21st Century NBA Team Values Analysis

Posted on 30 October, 2019 by Dimitrije Curcic

 

In 2001, the NBA generated $2.5 billion in revenue from its teams. Ten years later it was $4 billion, and in 2018, the revenue grew to $8 billion.

NBA teams are earning more and more money for their owners, so it's not surprising that the value of NBA teams also rises each year. This article will focus on changes in NBA teams' market values in the 21st century, and how/if the on-court performance affects the value of the team.

 

Summary

  • On average, an NBA franchise in 2019 was worth $1.9 billion, while generating $227 million revenue and $60 million operating income
  • This is an 8-time jump in value, 3x jump in revenue, and 12x operating income increase since 2001
  • Majority of the most valuable teams hasn't been performing according to their value
  • Performance and superstar players on the roster are important factors in the value of smaller market teams

 

How did the values of NBA teams change over the years?

The graphic below shows how the net worth of the NBA's 15 most valuable teams changed from 2001 until 2019:

 

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The 2010-11 season was a breaking point. After the league signed a new CBA in 2011, the average value of NBA franchises increased by 28.9% in just one year. This was the largest increase in team values since 2001 by a wide margin (14% in 2003 is in second place).

An even bigger jump occurred during the 2013-14 season when the average team values jumped by unreal 74.4%. This was also the first season where the average team value exceeded $1 billion.

The graphics below show 5 most and least valuable teams over the past 18 years: 

 

 

 

The New York Knicks and the Los Angeles Lakers are in a class of their own, and their value isn't the slightest affected by their performance on the court.

The Knicks have league-low 5 playoffs appearances over the last 19 years but managed to stay as the most valuable NBA franchise.

On the other end, Atlanta (26th in value), Memphis (27th), and Milwaukee (29th) have 10 postseason appearances. The New Orleans Pelicans, the least valuable NBA team, have 7. In spite of the better on-court performance, all these teams are 3-4 times less valuable than the Knicks.

 

Value vs performance - are big market teams overvalued?

If we can find one downside of the NBA business, it's that the results on the court are not affecting team values in a major way. In fact, in the 2017-18 NBA season, only 4 of the NBA's 10 most valuable franchises made the Playoffs.

Our data show that in the NBA, the most successful team on the court is not the most valuable team. Market size, brand, ticket prices are more important factors - look no further than the New York Knicks.

However, when we put the on-court results in the equation, things look a lot different. We've ranked all NBA teams by value and regular-season wins to see which teams "overperformed" and "underperformed" relative to their value:

 

 

 

The San Antonio Spurs are the most productive NBA team, providing the best results for a given value. They have been the NBA's most successful franchise since 2001. The Spurs completed the 2018-19 season as their 22nd straight winning season (tied for all-time best), and they managed to accomplish this unreal success despite being only the 11th most valuable team over the past 19 years.

Meantime, the Knicks are on the opposite side of the fence - they have the NBA's second-worst regular-season record since 2001 while still being the most valuable franchise.

A noticeable discrepancy between the NBA's two conferences has been the topic of conversation in the NBA circles. Over the past 19 seasons, only 7 times a team from the East won the NBA title. 10 out of 15 teams from the East average less than 40 wins per season in the 21st century, while only 5 Western teams are below 40.

At the same time, teams from the East have a bigger market value - on average, the Eastern team is worth around $651 million per season since 2001, while the average team from the West worths around $634 million. 

Diving a bit deeper, value and performance among the NBA divisions have an interesting distribution. All Western divisions have a better winning percentage than any division from the East, even though the market value of Eastern divisions overpowers the West. 

 

 

 

How NBA superstars affect small markets? "The LeBron effect"

The NBA is a star-driven league. It's the superstars that attract fans and media attention. But there are once-in-a-generation players, who affect the entire franchises. Since 2004, that superstar is LeBron James.

The influence that the King had on his teams could be described in a lot of ways. This is how the market value of Cleveland Cavaliers changed during the LeBron James era:

 

 

During the King's first 7 seasons with the Cavs, only one time their market value had smaller growth than the league average (2006). In 2007, when the team reached the NBA Finals, the Cavs's value jumped by 20%, while the league average was around 6%.  

In the year of Lebron's first departure (2010), the Cavs's market value dropped by 25% from the previous season, while the average franchise growth league-wide was at 1 %. During the LeBron-less period, only two teams had smaller overall growth in the NBA than Cleveland.

This is another confirmation that small-market teams depend on good players and good results, while the big market teams can afford to be unsuccessful over the extended period of time without negative effects on the team's value.

 

Use of content

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Author
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Dimitrije Curcic

Dimitrije Curcic has been playing basketball for over 22 years. Like Manu Ginobili, he’s a left-hander whose moves led him to a better career-shooting percentage than the Argentine himself. After playing professionally for 10 years, Dimitrije moved to coaching for two seasons before he became a basketball statistician for StatScore, and FanSided contributor for the San Antonio Spurs. Dimitrije loves to tell hoop stories through numbers and graphics and has been featured on Fansided, FiveThirtyEight, Eurohoops, and TalkBasket among the others.

dimitrije@runrepeat.com