Over the past 20 years, the New York Knicks have a winning percentage of .390.
The Knicks play to an average of 95% capacity at home games.
Since 2002, the Knicks finished in last place eight times and better than third just three times.
The Knicks’ revenue topped $428 million last year. Only one NBA team had more.
One of the Knicks’ greatest players—Charles Oakley—was banned from their arena; the team’s highest profile fan—Spike Lee—swore off attending games. Fans chant for the team to be sold.
The Knicks are the most valuable franchise in basketball.
The Knicks are a conundrum. Not very successful this century at winning games, they are the most valuable basketball franchise on Earth, worth $5.42 billion according to Sportico’s NBA team valuations, released last week. That’s a couple of hundred million dollars more than the Golden State Warriors, who have appeared in five of the last six NBA Finals, and nearly $300 million more than the L.A. Lakers, who are reigning world champions, the latest in a record-tying 17 NBA championships and 32 finals appearances.
Ask anyone in the sports business why the Knicks are so valuable, and the answer seems so baldly obvious the question is a surprise.
“This is the ultimate trophy asset,” said John Tinker, research director at G. Research, a division of the Gabelli money management firm. “You’d be buying a New York team in a sports crazy town with a lot of rich people.”
Call it the triumph of hoopla over hoops. While New York has arguably more iconic teams competing in other sports, most play in one of the outer boroughs or in New Jersey. It’s the Knicks (with their sibling hockey team Rangers) that play in the heart of the Big Apple, the greatest city in the world and the backdrop for countless movies and TV shows. Plus, the Knicks play inside the self-proclaimed “world’s most famous arena” (never you mind, Yankee Stadium, Wembley Stadium or the Roman Colosseum). A couple of stories beneath the hardwood are rail hubs of four transit systems, capable of delivering most of the region’s 20 million souls to MSG’s turnstiles. Top that with another layer of uniqueness: The Knicks are one of just two original, unmoved franchises remaining from 1946’s Basketball Association of America, the league that evolved into the NBA. (The Boston Celtics are the other; the third original team, the Warriors, left Philadelphia in 1962.)
“You’ve got market, brand and legacy,” said Sean Clemens, sport banking principal at Park Lane, a San Francisco boutique bank that has advised on dozens of team sales. “The Knicks, along with the Lakers, are always viewed as the iconic brand no matter what happens on a sports-competitive level year over year, decade over decade.”
The multi-billion-dollar price tag for the Knicks is a fair market value, based on analysis by Sportico predicated on confidential discussions with NBA experts, officials from various teams and, in the case of the Knicks, public filings. Indeed, one possible objection to that figure comes from the stock market. And Mr. Market seems to claim the Knicks aren’t worth nearly as much.
Madison Square Garden Sports is a publicly traded holding company that owns the Knicks and Rangers plus some toss-ins—a couple of G League teams here, an esports franchise and training centers there. (The arena itself is owned by a different company, MSG Entertainment.) The market says MSGS as a whole isn’t even worth $4.4 billion, a value reached by the market cap of the stock at $4.02 billion and $350 million in debt.
The seeming incongruity is based on one thing: “Not only does the Dolan family control the company, Jimmy Dolan has a personal veto on the sale of the company,” said G. Research’s Tinker, who covers the stock. While MSGS is listed on the stock market, the Dolan family controls the business through supervoting shares, meaning shareholders are really like limited partners in a traditional private team ownership group. You can go along for the ride, but you’re basically powerless. If someone wants to buy the Knicks, “there’s only one person you’re negotiating with,” Tinker said. “The negative press Jimmy’s had is stunning, but so far he has no inclination to sell it.”
Viewing MSG Sports as a limited partner in the Knicks and Rangers suddenly makes the valuation more sensible. It’s not unusual for limited partner stakes in sports teams to trade hands at deep discounts, perhaps as much as 35%, according to multiple sports bankers. That means the $4.4 billion enterprise value of the teams actually reflects a market estimation of the Knicks and Rangers being worth around $6.7 billion. Based on ballpark estimates that the Rangers could fetch as much as $1.5 billion themselves, the Knicks come in at a back-of-the-envelope $5.2 billion. That is not too far off Sportico’s more rigorous valuation, which includes additional Dolan family holdings related to the team.
Even then, should the Knicks be put up for sale, market watchers wouldn’t be surprised to see a private buyer pay well more. The pool of potential people willing to pay more than $5 billion for the team is very small, “but there would be two buyers who are serious. That’s all you need,” added Tinker. Like the other handful of analysts who follow MSGS, Tinker has a higher estimate of the company’s value beyond the market’s current price, based in part on hopes one day the Dolans will sell (and in part to the fact the Dolans have been generally good at creating shareholder value.) Shares trade around $166 right now, and Tinker thinks $270 is a reasonable expectation. That’s a 63% premium, valuing the Knicks and Rangers at a combined $7.2 billion.
The inherent benefits of the Knicks raises the question: Would winning make a difference?
“Oh, massively. Massive to the revenue,” said one executive who has worked for the organization and asked not to be named. “We were awful, and we still defied gravity on all our major revenue streams.” Winning would make an already attractive arena and TV sponsorship opportunity fetch a premium, while luxury box leases would go up, and the ability to charge more for the typical seat would skyrocket. The company formulated extensive plans to capitalize on the team rising to elite heights in the league, the executive added, “But we never got any good.”
To his credit, it’s not as if Jim Dolan doesn’t want the Knicks to win: No laissez-faire owner would sit in the stands to both watch an underperforming team and be exposed to unhappy New Yorkers. Yet until the team become beasts of the East again, Dolan won’t hold the love of Knicks fans. He’ll just have to settle for owning one of the most valuable teams in the world.
“There are a lot of determinants that go into franchise valuation, and the Brooklyn Nets, for example, have done a great job with building their brand,” explained Park Lane’s Clemens. The Nets are worth $3.4 billion, fourth best in the NBA. “But the Knicks are a New York institution. There are so many fans that have been on the journey with the Knicks over the years despite any fluctuation in performance on the court.”
As of Thursday, the Knicks’ journey in the young season had them at 8-11, good for eighth place.
