Well, the time we’ve all been waiting for is almost here. Whether he likes it or not, Donald Sterling will likely soon be forced to sell the Clippers.
Los Angeles’ wealthiest have been waiting at least two decades for the opportunity to buy the city’s second team. Sterling, so in love with the thought of owning an NBA team — not to mention the cash cow he turned it into while becoming the NBA’s cheapest owner — has never shown even a sign of loosening his hold.
What potential buyers are now bracing for is the final number on what is almost guaranteed to be the highest price ever paid for an NBA franchise.
When Los Angeles Dodgers owner Frank McCourt was forced to sell his team in 2012, big names from in and out of Los Angeles were lining up out the door to put together investment groups and large bids. At the time, Forbes valued the Dodgers at about $800 million. The team sold to Magic Johnson and Guggenheim Partners for a record-shattering and market-altering $2.15 billion.
Since then, the valuation of sports franchises has continued its upward trend. The Milwaukee Bucks, a consistent bottom feeder playing in the NBA’s smallest market, just sold for the highest price ever paid for an NBA team at $550 million. That figure has analysts estimating the Clippers could fetch about $1 billion.
But what are the factors that have changed the market, and how could they affect the actual selling price of the Clippers franchise?
Opportunities to buy franchises in America’s biggest markets are few and far between, with L.A. and New York historically sporting some of the most consistent family ownership in all of sports. That is why the Dodgers attracted bidders from all walks of the sports and business worlds.
Expect to see a laundry list of businessmen, celebrities, former NBA players and just about anyone else you can imagine lined up to buy the Clippers if and when the time comes. Those already rumored to be interested include the Guggenheim partners, boxer Floyd Mayweather and David Geffen.
New TV Deal
There is one important financial aspect that has to be taken into account when discussing the sale of the Clippers. What made the Guggenheim group able to bid such a seemingly exorbitant amount for the Dodgers was the team’s expiring television rights deal with Fox Sports, and the pending bidding war between Fox and Time Warner for the rights to broadcast Dodger games.
After the Lakers and Dodgers signed their own multi-billion dollar deals ($4 billion and $8.35 billion respectively) with Time Warner the last two years, the next team in L.A. with an expiring deal is the Clippers, whose deal with Fox Sports expires after the 2015-2016 season. Fox may be desperate to keep their rights to the Clippers in order to feasibly maintain both of their regional sports networks, Prime Ticket and Fox Sports West, and they will have a lot of money to spend after losing out to Time Warner for the rights to the Lakers and Dodgers.
The advance knowledge of the guaranteed income due to the impending TV deal will embolden the serious contenders in the Clippers’ bidding war to increase the amount they are willing to spend for the team. This perfect storm of a big market, billionaires and timing could send the Clippers’ selling price sky-high.
While many fans will not be happy that after Sterling’s racist remarks he will still walk away with up to 150 times what he paid for the team, other NBA owners are likely thinking two things: First, the public relations nightmare that will result for any owner that does not vote to remove Sterling, and second, the fact that the record-setting sale of the Clippers will cause the same seismic re-valuation of their teams that it did in MLB when the Dodgers sold in 2012.
With all these factors converging, don’t be surprised when the final sale price makes current predictions look low.