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NY Post: Prokhorov Looking to Cut Back Spending

June 25th, 2014 at 9:02 PM
By Richard N. Funaro

 

According to the New York Post's Josh Kosman, Nets owner Mikhail Prokhorov is preparing to reduce costs in an effort to get a $1 billion valuation of his team. Minority owner Bruce Ratner is currently looking to sell his 20% share of the team that he owns through his real estate company Forest City Enterprises.

According to Kosman, Ratner would have to sell his 20% stake for at least $200 million in order for the Nets to be valued at Prokhorov's $1 billion target. Kosman notes that this valuation could be difficult to reach because the team operated in the red last year.

As a point of reference, two NBA teams (the Milwaukee Bucks and the Los Angeles Clippers) have been sold in the past six months, which could serve as a rough guideline in figuring out how much the Nets are worth right now. On April 16 of this year, the Milwaukee Bucks, who have gone 84-167 over the past three seasons (including 15-67 this past season), were sold for $550 million after being valued by Forbes three months prior at $405 million. As Forbes mentions, the Bucks play in one of the smallest TV markets in the NBA, plays in a 26-year-old arena, and had the lowest overall revenue in the league last year. That includes money from ticket, merchandise, and concession sales, as well as league revenue sharing (which netted close to $20 million for the team this past season).

Following the lifetime ban of Donald Sterling in April, the Los Angeles Clippers were sold to former Microsoft CEO Steve Ballmer for $2 billion on May 27. Again, Forbes did an excellent job in breaking down why bids for the Clippers were exceeding $1 billion. The short explanation is that, unlike the Bucks, the Clippers play in a major TV market, have a TV contract that will expire in two seasons (which will likely mean increased revenues for the team), and the fact that the current Collective Bargaining Agreement (CBA) has increased revenue for teams in an effort to prevent teams from operating in the red. Forbes does point out, however, that over the past five years, the Clippers have only averaged $11 million in total revenue. While it is better than running a deficit, it is not the most profitable team.

So the question remains- what are the Nets currently worth? Brooklyn plays in a brand new arena, receives a lot of money through merchandise and ticket sales, and has its games aired on the YES Network, which has rated as the most watched regional sports network in America. Despite the fact that the Nets operated with a deficit last season, these factors would seemingly leave the team in a better position than the Bucks, and they sold for $550 million. And while the Clippers sold for $2 billion, that price may be an inflation of the team's true value. Nevertheless, it surely drives up the value of the other 29 teams.

This probably leaves the Nets somewhere in the middle of $2 billion and $550 million. If the Nets can cut back spending for a year (which would mean not bidding for top tier free agents like LeBron James, Carmelo Anthony, and Kyle Lowry this offseason), Ratner's stake could possibly sell for the $200 million Prokhorov is seeking. According to Kosman's report, Prokhorov wants to get under the luxury tax threshold by the 2015-2016 season, which gives the Nets a year to cut spending back. Just in time for a run at possible free agents such as Kemba Walker and Kyrie Irving following the 2015 Finals and Kevin Durant in 2016.

 

Tags: Basketball, Brooklyn, Brooklyn Nets, NBA

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