The Ripple Effect of 'The Business'
The NBA is thriving in a way it never has before. The dollars are pouring in, estimated values are souring, and the money pot continues to grow. Forbes recently stirred the pot with the release of their 21st Annual NBA Team Valuations. One thing that’s understood and often repeated is the fickle and fleeting nature of “the business." The ripple effects spreads farther than most can imagine. They determine how ownership groups and front offices manipulate moves and contract signings. They also determine how players fight to control their own destiny.
Between the NBA trade deadline frenzy, free agency looming, and the brightest stars flexing their pre-agency––the relationships between front offices and players have been testy to say the least. The result has been a proverbial tug-of-war for money, power, and influence.
The Golden State Warriors put astronomical numbers on the board, as much off the court as they do on it. They scored the biggest five-year value gain in the NBA at a whopping 367 percent. Steve Ballmer's Los Angeles Clippers followed in second at 282 percent. The Philadelphia 76ers, Milwaukee Bucks, and Toronto Raptors close out the top 5 earners.
The Warriors franchise is now worth an estimated $3.5 billion. Joe Lacob and his ownership group bought the team for $450 million at the turn of the decade in 2010. The franchise trails only the New York Knicks ($4 billion) and Los Angeles Lakers ($3.7 billion). These are two franchises looking to reinvent their future with big name free agents in the summer––multiplying their fortunes and running up championship rings as their greatest competitor is currently doing.
So how did the Warriors do it and what does such a high return on investment mean?
Jennifer Cabalquinto is bringing her vision to life as the Golden State Warriors build momentum in their move to San Francisco this fall. She joined the organization as CFO in 2013. Stephen Curry and the Warriors were in the midst of a cultural revolution, revitalizing the sport of basketball. Jennifer’s first season was the last time the Dubs didn’t make the NBA Finals. They’ve reigned supreme the last few seasons and the fierce Filipina businesswoman was determined to revolutionize the organization’s future and viability in a similar manner. It’s already paying off and the fruits of her labor might keep KD in a Warriors uniform.
The Golden State Warriors look to evolve outside the confines of the court. When they move into the Chase Center next fall, it will mark their transformation from NBA basketball franchise to entertainment dynasty, including real-estate and retail operations, year-round events, concerts and more.
Jennifer comes with the right background to lead the charge. Her area of expertise focused on television and theme parks, serving as the vice president and CFO of the Telemundo station group in Florida and Universal Studios Hollywood. She oversees the financial planning and accounting for the organization while managing business infrastructure.
She is merging the value of an NBA franchise whose won 3 of the last 4 championships and the financial integrity of a sports entertainment juggernaut. The organization moved into a cloud-based financial system to help with real-time transparency in operating cash flow.
Jennifer is a master at capitalizing on partnerships and building relationships. The Warriors’ two joint venture partners in Uber and Alexandria Real Estate Equities will help facilitate office space. JP Morgan Chase has purchased the naming rights to the new arena for the next 20 years. Japanese e-commerce company Rakuten has purchased real estate in the form of an advertising patch easily recognizable on the Warriors’ uniforms––the three-year, $60 million deal plays a pivotal role in the development of the $1 billion Chase Center.
Along with the organization’s ownership team, led by CEO Joe Lacob, Jennifer understands how perspective can often disrupt the industry and shift the culture.
“Joe looks at the organization as a business as well as a community asset,” she told Forbes. “So that changes the lens in terms of how we operate. He always wants us to continue to push for the boundaries of what traditional sports teams do.”
She remains focused on staying ahead of the curve seeking business growth and value. A gatekeeper in her craft, Jennifer understands how to create expertly tailored experiences for the evolving consumer––consistently tinkering and adapting to their palate.
Lacob and his squad are loaded in cash. The wealth will continue to build with already $2 billion in partnership deals and a new TV deal up for renewal in the next few years. He believes they can pull all the financial stops needed to keep this team fully intact, poise to extend the dynasty for years to come. They fear nothing, not even exceeding the luxury tax bill on pace to surpass $300 billion.
Lacob’s confidence boasts loudly in a statement with The Athletic’s Tim Kawakami, “We can do whatever we want (financially).” He continued, “And you should expect that that’s not going to be a reason this team … doesn’t stay great going forward. We have the capital to pay our players what they deserve. And we will.”
More power, more dollars, and potentially more winning is the ultimate goal––it just comes at another cost. Here lies a meaningful anecdote from Forbes senior editor Kurt Badenhausen:
“In the beginning of the decade, more than half of the NBA teams were losing money, and now the average operating profit is double the level it was two years ago––Teams have benefitted from the NBA’s $24 billion TV contract with TNT and ESPN, which kicked off with the 2016-17 season, as well as the collective bargaining agreement reducing the share of revenue players receive.”
Although the superteam concept has been around as long as we can remember, players have forced their hand more in the last decade. LeBron James has been on a mission and trailblazed the pre-agency era. High-profile players signing one and one contracts creates leverage and flexibility, along with the ability to snag the long term money for the right price and location (and teammates).
The King doubled down on his stance regarding the Harrison Barnes debacle in which he was traded by the Dallas Mavericks mid-game. The narrative is that teams can always do what’s best for their bottom-dollar and future endeavors, but dare an athlete voice his opinions or desires and he’s deemed ungrateful.
It’s why pre-agency is such a marvel, or headache depending on perspective. You declare your intentions for a trade before your contract is up or unwillingness to re-sign. A team cannot afford to let a high-caliber talent walk for free and so the best suitors line up. Players are taking back ownership and what they value has shifted. It’s not so much about tossing multi-million dollar contracts on the table and signing at the dotted line. Athletes in this climate aren’t glued to the money, although they still use their worth as leverage and understand their value.
All this wealth gives ownership groups and front offices a new level of entitlement. Players just want to take back control and steer their own destiny. Of the top ten most valuable teams in the NBA, seven of those are in the heat of drastically altering their fortunes with game-changing players, whether via trade or big-time summer acquisitions. The New York Knicks, Los Angeles Lakers, Golden State Warriors, Boston Celtics, Brooklyn Nets, Houston Rockets, and Los Angeles Clippers are each in position to make noise this summer.
Players want to change the narrative and control their own. This is a salary-cap driven sport consisting of predominantly black athletes. They’ve smartened up and want to dictate where and who they play with. Essentially, it’s like owning your masters in the music industry. Players are taking back their freedom and its ruffling some feathers––capitalizing on talent, flexing financial literacy, and maximizing the finite number of sprints, dribble moves, and finishes and all on the court.
The money trees will continue to sprout tall, given the popularity of the sport and its dynamic viability. It’s the power and influence that is up for grabs, and the game’s best are leading the charge. Watch out.
Forbes insight contributed to this report
Olivier Auguste is an NBA lifestyle writer based in New York City. Follow him on Twitter for more insight on hoops, music, and the culture we love.