Sacramento Kings

Sacramento Kings now worth $800 million, Forbes says

Sacramento Kings majority owner Vivek Ranadive led a group that bought the team for a $534 million valuation and pressed a deal for a new $477 million arena, as well as a $200 million adjoining hotel-retail project.
Sacramento Kings majority owner Vivek Ranadive led a group that bought the team for a $534 million valuation and pressed a deal for a new $477 million arena, as well as a $200 million adjoining hotel-retail project. jvillegas@sacbee.com

Their fans are upset with the team’s losing ways and the coach’s recent firing, bringing the new owners their first real public relations controversy.

Turmoil aside, however, the Sacramento Kings have become a remarkable financial success.

Forbes magazine, in its annual valuation of NBA franchises, reported Wednesday that Sacramento’s only major-league sports team is worth an estimated $800 million. If accurate, that would represent a whopping 49 percent improvement from less than two years ago, when technology tycoon Vivek Ranadive led an investor group that bought the team from the Maloof family.

Why the big increase? Ranadive and his partners can thank Microsoft founder Steve Ballmer – yes, the same man who tried to wrestle the Kings away from Sacramento in 2013 and move them to Seattle – and an incredibly generous new national television contract.

Those two factors have driven up NBA franchise values by an average of 74 percent over the past year, Forbes said.

“The NBA really continues to grow dramatically,” said David Carter, a sports consultant and business professor at the University of Southern California. “The future revenue streams for the NBA look really incredible.”

Even with their lofty new valuation, the Kings remain something of a bargain-basement franchise. They are the league’s 22nd most valuable franchise (out of 30) and trail the league average of $1.1 billion, according to Forbes.

Kings officials couldn’t be reached for comment.

When Ranadive and partners engineered the purchase of the Kings in May 2013, some sports business experts said they believed the new owners had grossly overpaid for one of the league’s lowliest franchises. The investors bought 65 percent of the Kings, thwarting the takeover attempt by Ballmer and his business partner Chris Hansen, in a deal that valued the entire franchise at $534 million. It was an NBA record at the time.

Some experts chuckled even more when Ranadive, shortly after taking charge in Sacramento, confidently predicted that NBA teams would be worth several billion dollars apiece in a decade’s time.

The latest Forbes valuation indicates he was onto something. Eleven teams are worth at least $1 billion, the magazine said. Topping the list: the Los Angeles Lakers, at $2.6 billion.

Driving the huge leap in values: Ballmer’s eye-popping $2 billion purchase of the L.A. Clippers last year and, perhaps more importantly, a series of new national TV contracts that will pay the league and its teams three times as much as the current deals. The new contracts, worth a combined $930 million a year, take effect at the start of the 2016-17 season.

Experts said the rising franchise valuations make sense in light of the increased revenue streams from TV and other sources.

“I don’t think we’re seeing a bubble,” said Paul Swangard, head of the Warsaw Sports Marketing Center at the University of Oregon. “I don’t think we’ve seen the last of it.

“We continue to see the value of these assets rise, fueled mainly by the size of their media deals and how coveted they are by people like Ballmer,” Swangard added.

Ironically, the one guy who might have overpaid for his franchise was Ballmer. According to Forbes, the Clippers are worth $1.6 billion, fifth highest in the league but about $400 million less than what Ballmer paid to grab the franchise away from disgraced owner Donald Sterling.

The Ranadive ownership group has done more than just ride the wave. It has pumped new life into the Kings’ business operations, stepping up season ticket sales while signing new corporate sponsorships. The Kings broke ground last summer on a new $477 million arena at Downtown Plaza, half of which will be funded by the city of Sacramento, and are laying plans for a $200 million hotel and office tower immediately to the north of the arena. Both are scheduled to open in October 2016.

Fans have responded. Attendance at Sleep Train Arena jumped 18 percent last year, the best in the NBA. This year, despite considerable rancor over the December firing of coach Michael Malone and the team’s slump in the weeks since, attendance has risen a fraction of 1 percent, to an average of 16,342.

According to Forbes, the Kings generated operating income of $8.9 million last year on revenue of $125 million.

Along with benefiting from the NBA’s upcoming national TV deal, Forbes noted that the Kings signed a “blockbuster” local agreement of their own last summer. The new contract with Comcast SportsNet reportedly pays the team $35 million a year, more than triple the old contract. Forbes called the agreement “a massive deal for a team in the nation’s 20th largest market.”

At the bottom of Forbes’ NBA value heap: the Milwaukee Bucks, at $600 million. That’s still $50 million more than the team sold for last year.

Call The Bee’s Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.

BY THE NUMBERS

$800 million

Forbes’ current estimate of Kings’ value

$534 million

Selling price of team in 2013

$1.6 billion

Current worth of Los Angeles Clippers

$1.1 billion

Average NBA team’s value

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