Celtics Selling Price Will Depend on Brand vs. Business

The Boston Celtics hit the market in a sale that shocked the sports world Monday. If completed, the deal would surely break the record for the most ever paid for an NBA team (Phoenix Suns, $4 billion) and could set a new bar for all sports (Washington Commanders, $6.05 billion).

In December, Sporty valued the Celtics at $5.12 billion, which would put them fourth in the NBA and well behind the Golden State Warriors ($8.28 billion), New York Knicks ($7.43 billion) and Los Angeles Lakers ($7.34 billion).

The Celtics should receive a premium for that valuation, as the next TV deal is trending toward a larger increase than what most NBA insiders were expecting at the end of 2023. A key question about the final sale price is how investors weigh the brand versus the business.

The Celtics brand is one of the strongest in the sport, with a record 18 NBA titles, one more than the Lakers. Yes, just two since 1985, but the Celtics are the reigning champions, have most of their key players under contract and have a large and passionate fan base.

NBA team valuations have skyrocketed in recent years, with the average team value sitting at $4 billion, a 70% increase over the previous year. Sportyinitial NBA valuations three years earlier. The message from the bankers the Celtics hire will be that elite sports brands rarely come up for sale in the NBA or other major U.S. sports leagues.

Of the NBA’s five most valuable teams, the Lakers (1979), Chicago Bulls (1985) and Knicks (1997) were all sold more than 25 years ago. In 2002, Wyc Grousbeck’s group paid $360 million for Boston, while Joe Lacob and Peter Guber paid $450 million for the Warriors eight years later. Of course, the 2010 Warriors were not today’s Warriors at the top of the NBA’s financial standings. The team played in the league’s oldest building — not the $1.4 billion Chase Center — and hadn’t been to the NBA Finals since 1975 — something it had done six times in the past decade.

The Los Angeles Dodgers and Toronto Maple Leafs were the last top-five teams to be sold in their leagues — both in 2012. Others, such as the Chicago Blackhawks (1954), New York Yankees (1973) and Boston Bruins (1975), have remained in the hands of owning families for decades.

The average NFL ownership period is 40 years, and only the Los Angeles Rams have changed hands among the five most valuable franchises in the past three decades. The Rams, for which Stan Kroenke paid $750 million in 2010, were at the bottom of the league in revenue and played in St. Louis—not a $5.5 billion stadium in Los Angeles.

Team owners have traditionally cashed in on asset appreciation when they sell a team—CBS’s sale of the Yankees in 1973 and Bob Johnson’s divestiture of the Charlotte Hornets in 2010 were rare exceptions. Excluding the NFL, the big year-over-year gains are unusual. There’s a reason bankers rely on revenue multiples to value sports teams, rather than earnings multiples. Nvidia’s P/E of 72 would look cheap compared to many sports teams.

“We are losing money,” Grousbeck said. Boston Globe last month. “We don’t care.”

The losses are tied to the team’s payroll, which will result in a luxury tax bill of $48 million for the 2023-24 season, according to Spotrac estimates.

The bills will only get bigger. On Monday, the Celtics reached contract extensions with Derrick White ($126 million) and Jayson Tatum ($314 million). The Celtics now have two of the richest contracts in NBA history, Tatum and Jaylen Brown ($285 million). Their luxury-tax bill in 2026 should be at least $180 million, even if they fill out the rest of their roster with minimum-salary players. That’s on top of a payroll that exceeds $220 million.

Another difficult part of the Celtics’ business is that they don’t own or operate their own arena, as TD Garden is owned by Delaware North, which also owns the Bruins. The Celtics and Lakers are the only top-five teams in the four major American sports leagues that don’t operate their own arenas.

The Celtics’ tenant status means they receive no revenue from non-NBA events. Concert and other event revenue also falls outside the league’s revenue-sharing system, which funnels more than $350 million to low-revenue teams, with top clubs footing about half the bill.

Joe and Clara Tsai recently sold a 15% stake at a $6 billion valuation to BSE Global, the parent company of the Brooklyn Nets, Barclays Center and the WNBA’s New York Liberty. The Celtics are a much more valuable brand than the Nets, but Barclays is a busy arena, and all the economics flow to BSE. In April, Barclays was the world’s most profitable arena, according to Notice board.

Even with arena restrictions, the Celtics still generated the fourth-highest revenue in the NBA in 2022-23, including the playoffs, when the Celtics reached the Eastern Conference Finals. But there’s still a big gap between them and the Lakers and Knicks, who generate nearly 50% more regular-season ticket revenue — the Warriors have nearly twice as much.

If the Celtics sell, they would be the fifth NBA team to trade in the past two years, joining the Suns, Dallas Mavericks, Milwaukee Bucks and Hornets. The sixth, the Minnesota Timberwolves, is currently in arbitration to determine future ownership.