NBA and Take-Two Interactive. The value of the venture, itself, proportional to each team's involvement, also has not been assessed at this nascent stage. The 22 teams that participate in the e-gaming venture include the Atlanta Hawks, Boston Celtics, Brooklyn Nets, Charlotte Hornets, Cleveland Cavaliers, Dallas Mavericks, Detroit Pistons, Golden State Warriors, Indiana Pacers, Los Angeles Lakers, Memphis Grizzlies, Miami Heat, Milwaukee Bucks, Minnesota Timberwolves, New York Knicks, Orlando Magic, Philadelphia 76ers, Portland Trailblazers, Sacramento Kings, Toronto Raptors, Utah Jazz, and Washington Wizards.

The operations of Planet Insurance Ltd., an entity owned by the 30 NBA franchises, are de minimis such that they would not affect team valuations and thus were not included.

Additionally, business operations related to the NBA's developmental league (through subsidiary NBA Development League Holdings LLC) and the Women's National Basketball Association (through subsidiaries WNBA Holdings LLC, WNBA, LLC; WNBA Enterprises, LLC; and WNBA Operations, LLC) were not included. WNBA teams in Brooklyn, Indianapolis, the District of Columbia, Minneapolis, and Phoenix share common owners with NBA teams in those markets.

• Brooklyn Nets: Valuation includes the Barclays Center's operating company, BSE Global, which team owner Joseph Tsai purchased in tandem with the franchise in a two-tranche transaction from 2018 to 2019. It does not include the value of the arena, itself, which is owned by an entity of the State of New York.

• Chicago Bulls: The Bulls and MLB's Chicago White Sox share common ownership, which, in turn, owns 50% of NBC Sports Chicago, a regional sports network that airs many of those teams' games. For purposes of this valuation, that 50% allotment was ascribed a 30:20 attribution in the White Sox' favor, given that there is more inventory dedicated to baseball games over the course of a broadcast year.

• Golden State Warriors: For businesses with high real estate values (such as hotels and stadia), it is common practice to include the full value in the transaction price, according to economist Ilhan Geckil, a managing director of consulting firm EconOne. Prospective buyers and sellers would then make purchase price adjustments pertaining to cash and debt thereafter. Pursuant to this norm—and since Sportico's valuations are based on the fair-market value for which the team and its holdings would sell (not net amounts)–the full value of the Warriors-owned Chase Center, as assessed by the City and County of San Francisco, has been included within the team-related business category. The Warriors, as sole owners of the venue, have the authority to sell it at their discretion.

• Indiana Pacers: The team's naming rights sponsor, Bankers Life (a subsidiary of CNO Financial Group), no longer pays the franchise; as a result, no such revenue has been recorded for the 2019-20 season. Despite the expiration of this sponsorship agreement, the venue has yet to be renamed and thus the sponsor information was listed in Sportico's data visualization of these valuations.

• Los Angeles Clippers: The value of real estate purchased by Clippers' owner Steve Ballmer for the team's new arena—more than $66 million based on widespread reporting and confirmed by Sportico—has been included in the franchise's valuation. Construction has yet to begin on the project itself, according to Clippers chief financial officer Eric Chan, and the development plan awaits further legal approvals. Note that once the multi-billion-dollar project begins in earnest, the value of the team is likely to increase significantly.

• Los Angeles Lakers: The Lakers' team-related business includes the equity value of its 50% stake in Spectrum SportsNet, as well as the share of the value of the Staples Center, owned by Lakers minority-owner Anschutz Entertainment Group (AEG), that is both attributable to the Lakers and proportional to AEG's ownership interest in the team. In turn, the value of the venue is based on amortized government assessments.

• New York Knicks: The Knicks' related business value includes stock held by the Dolan family in two publicly traded entities, Madison Square Garden Entertainment and MSG Networks Inc., which could sell in a transaction in tandem with the team–itself a part of a separate publicly traded company, Madison Square Garden Sports Corporation. The equity value of Class A stock in the two related entities (as of close of trading on 12/31/2020), as well as the estimated value of Class B stock in those companies–as held by the Dolan family, pursuant to information in SEC disclosures—were assessed, reduced proportionally to account for business segments related to the basketball team, and included. Premia were then applied to both holdings, based on the Dolan family's controlling interests and industry averages for take-overs in the entertainment sector (28.1%), which would be necessary in the event of a sale.

• Philadelphia 76ers: The 76ers and hockey's New Jersey Devils share common ownership. Unlike four other teams with shared NBA-NHL ownership, however, all ancillary businesses that affect valuation are in this case on a single team's books—the 76ers. As a result, the value of these entities are not split amongst the two teams and instead are allocated as basketball-related businesses. This includes stakes in Dignitas eSports, Elevate Sports Partners (a sports management company in partnership with the NFL's San Francisco 49ers), the Harris Blitzer Sports & Entertainment Venture Fund I (which incorporates 20 investments without outside capital and is valued at $22 million), Harris Blitzer's Innovation Lab, an option on 11-acres of land adjacent to the team's practice facility in Camden, N.J., and that facility itself. Not included is the value of Harris Blitzer's Venture Fund II, which is currently raising capital from outside investors toward a goal of $50 million.

• Toronto Raptors: The valuation of the team's interest in regional sports media includes two components: (i.) Equity ownership of NBATV Canada (formerly, Raptors NBA TV; solely owned by the Raptors' parent entity, Maple Leaf Sports and Entertainment); and (ii.) the value that the Raptors represent to team co-owner Rogers Communications, Inc.'s cable TV network, Sportsnet One, based on analyses of financial and programming data. Team-related property (split where applicable with sister entity, the NHL's Toronto Maple Leafs, and two real estate development joint-venturers, Cadillac Fairview Corporation and Lanterra Developments) were assessed using the currency exchange rate as of 12/31/2020.

• Washington Wizards: The valuation of the team's interest in regional sports media includes two components: (i.) Ownership's stake in NBC Sports Washington attributable to the team; and (ii.) to a far lesser extent, the value of the streaming platform Monumental Sports Network that is attributable to the Wizards. The value of team-related real estate holdings were split equally with sister entity, the NHL's Washington Capitals.

The average NBA team value depreciated 2% directly related to the business interruption and uncertainties caused by COVID-19 pandemic, based on a Sportico analysis. This included calculating all revenues for the last uninterrupted season, 2018-19, which, for most teams coincided with the fiscal year ending on June 30, 2019, and analyzing those results in connection with findings from the 2019-20 season. The decline ranged from less than 1% (Los Angeles Lakers) to 3% impact (Orlando Magic and New Orleans Pelicans), based on a confluence of COVID-19 infection rates (U.S. Center for Disease Control data), economic indicators, and team-specific factors. Our methodology for COVID-19 adjustments was vetted by economist Ilhan K. Geckil and Professor Max Raskin of NYU School of Law, a former official in the U.S. Department of the Treasury—both of whom additionally reviewed Sportico's broader methodology and valuation totals.

These findings are consistent with—and guided in part by—evaluations from industry experts. During a September 9, 2020 SporticoLive event, Ian Charles, the Managing Partner of the private equity firm Arctos Sports Partners, stated: "Fundamentally, sports franchise intrinsic value is a long-term durable asset with significant long-term revenue and cash flow growth... the 12 to 24 month increase in operating losses or reduction in positive cash flow should not have a significant impact on the intrinsic value of these franchises. If someone is selling control of these assets in next 12 to 24 months, there likely should be some purchase price adjustment, but it is [negligible]. We are talking 0% to 3% in our estimate."

The sale of the Utah Jazz (finalized in December 2020) and sale of a limited partnership in the Boston Celtics (August 2020) reflected no substantial discounts related to the effects of COVID-19.