Warriors Come Out And Play
The Golden State Warriors are being sold for a record $450 million. Which raises an interesting question: is the price proof that the owners’ cries of poverty are unfounded, or does it reflect an expectation that, whether via lockout or not, a genuinely unsustainable economic system will be fixed to the benefit of the new owners?
The Warriors were last sold in 1995 for $119 million; the current price represents roughly 9.25% annual appreciation. Which handily beats the roughly 4.5% annual appreciation in the S&P 500 over the same period. Of course, that excludes dividends, which might add another 2% to the annual return on the S&P, and also excludes profits (or various forms of self-dealing to reduce profits) extracted from the Warriors, which I have no idea how to estimate.
I suppose there could be a third option: perhaps new owners could increase the value of the franchise by relocating it from Oakland to San Jose? Or at least San Francisco (though I’m not aware of a suitable arena there)? Wouldn’t an NBA team benefit from playing in closer proximity to the vastly greater wealth of Silicon Valley relative to the East Bay? Gonzo, am I way off base here?
July 16th, 2010 at 9:50 am
Without doing any background checks of the buyers, I’m going to ass-ume they are at least (a) smart businessmen (or man) in order to have the means to afford the price tag, if not also (b) huge sports fans (as many owners are, which is usually a good thing, IMHO - though not always, I suppose). Even if they’re lifelong desire is to own an NBA franchise, or inexplicably, to specifically own the GS Warriors, the numbers have to crunch for them to pull the trigger. To that end, it’s ongoing evidence to me personally what has been clear to me for a long time, owning a major pro sports franchise in the US makes good business sense.
Whenever these people whine about how much money they’re losing, I can do nothing but roll my eyes. This forlorn NBA has a franchise in Minnesota that just gave Darko Milicic a 4yr/$20 million contract. Say what you will about Joe Johnson getting a max deal from Atlanta, or the Celtics giving Paul Pierce a golden parachute at 4yr/$61 million as he enters his mid-30s - among so many other examples. All you need to know is that the NBA is doing well enough to lavish $20 million on Milicic.
I’m not upset with Milicic. Bully for him (and his agent). I’m once again reminded of big white stiff Jon Koncack, who roughly 20 years ago was given a then-ungodly contract of 6yr/$13.2 mil (IIRC) by the Atlanta Hawks. People got on *him* for the contract. His response was simply, “The offered me that contract. Do you want me to say ‘no’?” Nope. I believe in free markets. Koncack, and Millicic, and all the rest should go get whatever they can get… bless ‘em.
But when Millicic can get $20 million guaranteed (over *any* number of years), I simply request that David Stern and the NBA owners spare me the hypocrisy of claiming Financial Armaggedon.
In short, if that’s what the Warriors sold for, then that’s obviously what they’re worth. And if the GS Warriors are worth $450 million, then the NBA is doing *quite* well, thank you very much.
July 16th, 2010 at 10:32 am
Tank - attendance isn’t the problem for the Warriors (last 5 years they have been ranked #10, 14, 6, 8 and 11 in the league). Rather it’s all about the mgmt decisions made over the last 15 years. Bad draft picks, bad FA signings, etc. So, I’m not sure playing 1) closer to SF or 2) closer to Silicon Valley would really help all that much.
July 16th, 2010 at 11:53 am
Btw, didn’t the Russian Billionaire spend over $700 million to buy the Nets? Or is that Nets purchase like the Red Sox purchase almost ten years ago, which included the team - and NESN, and Fenway, etc, i.e. it was for more than just the team?
I just googled, and looks like the $700 million does include partial ownership of the Brooklyn site that the Nets will be moving to. I don’t see anywhere that the $700 million is broken down, i.e. X million for the team and Y million for the Brooklyn arena, and Z million for something else (?).
I guess that since this sale only involves the Warriors team, then it’s “clear” what the team-cost aspect is, and they can list it as “most ever” (at least for now).
July 19th, 2010 at 9:15 am
Re Silicon Valley, I as thinking more in terms of suite sales than pure attendance. I just wonder how big a difference that might be, since I’d guess there are more companies willing to pay up on Sand Hill Road than in Oakland, but maybe not.
Re the Nets, I think the value of the basketball team is a pittance compared with the value of the real estate they were able to steal from its rightful owners (it’s a pretty bad case of public domain abuse) by offering to move the team to Brooklyn.