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Team Valuations – Milwaukee/Alabama edition

2014 April 17
by Victor Matheson

While the Philadelphia 76ers got all of the press this year with their record-tying 26-game losing streak, the Milwaukee Bucks quietly ended up blowing out the competition for worst team in the NBA finishing 15-67, fully 4 games worse than the hapless 76ers.

So what kind of reward does owner Herb Kohl get for guiding his team to NBA ignominy? Try $550 million, the price tag announced today as Kohl sold the team to New York investment firm executives Marc Lasry and Wesley Edens.

In other news, it was widely reported last week that in the latest government data on college athletic programs, the University of Alabama athletic department generated more revenue than every NHL team and 26 of 30 NBA teams.

So, here is an interesting thought experiment:  if the University of Alabama football team, which finished with only 4 fewer wins than the Bucks despite playing 68 fewer games, were a regular sports franchise, what would it sell for?

Of the $143 million in revenues generated by the athletic department, the football team is directly responsible for $88.7 million. The Bucks just sold for 5.05 times their annual revenue. Using this multiplier would put a value of roughly $450 million on the Crimson Tide football team. Revenue to market value numbers for other teams in the the NBA and NFL run between 3.2 and 5.2.

Of course, Alabama has another thing going for it as well. While Kohl had to pay his players about $54 million this season to generate those 15 wins and their corresponding $109 million in revenue, the Crimson Tide only incurred $2.2 million in player payroll expenses. In total, the school spent only $41.6 million on football, generating a profit of $47.1 million. On average, NBA and NFL teams at valued at 26.6 times their annual profits in the Forbes rankings. Using this multiplier, the Alabama football team would go for $1.253 billion, making it the 13th most valuable franchise in the US. By contrast, the endowment of the entire University of Alabama system in 2013 was $1.055 billion.

(Thanks to Josh Congdon-Hohman for the idea.)

One Response
  1. Andrew permalink
    April 28, 2014

    I have a few questions that you didn’t address in your original article:

    1–Did you take into consideration the idea of revenue sharing across the NBA vs. Alabama?
    Basically, the NCAA controls the rights to such things as the multi-billion dollar TV contract CBS provides annually which makes up for 95% of their annual operating revenue. Alabama doesn’t have the ability to take a 1/30 slice of that pie. All NBA teams are able to do so with their ABC contract. That makes the value of an NBA organization larger.
    2–How would you define Alabama’s valuation of facilities?
    Alabama/Milwaukee ownership of facility costs as part of the valuation. Just using Milwaukee as the example here, but they own and operate the facility (albeit a very old, lousy NBA arena by most measures). This helps drive more value. In a technical sense, it would be hard to say that Alabama athletics owns their facilities–the University does. So, you wouldn’t be in ownership of the facilities in that framework. Is there anyway you would be able to determine value with and without that?
    3–Wouldn’t it be hard to value Alabama vs. any NBA team because the University is not for profit?
    Lets face it, NBA franchises and owners in particular are trying to make money. Only a few owners spend frivolously, and by doing so actually drive up their value. Think about the Brooklyn Nets. The Barclay’s Center probably drove up the value of the Nets from the high hundreds of millions to high 1.billions. They are able to spend money freely without repercussion.
    4–With the influx of money the NHL expects to take in with a new upcoming TV contract, wouldn’t this allow their valuation to be higher?
    5–Both the NHL and NBA don’t have a governing body reducing their slice, doesn’t that put a higher value on them?

    I’m just curious what others think about this.

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