How The Golden State Warriors Became Kings Of The NBA

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(Image: NY Times)

Hey Friends,

The Golden State Warriors are kings of the NBA. No, I’m not talking about them winning four of the last eight NBA Championships or even their ridiculous 73-9 regular season record in 2015-16. I’m talking about their fast-rising valuation.

The Warriors are now worth $7 billion and are the NBA’s most valuable franchise, according to Forbes. That’s a high number, of course. But the interesting part is that for the first time in TWENTY YEARS, the NBA’s most valuable franchise doesn’t play in New York City (Knicks) or Los Angeles (Lakers).

NBA’s Most Valuable Teams (via Forbes)

1. Golden State Warriors: $7 billion (+25% YoY)

2. New York Knicks: $6.1 billion (+5%)

3. Los Angeles Lakers: $5.9 billion (+7%)

4. Chicago Bulls: $4.1 billion (+12%)

5. Boston Celtics: $4 billion (+13%)

But it also means the Warriors’ valuation has increased a ridiculous 1,455% (26% CAGR) since being acquired by Joe Lacob and Peter Guber in 2010 for $450 million.

Golden State Warriors Valuation (via Forbes)

• 2010: $315 million

• 2011: $363 million

• 2012: $450 million

• 2013: $555 million

• 2014: $750 million

• 2015: $1.3 billion

• 2016: $1.9 billion

• 2017: $2.6 billion

• 2018: $3.1 billion

• 2019: $3.5 billion

• 2020: $4.3 billion

• 2021: $5.6 billion

• 2022: $7 billion

So how did this happen? How did the Warriors go from the NBA’s 12th most-valuable team (valued at $315 million) to the NBA’s most valuable team (valued at $7 billion) in just twelve years? It can’t all be from winning, right? Well, yes and no.

The Warriors have shown how strategic basketball hires (GM Bob Myers, executive Jerry West, and Coach Steve Kerr), good draft picks (Steve Curry, Klay Thompson, Draymond Green, and Jordon Poole), and a critical free agent signing (Kevin Durant) can create a consistent, winning formula. And this leads to higher playoff revenue.

Here’s a good breakdown on the numbers from Tim Kawakami at The Athletic:

“What really drives the engine is the Warriors going deep into the playoffs, burnishing the brand, driving the TV ratings, selling future ticket and suite packages and ringing up enormous box-office totals for every home date.

I’m told that the Warriors brought in about $7 million gross box office per home game in the first and second rounds. They had six total home games in the first two rounds, which means about $42 million. That goes up to about $10 million per home game in the conference finals. The Warriors are guaranteed two Western Conference finals home games, which adds $20 million to the pot and gets it to $62 million this postseason and counting. In the Finals, it goes up to about $16 million gross per home game.

Big picture: If the Warriors get three home games in this round, make it to the Finals and get three home games there, that would be a potential cumulative $120 million gross playoff box office, somewhere near the Warriors’ record total in 2016, when they had four conference finals home games and four Finals home games.

Important note: The NBA takes a good chunk of all playoff revenue off the top, and there are others who get a percentage. The general estimate is that home teams keep about 33 percent of that total number as profit. But 33 percent of $120 million is $40 million — which is a lot more than any other team in the league, even the other ones still alive in the playoffs, will get.”

This is a big reason why the Warriors generated more revenue ($765 million) and operating income ($206 million) than any team in the NBA last season. Furthermore, it puts more cash on the team’s balance sheet should they want to go beyond the salary cap and pay the luxury tax each year to keep their winning team together.

But there is also another critical piece that is seldom discussed — real estate.

In 2019, the Golden State Warriors moved out of Oracle Arena and officially opened the Chase Center, a brand-new $1.4 billion arena in San Francisco.

(Image: Golden State Warriors)

This new arena provides Golden State with several benefits. For example, the Warriors didn’t actually own Oracle Arena—they signed a lease with the city and county—which meant they didn’t control any of the internal operations, benefit financially from other events at the arena, or even have control over security.

But it’s the complete opposite at the Chase Center. It was a significant up-front expense to privately fund the $1.4 billion arena. But the Warriors went from tenants to landlords — they now own and operate the building, book and manage all events, and get a lion-share of all the revenue.

This enabled them to sign a 20-year naming rights deal with Chase for $300 million. It helped them generate $150 million in arena sponsorships and advertising last year (2x more than any other NBA team), and they were also able to add luxury suites (with butlers) that helped bring in $250 million in premium seating last year (most in the NBA).

Still, basketball is just one piece of the equation. For example, the complex around the Chase Center also includes 580,000 square feet of office space and 100,000 square feet of retail and restaurant space. There is a large concert venue, a 5,000-seat theatre space, and Uber even opened its San Francisco-based headquarters on the property.

So long story short — while winning is a critical part of the Warriors’ secret to success, they have also done an incredible job building a durable, high-revenue-generating business for the long run.

I hope everyone has a great day. We’ll talk tomorrow.

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