We can often see that former players, billionaires, and businessmen invest in NBA teams, which begs the question if it is a profitable business. The truth is, most of the investors in NBA franchises are not there just for the fun of it or because they love basketball. In fact, there is an extremely profitable business behind such investments which can easily be proven by few facts.
If we look 25 years ago and check out some of the value of NBA franchises we can see some astonishing numbers. For example, Utah Jazz was purchased back in 1985 for $22 million, and today, the franchise is worth around $1.6 billion. Another example is the Milwaukee Bucks which quadrupled its worth in only six years from $405 million in 2014 to $1.58 billion in 2020.
This proves that investing in NBA franchises can be a profitable investment, and most of the success of franchises is based on the popularity growth for basketball.
It makes the sport even more attractive for investors, which is a positive thing for the sport since franchises sell minority stakes, which means that they can reinvest that money for new training centers, youth development, and players trades (check out how NBA trades work here: edge.twinspires.com/nba/trade-rumors/).
Is NBA Franchise Investment a Good Idea?
In order to find whether or not it is a good idea to invest in NBA franchises, we need to compare it to the traditional form of investing in the S&P 500, which is the most common type of investment that promises around 7% return of investment per year on average.
From the chart provided by PitchBook, we can see an impressive growth of the NBA compared to other leagues and it even surpasses the growth of the S&P Index. This is only explainable by the new wave of globalization in the NBA, which new innovative projects that surround the sport.
The league managed to sign a contract with many good television channels making the sport vastly available for the public and got involved in many interesting projects like the NBA Top Shot which uses blockchain technology in producing NFT’s (non-fungible tokens) that add additional value to every franchise.
Future of NBA Franchise Investing
We can see that investing in NBA franchises can turn out to have a huge return on investment, but they’re not so fast. Currently, investing in NBA franchises is limited to a select group of people in the world, and you have to be a billionaire or be involved in basketball to get a chance to participate.
However, we hope that things will change in the future as they are becoming more decentralized. Much like crypto, we hope that the money flow for investors will force big organizations and companies to decentralize their operations and allow regular people to get involved.
In other words, we will see stocks of companies or franchises in the NBA that we can buy from our phones and own a fraction of the company. This is a popular trend that is going on in the digital space of splitting the value with different investors, particularly in the NFT space.
Currently, the only way you can invest in an NBA team is by purchasing the team if they are on a losing streak for too long and the current owners don’t see a future or dunk a huge pile of money for a percentage of shares that is a very unlikely scenario.
But for buying a team, you’ll need a lot of money. For example, the Washington Wizards sold for $550 million in 2010, and the average investor doesn’t have that amount of money laying around.
Investing in NBA franchises can turn out to be a very profitable business, but unfortunately, it is still limited. However, there are many different ways you can invest in basketball if you think that this industry has a positive future.
In other words, you can invest in different companies that work closely with the NBA, so when the industry grows, so will the company you invested in.