NBA Valuation Surge Still is not enough to compete with NFL Money
According to Sportico’s statistics, the average NFL franchise value increased by 18% over the previous year after increasing by 14% the year before. Compared to the seven franchises in the other American sports leagues, the NFL has 16 worth at least $4 billion (four in MLB, three in the NBA).
In order to reflect the current sports club ownership landscape, where real estate and team-related businesses are becoming more and more significant components of the owner’s portfolio, Sportico introduced its own form of franchise valuations two years ago. These assets are not included in the values of other publications, but we require additional sources if we wish to look further back than two years.
We can piece together a picture of how sports franchise prices have changed over the past 25 years using data from Financial World and Forbes. The supremacy of the NFL is nothing new. As long back as we could tell, the league had the greatest average value in professional sports. What’s remarkable is that the NFL used to stand apart from the competition even more.
The Sports Industry Change in the 90s
The value of NFL teams skyrocketed in the late 1990s and early 2000s. From 2004 to 2009, the typical football team was worth more than twice as much as the average baseball or basketball team. These leagues are still far behind the NFL, which enjoys a healthy $1 billion lead over the NBA.
The hosts of Sportico’s podcast have theorized about the upcoming change in the hierarchy of the four main American sports leagues. Over the past 25 years, there has only been one significant change: the NBA overtook MLB, from which it has since distanced itself even more with each passing year.
TV Deals and more
Notably, it occurred in 2014, the same year the NBA agreed to a nine-year extension of its television rights agreement with ESPN and Turner, which was worth around three times as much per year as the prior agreement. TV deals do contribute significantly to price increases. The NHL’s two biggest such leaps, in 1998 and 2013, and the NFL’s largest single-year gain in average franchise value (1998) were all accompanied by a more than doubling of those leagues’ media-rights valuations.
Since Brett Favre won his first MVP award, the NFL’s clubs have routinely been the most valuable in professional sports thanks to their hefty television contracts. In terms of percentage growth, the league has also had its teams’ values increase the highest over that time.It should be noted that over the past 25 years, all sports franchises have been profitable investments. Even the average NHL team has increased by 1,112% since 1996, outpacing the S&P 500’s +534% growth.
Massive growth each decade
We divided the past 25 years into three fairly equal time frames and calculated the percentage increase in average franchise value for each of the four major sports leagues over those times to emphasize the NBA’s recent growth. NBA values climbed by 387% from 2012 to 2021, while NFL, MLB, and NHL values increased by 215%, 215%, and 207%, respectively, each about in pace with stock market growth.
Those represent a dramatic shift from the years 1996 to 2004 when the NFL’s 319% gain in franchise values greatly outperformed that of the other leagues. The dot.com crash occurred over those eight years, a 31-month period during which the S&P 500 lost nearly half of its value, while the NFL escaped unscathed.
Considered in the context of the nation’s economic circumstances, the other leagues also did rather well. Even the Great Recession of 2008 was unable to entirely destroy the value of sports. Between 2004 and 2012, the stock market only increased by 18%, yet the average club valuation in each league increased by at least 50%.
Only death, taxes, and the increase in the value of sports franchises are certainties if the past 25 years have taught us anything. All arrows are pointing up, even with the S&P 500 down 13% since New Year’s Eve. It remains to be seen whether the NBA will continue its hot streak or if another league will emerge as the leader in the percentage growth statistic.