Nick Friedell currently covers the Warriors for ESPN, but previously, the Minnesota Timberwolves were his assignment. As such, he has a strong opinion about the recently completed trade between the two organizations that had Andrew Wiggins and D’Angelo Russell trading uniforms.
“No,” Friedell answered when asked if Minnesota’s new pairing of Russell and Karl-Anthony Towns would turn the franchise around on Tuesday’s episode of “The Jump.” “I am all the way out on the Timberwolves. I don’t believe that Karl-Anthony Towns is mature enough as a leader to be the face of a team that can contend and grow. I think that D’Angelo Russell was really solid in my dealings with him in Golden State, but there’s a reason why the Warriors traded him. They did not believe that he was a core piece of a possible title contender.”
After suggesting that Russell’s day-to-day attitude, not just his position, encouraged Golden State to get rid of him, Friedell returned to his criticism of Towns.
“The culture that has been created in Minnesota, especially in the last year or so with [coach] Ryan Saunders and [general manager] Gersson Rosas … everybody is afraid of upsetting Karl-Anthony Towns. Karl-Anthony Towns was anointed as ‘the guy’, he got a max deal … what has he won in the league? Everything has kind of flattened since they said, ‘You’re the man.'”
When David Fizdale suggested that it’s commonplace for NBA teams to cater to their star players, Friedell wasn’t buying that excuse.
“A lot of stars in the league have won,” he countered. “Towns has never won anything. He has always been the guy that everyone has said, ‘Oh, he can do it.’ But I think around the league, guys, the word is starting to come out that Towns has a ton of talent, and they’re going to rack up a ton of points, but is somebody going to make him play defense all the time? Is somebody going to bring out the mental toughness that you need night after night to be the person that leads the way?”
Earlier in the show, Fizdale posited that, since they’re best friends, Russell might be the one to constantly be in Towns’ ear. Well, when Russell heard Friedell’s comments, he came to his and his best friend’s defense.
In their first game as teammates in Minnesota, Russell and Towns combined for 45 of the Timberwolves’ 126 points, but they were also a combined minus-29 in an 11-point loss. Russell can call Friedell a clown all he wants, but that doesn’t prove the reporter wrong. In fact, it has the opposite effect.
Most of the headline news for the NBA hasnot been flattering the past few months. Television ratings are down, with injured stars sidelined; business with China is in jeopardy over a tweet from Houston Rockets GM Daryl Morey; and in New York, the league’s biggest market, the Knicks are going through a seventh consecutive losing season while their owner feuds with fans.
But our research shows the business of basketball is still red hot. NBA franchise values continue to soar, up 14% in the past year to an average of $2.12 billion. Compare that with an 11% annual increase for NFL teams and 8% in Major League Baseball, with average values of $2.86 billion and $1.78 billion, respectively. NBA values are up nearly sixfold over the past decade.
The NBA’s 30 teams generated a record $8.8 billion in revenue last season, up 10% over the previous year. It will be up again this season, with gate receipts projected to rise 8% overall. Revenue will also be helped by a new arena for Golden State and renovations to existing arenas in Boston, Cleveland, Philadelphia and Washington.
“The NBA fundamentals are still strong, and the league is extremely well managed,” says Sal Galatioto, president of leading sports finance and advisory firm Galatioto Sports Partners. “It has hit a couple of bumps, but it is still very powerful media content and the greatest international sport after soccer.”
Consider the two transactions in 2019. Alibaba cofounder Joseph Tsai agreed in 2018 to buy the Brooklyn Nets over three years for $2.35 billion, but he accelerated the purchase in August and added the operating rights to the Barclays Center in a deal worth $3.3 billion for the team and arena. A month later, Michael Jordan announced plans to sell roughly 20% of the Charlotte Hornets to Gabe Plotkin and Daniel Sundheim. The agreement valued the team at $1.5 billion, up from $175 million in 2010 when Jordan bought majority control of the club.
Non-basketball factors are also at play. With the S&P 500 up 80% over the past five years, NBA teams remain a diversification option for those looking to pare down their stock holdings. The high stock market valuations have helped boost the prices for teams. Buying a team can also be a great tax break because tax law typically requires the amount of a purchase price of a business allocated to intangibles (often the vast majority with sports team acquisitions) to be amortized over 15 years. Such deductions can offset other taxable income.
By our scorecard, the moribund New York Knicks grab the top valuation ($4.6 billion) for the fifth straight year, up 15%, followed by the Los Angeles Lakers ($4.4 billion) and the Golden State Warriors ($4.3 billion). These three teams have by far the highest revenue in the NBA. Only the Dallas Cowboys ($5.5 billion) are worth more than the Knicks among North American sports franchises, with the New York Yankees ($4.6 billion) the only other team ahead of the Lakers and the Warriors.
In addition, teams in New York and Los Angeles go for sky-high revenue multiples. Recall that Steve Ballmer paid 14 times revenue for the Los Angeles Clippers in 2014. Tsai paid 11 times revenue for the Nets. The revenue multiple that billionaire Tilman Fertitta paid for the Houston Rockets in 2017 was a relatively cheap seven.
Those owners who bought in ten years ago had fortuitous timing (see chart below). They benefited from the NBA’s $24 billion TV contract with TNT and ESPN, which kicked off in the 2016-17 season and is shared equally among the 30 teams. Another boost: the collective-bargaining agreement signed in late 2011. It cut the percentage of basketball-related income going to the players to 51%, from 57%, boosting profits across the board. Operating profits were a record $70 million per team last season, up 15%. A half-dozen teams had profits of at least $100 million while the Oklahoma City Thunder were the lone team to have an operating loss last season ($23 million) because of the $61 million luxury tax bill on their massive payroll.
Although only two teams changed hands in the past four years, the NBA’s demographics and international prospects make it an attractive property for potential buyers. The NFL remains America’s most popular sport, with TV ratings that are the envy of every other pro league. NFL games represented 41 of the 50 most-watched programs in 2019. Yet as viewing gravitates more seamlessly to a streaming-centric world, the NBA’s younger demographic will be key. The NBA’s average viewership age is 43 versus 52 for the NFL and 59 for MLB, according to Nielsen. Streaming viewership of NBA games on ESPN and TNT is up more than 30% this season.
“This season’s NBA ratings story is silly. It is a small sample size. This is a year-round league with year-round stories,” says sports media consultant Lee Berke of LHB Sports. “The next NBA media agreements will be a substantially evolved set of deals because of streaming. There will be an increasing range of media companies that want the NBA for the U.S. and worldwide.” The current $2.7 billion per year NBA deal with ESPN and TNT runs through the 2024-25 season, and Berke expects the next deal to roughly double in value.
A recent poll of 2,000 sports business executives by analytics firm MarketCast pegged Americans favorite sports league by age groups. The NFL is dominant among fans 35-plus, outpointing the NBA by more than a 10-to-1 margin. But the NBA is a slight favorite among those 18 to 34, at 41% vs. 38%, and it’s a blowout among those 13 to 17, with the NBA holding a commanding 57% to 13% lead on the NFL; MLB registers a scant 4% among teens.
The international potential also helps differentiate the NBA from U.S.-centric leagues like the NFL and MLB. NBA games are available in 215 countries, and the league is littered with players from around the globe. Opening night rosters featured 108 players from 38 countries and territories, with last season’s MVP (Giannis Antetokounmpo), defensive player of the year (Rudy Gobert), rookie of the year (Luka Doncic) and most improved player (Pascal Siakam) among the players from overseas.
China remains an important market for the future of the NBA, as witnessed by the $1.5 billion deal signed with Tencent last summer. The league is working to smooth over relationships with its Chinese TV and sponsorship partners, but the situation is fluid. Most sports business executives think Morey’s tweet will have little long-term impact on the NBA’s business in China.