Steve Ballmer is now the proud owner of his very own sports franchise. Now that the former Microsoft (MSFT) CEO has finalized his deal to buy the Los Angeles Clipper’s for a cool two billion dollars he joins an exclusive club of super rich franchise owners.
The price tag for Los Angeles “other” NBA franchise ties the record set by Magic Johnson and Guggenheim Partners who purchased the Los Angeles Dodgers for the same amount in 2012.
So what is with all these rich guys snapping up sports teams?
For starters, says Yahoo Finance senior columnist Mike Santoli, it’s not about profits from the day to day operation of the team. “But I think what gives a buyer like Steve Ballmer a lot of reassurance,” he says, “is that you’ve almost never gone wrong buying a sports team if you eventually have to sell it. So the asset value tends to go up even though on a day to day basis salaries are expensive,” as well as any number of other costs.
Where it becomes more lucrative, Santoli notes, is the media buy. “Because the media rights have always escalated for all the major sports teams, generally they’ve become a good asset to own over time.”
Money aside, owning a sports team has also become a status symbol for celebrities, even if they own only a sliver of the team. For example, Usher owns a small piece of the Cleveland Cavaliers, Lebron James has a stake in English football (soccer) club Liverpool, Will Smith owns a piece of his hometown team the Philadelphia 76ers -- and the list goes on and on.
There is however one celebrity said to be in the market for a majority stake in a team. Jon Bon Jovi wants the Buffalo Bills dead or alive (they’ve been all but dead for the better part of two decades Santoli notes). There are rumors Bon Jovi and his Toronto based buyers group would move the Bills north of the border after buying the team for something in the neighborhood of $1 billion.
A team from such a small market, that is so used to spending time in the basement of league standings garnering even the mention of such an amount is a testament to how rare these sales actually are. “Not only are they not really expanding the number of sports franchises anymore,” Santoli says, “but you actually have these gatekeepers that have to approve the sales.” With such a low supply and a big barrier to entry it’s no wonder only the super rich (Bon Jovi’s net worth is estimated at $290 million) are snapping these teams up.
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