How do you buy an NBA franchise? Business Model, Franchise Cost, Teams
Well, you are interested to buy the NBA Franchise? In this article, we will explain everything about NBA Franchise like About NBA Franchise, NBA Franchise business model, Franchise cost, and everything you need to know.
What is NBA Franchise?
The NBA stands for v NBA is a professional basketball league in North America. To date, NBA is composed of 33 teams from the United States and Canada. In Us, NBA has almost all franchises (30 teams) and in Canada only 1 team.
The NBA (National Basketball Association) was founded on early June 6, 1946, and the initial name was Basketball Association of America and but on Aug 3, 1949, the name changed to NBA National Basketball Association.
In 1976, the NBA and the American Basketball Association (ABA) merged, adding four franchises to the NBA. The NBA's regular season runs from October to April, with each team playing 82 games. The league's playoff tournament extends into June. As of 2020, NBA players are the world's best-paid athletes by average annual salary per player.
Who Can Buy NBA Franchise?
It might be bad news because NBA franchise is not as readily available as common franchises in the market. To get this franchise you have to undergo a bidding war as soon as stocks appear on the market.
NBA is more expensive than other franchises and thus requires a larger investment plan and financial standing.
The NBA franchise bidding ranges from an initial $300 million US dollars to up to 600 million US dollars, making this type of franchise unsuitable for those with limited capital.
To apply for this type of franchise, keep in mind that you should be familiar with the fundamentals of management and finance. Because there is a large sum of money at stake in this type of rare investment franchise, it is prudent to use it to its full potential and ensure its success.
What is the NBA Franchise Business Model?
Before moving to any franchise, you must know its revenue model. Because finding a good franchise for revenue is tough nowadays. As we all know that basketball is one of the premier games in the United states so being a part of a team is always profitable. NBA team business model is too different from others.
Here are the few revenue sources that can make you profitable after being a part of the NBA Franchise.
- Basketball Related Income (BRI)
- Television Deal
- Ticket Sales and Concessions
- Licensing Agreements and Sponsorships
- Revenue Sharing
- International Growth
- The Bottom Line
1- Basketball Related Income
As a franchise owner, BRI is a fantastic way to make money. Because this includes ticket and concession sales, television deals that bring the game to viewers' homes, and merchandising rights from jersey and apparel sales.
Furthermore, because BRI contributes to salary cap calculation, revenue sharing must be excluded from BRI because it would provide an economic advantage to large market teams. High-revenue teams, such as the Los Angeles Lakers or the New York Knicks, would theoretically raise the salary cap, forcing small-market teams to spend exorbitant amounts to retain players.
2- Television Deal
The NBA announced a nine-year, $24 billion media rights agreement with ESPN and Turner Sports in February 2016. When the agreement went into effect for the 2016-17 season, ESPN and Turner Sports agreed to pay the NBA a total of $2.6 billion per year. 3 In comparison, the previous agreement signed in 2007 cost both networks $930 million per year. The new media rights agreement is a 180% increase over the previous one.
ESPN's television, digital, highlights, audio, data, and international NBA rights were expanded as part of the agreement. Throughout the 2024-25 season, games will be broadcast on ESPN and TNT.
3- Ticket Sales and Concessions
This is the second most profitable method of generating revenue. According to reports, the Golden State Warriors now have the highest ticket prices, followed by the Los Angeles Lakers. The Knicks continue to have some of the most expensive tickets in the league, ranking third in the league.
The Fan Cost Index (FCI), which is the cost of taking a family of four to an NBA game, is another option. This metric takes into account the cost of admission, concessions, and parking. The FCI for an NBA game during the 2019-2020 season was $430.25, according to Chicago sports business firm Team Sports Marketing.
4- Licensing Agreements and Sponsorships
The NBA decided to end its partnership with Adidas in June 2015 and instead signed an eight-year, $1 billion contract with Nike. This represented a 245% annual increase over the previous agreement. If you look closely, you will notice a number of sponsors and brands located throughout the arena. The NBA earned approximately $861 million in revenue from corporate sponsors during the 2016-17 season.
Revenue Sharing
- The NBA, like MLB and NFL, has a revenue-sharing model.
- As was previously established, the money made via this method has nothing to do with basketball.
- The NBA's revenue-sharing system attempts to rectify the imbalance between smaller markets and larger ones.
- Therefore, all teams combine their annual revenue and share it equally between the highest and lowest earners.
- As a result, each club will have a revenue stream proportional to its payroll cap for the upcoming season.
- The revenue structure mandates that small market clubs must earn revenue that is at least 70% of the league average in order to get the full revenue-sharing benefits.
- For the 2020-21 season, the salary cap will remain at $109.14 million per team.
Exponential Development Abroad
- In recent years, the NBA has seen a surge in the number of players from outside the United States.
- There were 108 international players representing 38 countries and territories on opening night rosters for the 2019-20 season.
- There were at least 100 foreign players in the 2019-20 season, making it the sixth year in a row that this has been the case.
- The two-time NBA Most Valuable Player, Giannis Antetokounmpo of Greece, is one of eleven international players now or formerly featured in the NBA All-Star Game.
- As this figure rises, the NBA will begin advertising in foreign countries in the hopes of increasing television viewership and merchandising revenues.
- Many NBA clubs could relocate to Europe in the near future.
Finally, the Bottom Line
The National Basketball Association's (NBA) popularity and financial success have skyrocketed in recent years, thanks to rising interest both at home and abroad.
The NBA has firmly established itself as one of the biggest and most lucrative leagues in all of world sports, with a TV agreement valued at $24 billion, a $1 billion Nike deal, an expanding number of corporate sponsors, rapid foreign growth, and an average NBA team valuation of over $1 billion.
What Would It Take to Acquire an NBA Team?
If the owner is selling more than 10% of the team's ownership, the league may require them to pay up to $50,000 to cover any costs they incur as a result of the request, including but not limited to attorneys' fees. To finalize the sale and bring in a new owner, 75% of the NBA's Board of Governors must vote in favor of the transfer after all impacted parties and the commissioner have given their consent.
List of NBA team values for the 2021-22 season
| Ranking | Team | Estimated value | |
| 1. | Knicks | $5.8 billion | |
| 2. | Warriors | $5.6 billion | |
| 3. | Lakers | $5.5 billion | |
| 4. | Bulls | $3.65 billion | |
| 5. | Celtics | $3.55 billion | |
| 6. | Clippers | $3.3 billion | |
| 7. | Nets | $3.2 billion | |
| 8. | Rockets | $2.75 billion | |
| 9. | Mavericks | $2.7 billion | |
| 10. | Raptors | $2.48 billion | |
| 11. | 76ers | $2.45 billion | |
| 12. | Heat | $2.3 billion | |
| 13. | Trail Blazers | $2.05 billion | |
| 14. | Kings | $2 billion | |
| 15. | Spurs | $1.98 billion | |
| 16. | Wizards | $1.93 billion | |
| 17. | Bucks | $1.9 billion | |
| 18. | Suns | $1.8 billion | |
| 19. | Jazz | $1.75 billion | |
| 20. | Nuggets | $1.73 billion | |
| 21. | Hawks | $1.68 billion | |
| 22. | Pacers | $1.67 billion | |
| 23. | Cavaliers | $1.65 billion | |
| 24. | Magic | $1.64 billion | |
| 25. | Thunder | $1.63 billion | |
| 26. | Pistons | $1.58 billion | |
| 27. | Hornets | $1.575 billion | |
| 28. | Timberwolves | $1.55 billion | |
| 29. | Pelicans | $1.53 billion | |
| 30. | Grizzlies | $1.5 billion | |
| Team | Owner | ||
| Knicks | Madison Square Garden Sports | ||
| Warriors | Joe Lacob, Peter Gruber | ||
| Lakers | Jerry Buss Family Trusts, Mark Walter, Todd Boehly | ||
| Bulls | Jerry Reinsdorf | ||
| Celtics | Wycliffe Grousbeck, Irving Grousbeck, Stephen Pagliuca, Robert Epstein | ||
| Clippers | Steve Ballmer | ||
| Nets | Joseph Tsai | ||
| Rockets | Tilman Fertitta | ||
| Mavericks | Mark Cuban | ||
| Raptors | Bell Canada, Rogers Communications, Larry Tanenbaum | ||
| 76ers | Joshua Harris, David Blitzer | ||
| Heat | Micky Arison | ||
| Trail Blazers | Paul G. Allen Trust | ||
| Kings | Vivek Ranadive | ||
| Spurs | Holt family, Sixth Street Partners | ||
| Wizards | Ted Leonsis | ||
| Bucks | Wes Edens, Marc Lasry, Jamie Dinan | ||
| Suns | Robert Sarver | ||
| Jazz | Ryan and Ashley Smith | ||
| Nuggets | Stan Kroenke | ||
| Hawks | Tony Ressler | ||
| Pacers | Herbert Simon, Stephen Simon | ||
| Cavaliers | Dan Gilbert | ||
| Magic | DeVos family | ||
| Thunder | Clayton Bennett, George Kaiser, Aubrey McClendon estate | ||
| Pistons | Tom Gores | ||
| Hornets | Michael Jordan | ||
| Timberwolves | Glen Taylor, Marc Lore, Alex Rodriguez | ||
| Pelicans | Gayle Benson | ||
| Grizzlies | Robert Pera | ||
Disclaimer: The information provided in this post is for general informational purposes only and does not constitute professional advice. Please consult a qualified professional before making any decisions based on this content.
