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Steve Ballmer

Steve Ballmer, former Microsoft CEO (L), sits with Dan Beckerman, the President and CEO of AEG (R) in the first period of Game Six of the Western Conference Final during the 2014 Stanley Cup Playoffs at Staples Center on May 30, 2014 in Los Angeles, California. Steve Ballmer has reportedly made an offer to purchase the Los Angeles Clippers basketball team for $2 billion.

The world of business has been abuzz about the $2 billion sale of the Los Angeles Clippers to former Microsoft executive Steve Ballmer, and for good reason -- $2 billion is nearly quadruple the previous record for an NBA team (last month's $550 million price tag for the Milwaukee Bucks).

"I think this sets a new bar for pricing," says Matt Powell analyst with SportsOneSource. "It’s like the real estate market, right? What’s your comparable? And I think this is always going to be thrown up in people’s faces about what a team is worth."

$2 billion might not be as crazy as it sounds when you consider a couple of factors, like "the size of the LA market and the fact that there’s a big pending TV contract coming up and quite a few interested bidders," says David Carter, director of USC’s Sports Business Institute. "The number on the surface seems a little bit high, but when you peel it back, ultimately, it might make sense."

The Clippers brought in an estimated $128 million dollars in revenue last year, according to Forbes. That's a far cry from $2 billion, but sports teams tend to be reliable earners. "Franchise values are going to continue to climb," says Carter. "We’ve seen nothing short of a real appetite for sports content and fans consuming it so many different ways."

Carter also points out that a team like the Clippers actually coming up for sale is a rare window of opportunity.

 

About the author

Stacey Vanek Smith is a senior reporter for Marketplace, where she covers banking, consumer finance, housing and advertising.

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