Brooklyn Nets: It's The Capitalist Thing To Do

From the desk of:  THE HOOPS OF FLATBUSH

TONIGHT

Brooklyn Nets

vs.

New York Knicks

The Far Side

EAST RIVER

Brooklyn Nets: So Much For Being A Long-Term Investor; Mikhail Prokhorov Buys Low, And Will Now Sell High; Could Be Out Of Team Picture By 2021.

According to ESPN, Mikhail Prokhorov will sell a 49% stake in the Nets to Joseph Tsai, co-founder of e-commerce company Alibaba.  ESPN's Adrian Wojnaroski and Zach Lowe report the purchase price will be based on a $2.3 billion dollar evaluation of the team, league sources said.  The deal does not include Barclays Center, but reportedly gives Joseph Tsai the option of acquiring a controlling interest in the Nets within four years.

Now let's crunch some numbers ...

Figures vary from source to source.  I'll therefore stick with FORBES, for argument's sake.

As of February this year, Forbes placed Mr. Prokhorov's total investment into both the Nets and the arena at $365 million dollars.  Forbes ranked the Nets, at the time, seventh in the NBA in team evaluation, citing a value of $1.55 billion dollars, after debt.  Eight months later, and considering the Houston Rockets recently sold for $2.2 billion dollars, the numbers appear in line.

Mikhail Prokhorov stands to make a substantial profit, to say the least.

Operating losses be damned ...

According to the same ESPN report, the Nets $144 million dollar operating losses in 2013-2014 led the league by more than $100 million dollars.  That, however, was mostly Mr. Prokhorov's prerogative.  The club nonetheless lost another $23.5 million dollars last year, the league's second highest figure behind only the Detroit Pistons.  For added perspective, however, consider the Cleveland Cavaliers, despite winning a championship, two years ago led the league in operating losses.

The report goes on to say Brooklyn's local TV deal earnings, and net local revenue, were the lowest figures in the league last year.

As NetsDaily words it - the team has never made a profit in Brooklyn (although Barclays Center has been profitable).

And now for the background numbers, which I find most concerning of all.

Their first season in Brooklyn remains their best season to date.  The team went 49-33, and averaged 95% capacity at Barclays Center, ranking 16th in the league with 17,187 fans per game.  However, they got bounced in the first round of playoffs.

They sustained 95% crowds in year two, and even won their first playoff series, but got bounced in the second round.

The Nets standing dipped in 2014-2015, and attendance followed suit.  They finished the regular season below .500 with a 38-44 record, while patronage at Barclays Center likewise dipped to 94% capacity, ranking them 20th in the league.  They got bounced out of the first round of playoffs yet again.

In 2015-2016, matters quite obviously took a turn for the worse.  In posting a dismal 21-61 record, attendance dropped below the 17,000 mark, to just 83% of capacity, ranking them 27th in the league.

Last season actually witnessed a slight uptick in patronage, up to 85% of capacity, which nonetheless ranked just 28th in the league.

All told, the Nets have posted an aggregate 172-238 (.419) record during their first five years in Brooklyn, for a 34-48 average yearly mark, while playing in front of 90% capacity crowds at Barclays Center.

Joseph Tsai seems pleased with the direction general manager Sean Marks and head coach Kenny Atkinson are guiding the organization.

So am I.

At least we have that in common.

I fear, however, the Nets future in Brooklyn remains as precarious as ever.  By 2021, the team will have potentially changed principle owners for a third time within a 12-year span.  That makes James Dolan and the Knicks appear stable by comparison.

That's troubling.

But NetsDaily also mentioned the purchase is a personal investment by Tsai ... rather than a corporate purchase by Alibaba.

That's comforting.

Mr. Tsai will no doubt want this team trending towards the positive by the time his option tentatively comes into play four years from now.  And so the only things I feel will satisfy Mr. Tsai will be substantially more wins, increased attendance, and growth in local revenues.

It's no secret Bruce Ratner used the Nets as a ruse to further his own real estate interests, namely the development of Pacific Park.  He proved that very early on through his refusal to re-sign Kenyon Martin.

Be that as it may, Mikhail Prokhorov is a smart businessman, and in Bruce Ratner, encountered a desperate and motivated seller.  He merely seized an opportunity, and capitalized on Ratner's financial misfortune.  He bought low, and will now sell high.

Capitalists are, as capitalists do.

Russian oligarchs are no different.

I feel he's been a good owner.  He dared to be bold.  At least he tried.  But his plan ultimately proved ruinous, and so he ordered a rebuild.

I'm okay with that.

I also initially believed he was in this for the long haul.  But he's now proving me, and anyone whom thought similarly, wrong.

The hope is Sean Marks and Kenny Atkinson (and Mikhail Prokhorov) continue getting this team turned around.  Hopefully, that will entice Mr. Tsai enough into committing his full resources towards creating, and sustaining a long term winning brand in Kings County.

ICYMI: 

AFTERMATH