Bucks Franchise Worth $1.86 Billion

Last week the online publication Sportico (The Business of Sports), estimated the current value of the Milwaukee Bucks franchise at $1.86 billion.

That’s a stunning increase in value since the team was purchased for $450 million in 2014. (The $550 purchase price was discounted by the $100 million former owner Herb Kohl promised to pay for a new arena.) It’s a more than four-fold increase in franchise value in just 6 years, and a big part of that value was the huge subsidy given the team, which paid little to build Fiserv Forum and was given free downtown land as part of the bargain. As Forbes reported in 2019, “Milwaukee ranked fourth highest among the 30 NBA teams in the five year increase in value of its franchise.”

This increase helped the Bucks jump from last place in franchise value among the 30 NBA teams, prior to the new arena’s construction, to 19th in Forbes’ analysis of February 2020.  Sportico’s analysis suggest the Bucks have continued to rise in value, to the 16th most valuable NBA franchise, ahead of 14 other teams. Considering the team is located in one of the smallest metro areas among NBA teams, that’s remarkable. And again a key part of that hike in value is its very generous government subsidy.

To put it another way: the Bucks biggest owners, Marc Lasry (estimated net worth $1.8 billion), Wes Edens ($1 billion) and Jamie Dinan ($2 billion) could have easily afforded to pay for the entire cost of Fiserv Forum and would have still gotten richer, as the value of the franchise has risen by $1.4 billion since they bought the team. 

The Bucks’ owners are credited with paying half the costs ($250 million) of the new $500 million arena, with taxpayers the rest, in typical media accounts. But that leaves out all kinds of other subsidies charged to taxpayers that lower the facility’s cost for the owners: a sales tax exemption on building materials, equipment and supplies to build the arena, a property tax exemption on the arena, a sales tax exemption on luxury suite revenue and all retail sales within the arena, the interest payments on bonds issued to pay for the arena, and various other charges that brings the total bill for taxpayers to at least $800 million as I’ve previously estimated. These are all costs a for-profit business would normally pay, but the billionaires who own the Bucks will never be charged over the likely 30-year life of the arena. 

Back when the debate over the arena subsidy was going on, NBA observers noted that the value of franchises were likely to rise in the coming years. “The NBA’s $24 billion TV contract with TNT and ESPN, which kicked off in the 2016-17 season and is shared equally among the 30 teams,” provided a huge boost in revenue to all the teams, as Forbes has reported. “Another boost: the collective-bargaining agreement signed in late 2011. It cut the percentage of basketball-related income going to the players to 51%, from 57%, boosting profits across the board.”

“Since 2010, the average NBA team value is up nearly sixfold and growing at a much faster rate than the other three major U.S. sports leagues, thanks to strong international growth prospects and blockbuster media deals,” the story noted. “The average basketball team is worth more than $2 billion for the first time. As recently as 2011, no NBA franchise was valued at even $1 billion.”

Yes, the pandemic cut revenue for sports teams. Sportico estimated that the Bucks’ annual revenue dropped from $299 million in 2018-2019 to $259 million in the 2019-2020 year. But that’s a short-term blip for a business whose long-term prospects are spectacular, even compared to the very profitable NFL and Major League Baseball.

“As viewing gravitates more seamlessly to a streaming-centric world, the NBA’s younger demographic will be key. The NBA’s average viewership age is 43 versus 52 for the NFL and 59 for MLB, according to Nielsen,” Forbes reported. The story cited a recent report by analytics firm MarketCast which found “the NFL is dominant among fans 35-plus, outpointing the NBA by more than a 10-to-1 margin. But the NBA is a slight favorite among those 18 to 34, at 41% vs. 38%, and it’s a blowout among those 13 to 17, with the NBA holding a commanding 57% to 13% lead on the NFL; MLB registers a scant 4% among teens.”

Yet even as all NBA teams have seen their value skyrocket, the Bucks have risen even faster, passing 14 teams in franchise value, according to the Sportico analysis. And its analysis is in-line with Forbes, which has shown the Bucks steadily rising versus other franchises. As of February 2020, Forbes ranked the Bucks as the 13th most profitable team, with an annual revenue of $283 million and a bountiful operating income of $69 million or 24%, which ranked the Bucks head of 17 other NBA teams.

Defenders of the Bucks’ owners might argue they have made smart decisions in how they have run the team, which has helped drive profits. I’d agree. Which only offers another reason why the owners, three of the richest people on the planet, could have easily afforded to pay for the arena. Instead, some of the poorest people in this community will be helping pay the taxes and make up for the tax exemptions that subsidized the arena’s construction.