It was mere weeks ago that people were gasping at a speculated $1 billion-plus sale price for the Clippers, which would be double the previous record for an NBA franchise, $550 million for the Milwaukee Bucks.
Now, if you believe multiple recent media reports unconfirmed by KPCC, the price could exceed $2 billion, an astonishing amount for a franchise that was once considered the laughing stock of the NBA.
Is a $2 billion price tag justifiable? Absolutely, says Andrew W. Kline, Managing Director of Park Kline, a Century City-based investment bank that specializes in sports transactions.
"There are a number of ways to justify a purchase like this financially," said Kline. He added that the value may be influenced by two potentially lucrative media deals on the horizon: "One with the Clippers, and one with the league. Both new deals should drive significant revenue and value."
Forbes staff writer Kurt Badenhausen reported that the NBA is getting ready to sign a new national TV deal that is expected to easily double the league's current $930 million contract. The NBA is the last major sports deal available for some time, and a plethora of channels – including new entrants such as Fox Sports 1 and the NBC Sports Network – are all competing for marquee live programming.
Meanwhile, the Clippers’ current deal with Fox Prime Ticket — worth about $20 million a year, according to Forbes — expires after the 2015-16 season. A new contract could fetch $60-75 million, Forbes' Badenhausen estimated.
Still, in this, their most popular season ever, Clippers broadcasts mustered a measly 1.27 rating, which means only 72,000 households were watching. That was far below the 2.15 the Lakers got, even though they were one of the worst teams in the NBA.
That's one of the reasons longtime sports agent Leigh Steinberg is skeptical about a $2 billion sale price.
"I think those reports are fanciful and fairly absurd," said Steinberg.
Steinberg said the rumored Clippers bidding frenzy reminds him of when he's been an agent representing free agents, such as quarterbacks Warren Moon or Ben Roethlisberger. He suspects many reports about the Clippers astronomical price could be coming from Sterling's camp.
“I don’t think it’s very unusual for people in the business of trying to sell something to inflate the prospective price, trying to create a perceived value that’s much larger than what makes sense from a business standpoint,” said Steinberg. “It’s greatly in the interest of anyone attempting to sell the Clippers to have the largest figures out there so they create a bidding war.”
Steinberg points out that L.A. is still a Lakers town and that it was only two years ago that the Dodgers sold for $2.3 billion, a valuation many thought was way too high, especially since there were no other bids for the team that come close to that. Still, he points out the Clippers don't approach the popularity of the Dodgers or the Lakers.
“It’s entirely possible in the heat and competitive process of attempting to buy a team that the price can move far beyond anything that you or I would consider rational,” said Steinberg. "If the purchase price is too high it creates a situation where it’s very difficult for the revenues to ever come close to paying off that initial price.