The Money Makers

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It comes as no surprise that the 3 NBA teams that find themselves in the healthiest financial situation ply their trade in North America’s 3 largest cities. A larger population means more people to fill your arenas, buy your merchandise, and a much bigger chance that you’ll be able to sign a major television deal. But not all the teams that have recently posted profits play in major markets. And not all teams that play in major markets post profits (see the Mavericks, for example). Success on the court—being able to wow your city with transcendent superstars and fantastic basketball—also plays a part in having success off the court.

Here are 5 NBA teams that have been leading the league in turning a profit:

Los Angeles Lakers
 
 

Owner: Jerry Buss (Net Worth: $600 million)
Current Value: $900 million
Revenue (2010-2011): $208 million
Profit (2010-2011): $24.3 million
Salary Expenditure (2012-2013): $100,087,153

Despite their current on-court troubles, the Los Angeles Lakers are by far and away the most valuable team in the NBA. Historical (16 NBA championships) and recent success have helped keep attendances high at the Staples Center, but the biggest money maker may have been their recent television deal with Time Warner Cable. The Lakers signed a 20-year deal with the cable company that is worth $200 million annually to the franchise. The profit margin for the Lakers would be larger, but player salaries continue to eat into a substantial portion of the budget. The Lakers are way over the salary cap, which is currently $58 million, and will be forced to pay a large amount of luxury tax because of it.

New York Knicks
 
 

Owner: James Dolan (Net Worth: $494 million)
Current Value: $780 million
Revenue (2010-2011): $244 million
Profit (2010-2011): $74.9 million
Salary Expenditure (2012-2013): $80,474,660

The team with the largest, and most loyal fan base in the NBA continues to do very well financially. The main reason for that is the sheer size of the Knicks’ market. New York City is the largest metropolis on the continent and the team has no shortage of followers locally and in the North East more generally. Attendances fell at MSG during those dark early years of the 21st century, when the team was reeling under Isiah Thomas’ stewardship, but a recent turnaround in fortunes has resulted in a major boost in ticket sales. Last season the Knicks ranked 5th in average crowd size, and that’s not expected to change this year with a team that could contend for a championship. One other thing to note: the Knicks got a massive boost in revenue last season at the height ‘Linsanity’, and it would’ve been interesting to see how much further their brand could’ve expanded globally if they’d matched Houston’s offer for Lin.

Chicago Bulls
 
 

Owner: Jerry Reinsdorf (Net Worth: $280 million)
Current Value: $600 million
Revenue (2010-2011): $185 million
Profit (2010-2011): $59.4 million
Salary Expenditure (2012-2013): $74,638,230

The Bulls lead the league in attendance this season, and have done so for the last 3 years; a big reason why Reinsdorf’s team is currently the 3rd most valuable in the NBA, and continues to make a handsome profit. However, it can’t be ignored that the Bull’s front office has a reputation for being cheap when it comes to signing players, which could be another reason why the team has continued to stay in the black over the past few years. Just as important to the financial health of the franchise, despite the fact that they’re currently a very unattractive team to watch without Derrick Rose, is that the Bull’s are one of the few NBA teams known worldwide. You can thank Michael Jordan and his 6 championship winning teams for that. You could be in London, Rio, or Tokyo, and you’ll probably see someone wearing a Bull’s jersey. That all-important brand recognition, built during the 90s, has carried over to the present day.

Miami Heat
 
 

Owner: Micky Arison (Net Worth: $5.8 billion)
Current Value: $457 million
Revenue (2010-2011): $158 million
Profit (2010-2011): $26 million
Salary Expenditure (2012-2013): $83,237,893

Given that owner Micky Arison is a multi-billionaire, he’s probably not too concerned if his franchise loses a few million here and there. But the Miami Heat posted a nice profit in LeBron’s first year with the team. In an interview with CNBC, Arison said, regarding the ownership of an NBA team, “This is a hobby of passion, it’s not a business”. In other words, if you think you’re going to make money owning a basketball team, forget it. Given the amount that teams spends on player salaries—the Heat are about $25 million over the cap—there isn’t a whole lot left for your own pockets, if any. Despite a healthy attendance record, and much recent success, the Heat are also in a relatively small market, which means that they’re making much less in television deals than the Lakers or Knicks. But with the world’s greatest basketball player on the roster, the team will likely continue to punch well above their weight financially.

Oklahoma City Thunder
 
 

Owner: Clay Bennett (Net Worth: $400 million)
Current Value: $348 million
Revenue (2010-2011): $126 million
Profit (2010-2011): $24.5 million
Salary Expenditure (2012-2013): $69,787,657

The blockbuster trade that sent James Harden packing to the Rockets was viewed as a clear sign that small market teams cannot compete financially in today’s NBA. The Thunder weren’t willing to sign Harden to a max deal, with 3 other players currently signed to huge contracts (Durant, Westbrook, and Ibaka). Signing a 4th would mean major luxury tax penalties in the years to come for the Thunder—and they would struggle under that burden. But many argued that the OKC front office was simply being cheap, sighting their recent profits to back up that assertion. Looking at the figures one could make an argument that this small market team is actually doing pretty well. The Thunder are the only show in town, so to speak, and have done very well when it comes to attendance numbers. With Durant and Westbrook wowing the crowds, those numbers shouldn’t drop, but as the reality of paying high NBA salaries kicks in, the profit margin may shrink for Bennett’s team.

Team valuations, revenue and profit figures courtesy of Forbes: 

Team salaries owner figures courtesy of HoopsHype: http://hoopshype.com/salaries.htm

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