$2B for the LA Clippers? WTH?

Former Microsoft CEO Steve Ballmer has reportedly purchased the LA Clippers from the Sterlings with a $2B offer. This for a team with no history of success and in a market that is shared with one of the most iconic sports franchises in the world.

I get that it is in LA, but just a year ago Magic Johnson got the freaking LA Dodgers for the same amount of money along with their ridiculously lucrative media deal.

The Milwaukee Bucks were sold for $550M earlier this year and a Russian Billionaire bought the Brooklyn Nets just a couple of years ago for $360M.

When the Donald Sterling scandal broke I had heard that the team could go for $600M and later I heard $900M but2 billion?

What is going on here?

A lot of new billionaires with money to blow?

Is he going to move it to Seattle?

He said that he’s not planning to move it, as that will damage its value. (It’s worth more as an LA team.)

The new collective bargaining agreement is tremendously favorable to owners and has made teams much more desirable as investments. For that exact reason it might be a long time before another NBA team is available for purchase. Combine those factors and the fact that this is a good team in a major market and this isn’t a big surprise.

And this is a sticky, why?

I’m wondering if I accidentally stickied the thread while I was posting last night. Anyway it’s been fixed.

Didn’t the Bucks just sell like a month ago?

Yes. They sold for $550 million, which was a record even though they are perpetually mediocre to terrible and play in a tiny market, and the new owners already agreed to kick in $100 million for renovations (the old owner will do the same). But there aren’t any other teams on the market right now, and my sense is that nobody expects another team to go on the market soon. The Clippers being available was a surprise, after all. That’s one of several reasons the Clippers sold for so much. It helps to get a couple of billionaire groups competing against each other, of course. Owning a sports team has always been a status thing, but now it’s also a really strong business proposition. The sale prices for teams have gone way, way up since the new CBA was signed. The author also notes that are TV deal considerations involved for the Clippers and the NBA at large, which will also drive up team valuations.

Pre-emptive bid. If money’s not much of an object, and it isn’t for Ballmer, and it’s something you really want, it can simply be a sound tactic to go high enough to scare other bidders out of the market. An extra billion doesn’t really mean anything to him, but being a major team owner in a top market obviously does.

He’s the only bidder who wasn’t looking for partners, which is also a plus. Ballmer has that much in pocket change.

He wasn’t being preemptive. The Sterling trust set a deadline and he was one of several potential owners who made offers. The other bids that we know of were worth $1.2 billion and $1.6 billion, so the record was getting smashed no matter what. I saw several NBA writers predicting that the final price was going to be in the neighborhood of $2 billion.

But the team doesn’t own its arena (so no luxury box revenues) and unlike the Dodgers, there’s no lucrative deal with Time-Warner.

Though, out of the three names most associated with Microsoft (Gates, Allen and Ballmer), two of three of them now own NBA teams.

According to the SB Nation piece I linked to, they’ll have a new TV deal soon. The current one brings them about $20 million a year, and the new one won’t be equal to the Dodgers or Lakers, but it’ll be a lot bigger than what they have now.

Of course, its new owner could build a new stadium and found a Clippers cable system just with the loose change from his Rolls Royce’s cupholders. :slight_smile:

Nitpick: Ballmer’s father worked for Ford, and he’s known to favor American cars, so the loose change would more likely be in his Lincoln’s cupholders.

So what would the Lakers, Celtics or the Knicks sell for today? It really raises the bar on sports team values.

The franchise market value estimates from Forbes Magazine.

I’m only guessing, but I’ll say the starting price would be $5 billion.

This is proof that Forbes estimates are worthless. They have the Bucks at $405 million (actual sale price: $550 million) and the Clippers at $575 million (oops, try $2 billion). So if they think the Lakers are worth $1.35 billion and the Knicks are worth $1.4 billion, you can do your own math and conclude the real value would be several times that if the teams were actually on the market.

Obviously, those estimates need to be updated. The Clippers are valued at $575 million while the Knicks are at $1.4 billion. So given the Clippers sold for roughly four times that, does that mean the Knicks are really worth about six billion dollars?