Prokhorov's ceiling: whether the billionaire could earn on the Brooklyn Nets

Mikhail Prokhorov has built the club with the highest salaries in the NBA. But he hasn't achieved sporting success during the five years of ownership of the Brooklyn Nets.
21.08.2015
Forbes
Origin source
Eighteenth-July 2013 at its home arena, Barclays Center in Brooklyn Brooklyn Nets basketball club presented to reporters the new players - stars Paul Pierce, Kevin Garnett, Jason Terry and Andrei Kirilenko. From the statement of the participants were not only Kirilenko, but the surprise was the appearance of the owner of 80% Brooklyn Nets Mikhail Prokhorov, paid for new acquisitions. The total annual salary of the holders of championship rings Pierce, Garnett and Terry in the new club exceeded $ 30 million. Kirilenko joined the Brooklyn Nets for $ 3.2 million. As a result, the trade loud payroll 15 players of the club in the season 2013/2014 swelled to $ 115 million, more than for $ 50 million exceeded the established National basketball Association (NBA) ceiling. Under the rules of the NBA club he was forced to pay a record in the league, "luxury tax" - $ 90 million.

"I promised to create in Brooklyn team capable of fighting for the title. At this stage, I did everything I could, "- explained his increased spending on players Prokhorov at a news conference at the Barclays Center. Season 2013/2014 Brooklyn Nets finished with a loss of $ 144 million and lost in the semifinals of the conference, that Mr.ikak not corresponded to spend on a star cast. Pierce, Garnett and Terry in season 2014/2015 played for other clubs in the NBA, Andrei Kirilenko returned to Russia and completed a career.

In the new season Brooklyn Nets players salaries have decreased to $ 94 million, "luxury tax", estimated to be slightly over $ 40 million sports achievements are too modest -. Club Mikhail Prokhorov made it to the playoffs, but lost in the first round and from further the fight was out. When in 2010, Prokhorov bought the basketball club, he promised over five years to make him a champion of the NBA. As a result, the second round of the playoffs has become his greatest sporting achievement. Perhaps he did on his American basketball great business project?

League of equal opportunities

In an interview with Forbes in 2010. Prokhorov said that the move from New Jersey to Brooklyn his basketball club will be profitable. In May 2010, the NBA Board of Governors approved the purchase of 80% of Prokhorov club New Jersey Nets, which was renamed the Brooklyn Nets in two years. Together with the Russian billionaire bought the club in structures developer Bruce Ratnerand 45% in the construction of the home arena for the club in Brooklyn - Barclays Center. All these purchases Prokhorov cost of $ 200 million is projected Prokhorov, in 2012 the team had to make a profit:. "Millions of twenty. According to a conservative estimate. " Barclays Center cost about $ 850 million was built for a record 2.5 years and inaugurated in the autumn of 2012. The symbolic ribbon was cut businessman from Russia together with the billionaire Michael Bloomberg, who was then mayor of New York. Prokhorov is not miss the opportunity to loudly declare that, by 2015, the club will win the NBA title.

For the season 2013/2014 in the Brooklyn Nets held a full rebranding of the club logo and changed shape. If you came in fourth in 2012. Sales anecdotal form club held 31 th place (of 30 clubs in the league, but the sales team Prokhorov form ahead of defunct club in Seattle), then in the spring of 2013. When the capacity of Barclays Center 18000 spectators 11,000 season tickets were sold in the first season. Ticket sales ($ 25 on the second floor up to $ 120,000 in the VIP-zone) went so well that once the match is off by Michaellumberg - he did not get tickets, show off the club. The club and the arena is almost concluded 120 sponsorship contracts, including with the Russian "Aeroflot", which with the help of the basketball project Mikhail Prokhorov decided to improve the image of North America.
But the club still does not have enough high-profile sporting achievements. And in the season 2013/2014 Mikhail Prokhorov went on break, giving Racing unprecedented financial resources, even by the standards of the most generous to the players of sports associations in the world - the NBA (448 players in the league salary fund in 2014 exceeded $ 2 billion, the average salary - more than $ 4 5 million). During the season for salaries and taxes Brooklyn Nets spent about $ 200 million.

But the money in the NBA, it turned out, do not solve all the problems - the league has long learned to equalize opportunities between rich and poor clubs. "In the NBA works typically 20% - says the former CSKA player, Honored trainer of the RSFSR, TV commentator Vladimir Gomelsky. - From all that makes the NBA to broadcast, attributes, licenses, the league remains with only 20%, the rest is distributed to the clubs. Clubs sell local teletransltion, their attributes, tickets and 20% of this income is directed to the NBA. To maintain the competitiveness of club work and "luxury tax", that club owners have to pay the league, if wages exceed the thresholds. " The main problem Brooklyn Nets, according to Gomel, in poor management, made a number of errors, including the acquisition team. "How can, for example, to evaluate the purchase for the money Pierce and Garnett, who 70 years for two? - Wonders the former coach. - They have legs play for 35 minutes, do not stand up, they will be walking, and they did. "

Prokhorov, however, thought that with the purchase of these players club hit "magnificent starry balance between veterans and young talent." What was really going on in the club, he told the cable channel ESPN Paul Pierce in April 2015. "We were not surrounded by young players who for something aspire. In contrast, around us were the only veterans who did not want any play or train - frank Piers. - Me and Garnett every day had to persuade one or another guy to worktraining. If me and Kevin were not in the Nets, the team would have suffered a fiasco of enormous proportions. "

According to Chairman of the Board of Directors Brooklyn Nets Dmitry Razumov, raising the profile of the team at the expense of investments and aggressive marketing campaign was a conscious decision. "In fact, and basketball operations, and business Brooklyn Nets - is a start, we had to build everything from scratch, - said the mind. - Given the size of the market and the competitive environment it had to be a great investment. At some point we decided to sacrifice operating profit for capitalization increase the team. "

Brooklyn Nets in the season 2013/2014 was eliminated from the playoffs, losing to the team Miami Heat, which was charged "luxury tax" in the amount of $ 14.4 million, and became the champion San Antonio - one of 25 clubs, not to exceed the salary threshold. All of them, by the way, received $ 3 million from the assembled NBA in 2014 "luxury tax." "For Garnett and Pierce overpaid - he recognized a familiar Prokhorov - but they contributed to the growing popularity of the club. Not so good was the game, but in the playoffs is still out. Mr. Michaelikogo not blame, he has some negativity to individual players, their motivation, but positive on the growth of the cost of the club for him is more important. "

Money makes money

In January 2015 the American magazine Forbes estimated the Brooklyn Nets at $ 1.5 billion with an annual revenue of $ 212 million. A year earlier, the club was estimated at $ 780 million (on revenue of $ 190 million). "When planning the deal, we had hoped that moving the team from New Jersey to Brooklyn, New York, our aggressive approach to business and basketball teams will give their results, and fortunately, that's what happened, - says Mikhail Prokhorov. - Given that the total investment in the project - team and Barclays Arena - was about $ 400 million, the current valuation of the team alone at $ 1.5 billion - an excellent result. "

Vladimir Gomelsky believes that the growth of capitalization of the club has nothing to do with the actions of Prokhorov and his management team: "The whole league got rich, it came to billions of transactions in the last year also was awarded a contract for a fantastic television broadcasts." (Autumn 2014 NBA signed a contract for nine years teletranstion with broadcasters ESPN and TNT at $ 24 billion, increasing annual revenues from television rights league c $ 930 million to $ 2.5 billion) "Athletic skill has little relation to the cost of the club -. agrees to an independent expert Larry Cool Sports. - The new deal with national television substantially increased its revenues, which caused another increase in the cost of the club. Then the Los Angeles Clippers for sale set a new price "level. NBA entry Planck has risen sharply for the new owners. In April 2014 the club bought the Los Angeles Clippers for $ 2 billion for the $ 550 million was sold to Milwaukee Bucks, in May, the former CEO of Microsoft Steve Ballmer.

The rising cost of teams in the league against the background of recent major transactions and signing of new agreements with the NBA television Walt Disney and Time Warner made the agency Fitch Ratings in January 2015 to increase the credit rating of the Basketball Association to a record level of "A-" (compared to "Gazprom" and the Russian Railways assigned "BBB-" ratings). Agency analysts summed up: "NBA has a strong economic model that includes equal distribution of revenue from multi-year televisioncontracts and a significant distribution of the proceeds from the teams. The current collective agreement between the NBA and the NBA Players Association provides financial stability and the competitive balance. Stability display viewing and visiting fans at matches against American fans the amount of growth abroad. " In response, the NBA has increased the total credit limit of all 30 teams nearly doubled, to $ 1.5 billion.

Managing Partner of ROI Sports Group estimates the cost of Ray Katz Brooklyn Nets in the $ 1.2-1.5 billion Appreciation Club, in his opinion, due primarily to increased sales of the rights to broadcast on the national level, in the second turn -. With an increase in sales local, regional media market. «Nets did a great job on the growth of revenues at the local level sponsorship - Katz explains. - In addition, the attendance of matches of the club in Brooklyn higher than it was in New Jersey. "
Particular attention is paid to the club started the Russian-speaking fans - for the first time in the NBA in Russian began to conduct promotions by email and regular mail distribution. On the domestic scene carried out even specials evening of Russian culture. Matches opened famous sportsmen from Russia, the Russian opera singers, fans in the stands shout taught in Russian "Over-soup-ta" (by analogy with the American cry of Defense). "It is as a result five people from the entire Russian-speaking Brooklyn - assesses the results of Gomel. - The club has no history, it is he and Prokhorov begins, although Nets won the league title twice, in 1974 and 1976 ".

Chairman of the Board Dmitry Razumov said that during the tenure of Mikhail Prokhorov revenue Brooklyn Nets increased by 91%. Sales of goods with symbols per person increased by 320% attendance at events (congestion stands) increased from 69% to 94% over five years. In addition to revenues from the sale of tickets and events Barclays Center receives money for sports naming by British banking group Barclays, which signed a 20-year contract worth $ 400 million.

It was also the place of purchase of Barclays Center. The statements of the company of Bruce Ratner's Forest City said that the center's revenues amounted to $ 117 million in 2014, $ 12 million more than the year before (in 2012Revenue in the arena was below $ 50 million). In October 2013, Forest City announced that in the first year of the Barclays Center became a concert venue the number one in the country, the citizens and visitors of New York spent a while in the stadium and next to him, about $ 145 million. According to Pollster magazine, in 2014 , the home arena Brooklyn Nets has confirmed the title of the most popular concert venue in the country and ranked 11 th in the world. Here we spent their show, Paul McCartney, Barbra Streisand, Jay-Z, Rolling Stones. It is planned that in 2015, Barclays Center will be the arena for the matches of the National Hockey League, and in 2016 - the site of the Democratic National Convention.

"In America, are now few who do not know Mikhail Prokhorov, - says head of Russian-American Media Svetlana Ivanova. - In addition to the basketball world for him, of course, and monitors the business world. After all, Prokhorov has created a new brand in America - Brooklyn Nets. Its development from the point of view of the growth of the team and the financial side of the issue to the Americans, and many outside America's very interesting. "

The new brand quickly gained star of the fans, including Jay-Z, Beyonce, Rihannaand Nicky Menage, Floyd Meyuezer, Maria Sharapova and Kim Kardashian.
This year, the club's games have visited Prince William and his wife Kate, Michael Bloomberg, David Beckham, Paul McCartney, Bill Clinton.

In 2013, Mikhail Prokhorov, was on the cover of the American Forbes. Article about him began with a visit to a billionaire match for his club with Chicago Bulls in the Barclays Center arena. "Buy NBA Prokhorov bought the entrance to the highest US light, - said Vladimir Gomelsky. - He is known, are considered to be with him. If you want to meet someone, it is unlikely anyone will refuse. But with basketball he has not yet happened, the club NBA denser must be dealt with, but the time for this, of course, Prokhorov's not. "
In March 2015 the American TV channel ESPN has made a rating of 30 NBA clubs owners, in which Mikhail Prokhorov took 29th place in the ranking of club's general manager, Dmitry Razumov took 30th place.

To drive the prices up

In the October 2014 edition NetsDaily reported that Prokhorov is in talks to sell its stake in the Brooklyn Nets owner of a baseball team Los Angeles Dodgers. According to the newspaper sources, the talks of Russian clubbillionaire who was valued at $ 1.7 billion, and its home arena Barclays Center - at $ 1.1 billion.
In January 2015, Bloomberg reported that Mikhail Prokhorov has hired Evercore Partners investment bank to find buyers for its stake in the Brooklyn Nets. According to Forbes data sources, this time the value of the club and its home arena was evaluated by Prokhorov $ 3 billion - but this is the assessment and braked bargain.
In April, he said he would not sell all of its ownership in the American basketball draft, but only a minority stake. Prokhorov is too inflated price? "If there will be any Arab sheikhs, that Prokhorov may not find buyers for the club claimed their prices", - says Vladimir Gomelsky. In turn, Ray Katz of ROI Sports Group estimates the club and its home arena at $ 2.2-2.5 billion, "Get them for $ 3 billion, the owners will only appear if an aggressive buyer Steve Ballmer level", -. Sure Katz. Brooklyn Nets unprofitable five years, which owns the Russian billionaire.

At the end of the first half of the season 2014/2015 local Telerating Brooklyn Nets, according to the magazine SportsBusiness, decreased by 29%, to 0.55 - it has become the fourth largest fall in the NBA. The interest in the club and its owner from Russia among American fans began to subside. To maintain or increase the capitalization of the club has needed sports scores. Vladimir Gomelsky does not see until Brooklyn Nets prerequisites for this.