The Perfect Storm - Why The Sale Of The Clippers Will Likely Surpass $1 Billion
Donald Sterling stands to make a huge profit off of his original $12.5 million investment to purchase the Los Angeles Clippers in 1981. But if he is forced to sell now, he stands to lose hundreds of millions more as the team's value will skyrocket in the coming years.
Forbes recently valued the Clippers at $575 million.
However, a number of factors are coming together at the right time that will make the Clippers immensely more valuable and will likely push the ultimate sale price past $1 billion, here's why.
Television revenue
The single-biggest factor that is going to push the value of the Clippers skyward is the same factor pushing up values of franchises in all sports, television revenue.
On the national level, television revenue for the NBA is expected to more than double from $930 million annually to more than $2 billion annually following the 2015-16 season.
More importantly for the Clippers, their own local deal also expires after the 2015-16 season and they will make substantially more in their new deal than the $22.5 million per year they are making now.
The cross-town Lakers recently started a new 20-year local television contract that pushed their local television revenue from $30 million annually to an average value of $200 million per year, an increase of nearly 600%.
If the Clippers see the same increase, their local television revenue would jump to more than $125 million per year.
Big market
Let's face it, this is Los Angeles, one of the two biggest markets in the NBA. It is so big, one could argue that L.A. is more important to the NBA than it is to the other major sports leagues.
It has been 33 years since a team in L.A. was for sale. As a result, some big names are jumping at the chance to own the Clippers, a team that has the potential to become a marquis franchise.
The Lakers are a mess
The Lakers are a team that is struggling right now and that has opened the door a bit to let the Clippers grab a bigger share of L.A.'s attention.
Celebrities like winners and big stories. Casual fans like who the celebrities like.
With the Lakers missing the playoffs and Kobe Bryant nearing the end with no obvious replacement on the horizon, attendance will remain strong for the Clippers (100.8% capacity this season compared to 98.8% for the Lakers).
More importantly, the Clippers TV ratings will narrow the gap with the Lakers. This season, Lakers games were seen in an average of 122,000 homes while Clippers games were seen in approximately 72,000 homes according to SportsBusiness Daily.
That will add even more value to their next television contract.
The Clippers are seriously undervalued
The Clippers will likely never be the Lakers. But the only reason the Clippers are just the 13th most valuable franchise in the NBA and nearly $800 million less valuable than the Lakers is because the team was poorly run for so many years.
At the very least, a well-run Clippers franchise should be a lot closer to the value of the Lakers even if still worth less.
Every team is prospering
The Milwaukee Bucks were considered the least valuable franchise in the NBA with a value of just $405 million according to Forbes.com.
Yet, they recently sold for $550 million, a 36% increase over their valuation.
If the Clippers were undervalued by just that same amount, their actual value would be closer to $800 million. But the Clippers obviously have much more going for them than the lowly Bucks.
Good players
Thanks to the intervention of then-commissioner David Stern, a trade that would have sent Chris Paul to the Lakers was vetoed and Paul was eventually dealt to the Clippers.
The Clippers, with Paul, Blake Griffin, and solid supporting cast, are no longer the joke of the NBA and are suddenly one of the best team's in the league.
It took Sterling 30 years to finally own a good basketball team and somebody else is going to reap most of the benefits.
A suddenly lovable team with a national audience
The national perception of the Clippers had already improved with the likeable Paul and Griffin, the high-flying Lob City, and a championship-caliber team.
But ironically, love for the Clippers on the national level has been pushed to an all-time high because of the racist comments made by their owner.
Suddenly everybody loves the Clippers and has rallied to the side of the players, coaches, and even their fans.
The result is a team whose marketability at the national level will suddenly rank with the likes of the Lakers, Heat, and Knicks and whose value should be much higher.
Potential owners will see these factors and the potential return on investment and the bidding for the Clippers will likely go sky-high.
