Anyone wondering why NBA owners seem to be pushing harder for starting an NBA league in Europe than expanding domestically, we have some answers for you.
But it’s all about the money.
Commissioner Adam Silver has been in Europe this past week, talking up the NBA’s vision and selling it to potential stakeholders in the new venture, including Real Madrid, reports Joe Varden of The Athletic. Part of what Silver and the league are pitching is a $500 million per team franchise fee to buy in, reports the Sports Business Journal.
The NBA is pursuing franchise fees of more than $500M from teams looking to join the prospective NBA Europe, with multiple sources maintaining the league’s preferred number is somewhere between half a billion and $1B….
Franchise valuations are also said to be part of ancillary discussions with banks and private equity conglomerates, as part of an effort to settle on a dollar figure. An official from one EuroLeague franchise had earlier scoffed at a proposed $500M figure, and — considering the template for NBA Europe includes existing EuroLeague clubs — it seemed unclear whether teams will be priced out of joining.
See why NBA owners like this idea? They could secure a share of these massive franchise fees — at least 10 teams at half a billion each is $5 billion at minimum, about what the expansion fee would be for a team in Seattle or Las Vegas — without having to give up any of their new national television revenue or equity in the league.
What the NBA envisions is a few current big-name European teams — “A” license-holding, stakeholding teams from the existing EuroLeague — jumping ship to the new NBA league, with Real Madrid seen as the most willing team to make a move (Tony Parker-owned ASVEL Basket also is one to watch). Then the NBA could tap into sovereign wealth funds and private equity — groups limited in how much of a stateside NBA team they can own — to put together expansion teams or prop up smaller existing teams, something Varden details at The Athletic.
The United Kingdom is home to soccer’s mighty Premier League and is also another place where the NBA could attract big soccer dollars from Middle Eastern sovereign funds. The British Basketball League’s reigning champion, London Lions, is owned by tech giant Tesonet…
Additionally, Silver and his associates met in London this week with representatives from four private equity firms (CVC, RedBird, Bridgepoint and KKR), as well as officials from the Turkish basketball and soccer club Galatasaray.
The NBA believes there is money left on the table in Europe, in areas such as broadcast rights and getting new, larger arenas built. What the NBA touts is its brand name and its business acumen — the ability to squeeze every dollar out of the business of basketball. What Real Madrid and teams such as FC Barcelona or Fenerbahçe Istanbul bring is history and a built-in fan base for the league.
We’re still a few years away from an NBA league in Europe, but it has become a growing focus for the league. From an existing NBA owner’s perspective, it’s easy to see why this is attractive. We’ll see if the European clubs (and fan bases) feel the same way.
