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.