A closer look at the 2019 Forbes valuation of the Atlanta Hawks

Forbes released their 2019 NBA Franchise Valuations in early February of this year, which provides the best publicly-available data on the finances of NBA teams. Forbes has undertaken the task of providing estimates of financial performance for NBA teams every season since 1998, when the average of NBA team valuation was $167 million. With the most recent iteration, the average valuation is now at an all-time high of $1.868 billion and the New York Knicks have the highest-valued team ($4 billion) for the fourth year in a row.

A few obvious factors have led to the increase in franchise valuations over the years: large increases in television revenues, new streams of revenue, tempered labor costs, lower interest rates, and 25 new or renovated arenas. The television deal in 1998 paid out $274 million, while the most recent season paid $2.225 billion. Teams are also now able to earn income through digital distribution of games and jersey patch sponsors, streams that were not previously available.

In addition, labor costs have been reduced from a share of around 55 percent of Basketball Related Income (BRI) in 1998 to now between 49 and 51 percent of BRI, based upon the most recent Collective Bargaining Agreement (CBA). In terms of the Forbes methodology, they do not release much in their methods aside from noting that they use a revenue multiple.

While these factors lead to league-wide increases, we are an Atlanta Hawks-centric site and we are going to dive into the finances related to Atlanta specifically.

Hawks valuation over the years

The average valuation of an NBA team increased by 13% year over year and the Atlanta Hawks had that same increase, from $1.15 billion last year to $1.3 billion this year. While it would make sense to expect Atlanta to be in the same ranking as the previous year, this is not actually the case, as they fell from the 23rd-most valuable to the 24th-most valuable team — it was Denver (24th to 21st) and Milwaukee (26th to 22nd) jumping above Atlanta while Cleveland (15th to 25th) fell behind.

Over the years, Atlanta has been in the bottom half of the league the throughout the data available, with 1990 and 1991 being the high points at 14th-highest in valuation, while 2011 and 2012 were the low points for the team at 28th.

Listed within the figure are sales (or failed sales, shoutout to pizza mogul Alex Meruelo) of the Atlanta Hawks over the years. Tony Ressler purchased the Atlanta Hawks at a valuation of $730 million for the franchise in 2015, according to Forbes.

As previously mentioned, the Atlanta Hawks have seen similar increases in valuation to the rest of the NBA but unlike the rest of the NBA, Atlanta recently underwent a $192.5 million renovation of their arena. The renovation began at the conclusion of the 2016-17 NBA season and was finally completed prior to this 2018-19 NBA season. The 2017-18 NBA season operated with a lower seating capacity than the previous due to the renovations, which likely hampered revenues for that season along with the team’s poor performance on the court. The important aspect to note here is that the Forbes valuation uses financial data from the 2017-18 NBA season in estimating the 2019 valuation of the Atlanta Hawks, so we can expect a substantial jump in valuation for the next iteration of the Forbes data because of the newly renovated arena.

Another interesting aspect to keep an eye on for the club’s valuation is the development of The Gulch. Currently, the Los Angeles based CIM Group (headed by Richard Ressler, the brother of Tony Ressler, who is the principal owner of the Hawks) is seeking approximately $1.9 billion in public monies to aid in the $5 billion development of The Gulch into an LA Live-like district. Such a project would not have a direct effect on the Atlanta Hawks as leases, rents, and sales of the development would accrue towards CIM, however there may be spillover effects of having a booming entertainment district surrounding the arena which lead to increased attendance of Hawks games. The project has yet to be officially greenlit and there is an active grassroots movement to halt the project (or at least reduce the public subsidies).

Revenues

Like franchise valuations, the revenues for the Atlanta Hawks have continually been in the lower half of the league and the revenues largely mirror franchise valuations. Much of this is because costs do not vary too much from team to team due to the nature of a salary capped league.

Revenues for NBA teams are made up of the national television deal, local broadcast deal, advertising, merchandise, and gate sales (tickets). The national television deal is split equally over teams and the NBA’s new TV deal kicked in for the 2016-17 Season. The national TV deal most recently paid out $2.225 billion, which is a slight increase from the $2.1 billion in 2016-17 but a massive increase from the last year of the previous contract, which paid out $1.035 billion.

Atlanta most recently revised their local television deal with Fox Sports South for the 2016-17 season. Reportedly, the revenues from local broadcast went from approximately $12 million a year to more than $30 million a year with the new contract.

Additionally, the sponsorship deal for the newly renamed State Farm Arena has yet to be accounted for in those revenues, as the new deal with the American insurance giant didn’t kick in until this season and revenues comprised of Forbes’ valuations date back to 2017-18. From the arena’s opening in 1999, the Hawks had played in Philips Arena, as Philips Electronics agreed to pay $180 million over 20 years for the arena’s naming rights. As it turns out, the agreement only lasted 19 years as Philips and the Atlanta Hawks mutually agreed to a new sponsor of the arena, with State Farm taking over the naming rights to the tune of $175 million over 20 years. While the new naming rights agreement is a decrease in annual revenues, Atlanta still maintains the second-highest naming rights deal in the NBA as only the Barclays Center in Brooklyn is more lucrative at $200 million over 20 years.

Another perspective for revenues of Atlanta is to look at Forbes’ estimates of their gate revenues from ticket sales. There were a few years in the mid-90s to the early 00s that Forbes did not produce estimates of gate revenues, so apologies for the lack of data in the chart, but Atlanta has consistently lagged behind the rest of the league with respect to gate revenues as well.

The astute reader will be able to pick out the blip up in gate revenues for the 2014-15 season where the team recorded an Atlanta record 60 wins and their first ever Eastern Conference Finals appearance. That same reader will realize the team was nowhere near the top of the league for gate revenues and still lagged the league average. Heck, last season the Atlanta Hawks were dead last in gate revenues, which is likely due to reconfiguration of the arena, which reduced capacity (and winning only 24 games did not help matters). There are various theories as to why the Atlanta market has not produced more in ticket sales over the years, none of which I will express but feel free to discuss them in the comments.

For some historical perspective on the Atlanta Hawks, you can check out our previous descriptions of the Forbes valuations back in 2018, 2016, and 2014. Clearly, we decided to break the streak of only writing up the Forbes valuations in even numbered years.