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Franchise value — the other way the owners win labor talks

Nov 9, 2011, 10:51 PM EDT

Mark Cuban, David Stern AP

When the NHL lost a season due to lockout, the operative phrase used by the owners was “cost certainty.” The NBA owners were smarter about their spin and disguised it as “competitive balance” but the idea of controlling team spending has been the same.

One thing that happened for NHL owners when the lockout ended — their franchise values went up. Any business where you can better control costs becomes a more valuable asset.

Which brings us around to the NBA lockout. With each percentage of basketball related income the owners squeeze out of the players, not only do they get more revenue their franchise value will reflect it. Friend of this blog Larry Coon explains it well at ESPN.

How much will franchise values increase? It’s hard to say. There are a lot of factors that go into determining the value of a business, and a number of ways to do the calculation. A conservative estimate might be a $3 million to $12 million average increase in franchise values for each percentage point in revenues the league wrests from the players. Decreasing the players’ split of BRI from 57 percent to 50 percent therefore might be worth $21 million to $84 million per team.

The owners will only see this money when they sell their teams. But when they do sell, none of it is shared with the players.

Just a reminder how big the owners are winning these negotiations. The rich get richer. And maybe it’s why they can give a little on system issues and end this thing.

  1. Chris Fiorentino - Nov 10, 2011 at 9:45 AM

    And how much of the money the players earn from sneaker contracts and commercials do the owners get? It’s the same thing…it’s none of the players business what the owners get for selling their team and the players don’t deserve a nickel of the capital gain. Period. And it’s a dumb sentence to even put together to say that the players don’t get any of that.

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