How much are the NY Knicks Worth? Analyst says up to $3 Billion.
In the wake of Steve Ballmer's agreement to purchase the Los Angeles Clippers for $2 billion, the value of the other NBA franchises is being re-evaluated. Today, Rich Tullo of director of research for Albert Fried & Co. issued a report on the New York Knicks. His report concluded that the Knicks are worth 50% more than the Clippers. His report further concludes that the Clippers' "true intrinsic value" is only $1 billion, so the floor for the Knicks is $1.5 billion. The top of the range is $3 billion - 50% more than the $2 billion that the Clippers just fetched. The greater value ascribed to the Knicks than the Clippers is counter-intuitive since the Clippers are one of the best teams in the NBA, while the Knicks failed to make the playoffs. The structural advantages held by the Knicks (better city, better TV deal, better stadium deal) as a wholly-owned subsidiary of the integrated Madison Square Garden Company outweigh the detriment of the Knicks' comically bad roster management. Below the fold, I breakdown why the Knicks hold so much more value than the Clippers. THE CLIPPERS' ADVANTAGES
The Clippers Have Two Superstars Stars Signed For Years
Right now, the Los Angeles Clippers are a much better basketball team than the New York Knicks. The Clippers have two of the top ten players in the NBA - Chris Paul and Blake Griffin. Chris Paul was just named to the All-NBA First Team, confirming that he is considered the best point guard in the league. Blake Griffin just came in third for 2014 MVP (behind Kevin Durant and Lebron James) and was named to the All-NBA Second Team (again behind Kevin Durant and Lebron James). The Clippers have both Chris Paul and Blake Griffin signed through at least the end of the 2016-17 season.
The Knicks' Best Player Is Not As Good And Can Leave
The Knicks, on the other hand, did not have a single player make an All-NBA roster. The Knicks' best player last year - Carmelo Anthony - ranked a distant 15th in the 2014 MVP voting. Literally thousands of columns and blogposts have debated whether Carmelo Anthony is a superstar, or merely a very good offensive player who has been overpaid. Even if Anthony is a superstar, he is not tied to the Knicks. Anthony can leave the team as a free agent this summer.
The Knicks Have Three Of The Most Overpaid Players In The NBA
Every year, Grantland's list of the "Worst Contracts in the NBA" is dominated by Knicks. This year, the Knicks had three of the eight worst contracts, including the worst contract in the NBA (J.R. Smith #8, Andrea Bargnani #3, Amar'e Stoudamire #1). Under the NBA salary cap, these bad contracts prevent the Knicks from signing new free agents to improve the team.
The Clippers Have A Great Coach; The Knicks Do Not Have A Coach
Clippers' coach Doc Rivers held the team together during the Donald Sterling fiasco. In fact, the Clippers won their first round playoff series over the Golden State Warriors and pushed the Oklahoma City Thunder hard in the second round. While Rivers was coaching the Boston Celtics, the team won the NBA Championship and Rivers was named the Coach of the Year. The Knicks do not have a coach right now. More specifically, they have the most successful coach in NBA history, Phil Jackson, as team president, but he has stated he is not healthy enough to coach the team. Jackson's first choice to coach the team - former Phoenix Sun GM Steve Kerr - rejected the job in favor of becoming the coach of the Golden State Warriors. THE KNICKS' ADVANTAGES The Knicks Have A Much Better Stadium Deal The Knicks are owned by MSG, which also owns Madison Square Garden (along with the NHL's New York Rangers, the MSG regional sports network, Radio City Music Hall and other ventures). As a result, the MSG group collects all of the revenue generated by the Knicks, including luxury suite sales, luxury suite concessions and in-stadium advertising. The Clippers, on the other hand, are co-tenants in the Staples Center with the Los Angeles Lakers. The Clippers pay rent (although not a big number) to AEG, but only 10% of the luxury suite revenue. The Knicks Have A Much Better Television Deal Right now, the Los Angeles Clippers have one of the worst television deals in the NBA, given the size of their home city. Fox Sports Prime Network pays the Clippers $20 million/year. By contrast, the Lakers receive an average of $200 million/year for their cable rights. The value of the Knicks cable rights is more difficult to glean, because the Knicks are broadcast by their sister company, the MSG Network. For purposes of the NBA collective bargaining agreement, the Knicks' broadcasting revenues are presumed to be equal to the Lakers. On this basis, the Knicks are making 10x as much as the Clippers from broadcasting. New York Is A Much More Affluent City Than Los Angeles As Nate Silver recently wrote, New York's economy is nearly twice as large as Los Angeles'. The aggregate personal income of residents of the New York metropolitan area is 85% larger than that of the Los Angeles metropolitan area. According to Forbes, New York has more than twice as many billionaires as Los Angeles (65 vs. 30). Finance is New York's bedrock industry, which generates hundreds of high-flying millionaires at investment banks and hedge funds. Movies and television - Los Angeles' bedrock industry - does not generate nearly as many superwealthy sports fans. The Knicks Dominate Their Market, The Clippers Have Been Second Fiddle To The Lakers The Knicks have been the number one basketball team in New York since their founding nearly seventy years ago. The Knicks are almost always relevant in New York, even when they are awful. The Knicks' celebrity row draws the biggest stars in entertainment. The images of Spike Lee (and Woody Allen) at Knicks games are indelibly etched in the public mind. The Clippers, on the other hand, are relevant only when they are good. Until recently, Billy Crystal was the highest profile Clippers fan. The Clippers could not fill the Staples Center with paying fans until their recent run of success. Ironically, Donald Sterling earned his first lifetime achievement award from the Los Angeles Chapter of the NAACP for giving away thousands of unsold Clippers' tickets to poor kids. For all of these reasons, the Clippers average ticket price is roughly half of the Knicks' average ticket price. Last year, while the Clippers were on their way to winning the Pacific Division, their average ticket sold for $63. The Knicks, en route to a 36-56 record and missing he playoffs, sold their average ticket for $123.