Five years ago, billionaire Russian oligarch Mikhail Prokhorov spent $223 million to purchase 80 percent of the New Jersey Nets and 45 percent of the Barclays Center, then under construction, becoming the first non-American owner of an NBA franchise, and the second in U.S. professional sports (Nintendo owns the Seattle Mariners). Shortly afterward, Prokhorov filmed a delightfully low-tech video in which he announced his desire to bring “all of us” a championship perhaps as soon as the following season, a claim so outlandishly boastful you’d have to be the richest man in Russia to make it.
Despite a rich history, by the time Prokhorov purchased the team the Nets had become one of the least-cool franchises in the league, mired in mediocrity in a unappealing market. All of a sudden, they were owned by a Russian playboy who sounded like a Bond villain; a man who films jet-ski stunt videos, harbors political ambitions, parties in the French Alps with supermodels, owns a 200-foot yacht, and once told “60 Minutes” that his five favorite passions are business, sports, food, human interaction, and women (emphasis mine). Combined with the impending move to Brooklyn, the Nets suddenly seemed cool.
Five years later—sans championship—Prokhorov is (probably) selling the team. What happened?
There are a number of potential explanations. One is that the novelty of owning a professional sports franchise wore off, and reality set in. Despite swaggering claims to the contrary, from the beginning it seemed that Prokhorov viewed the Nets as a shiny new toy; he’s been increasingly absent from Nets’ games, appearing courtside only a handful of times per year. And though the team has improved, it has come at great cost: last year, the basketball side of the Nets’ business lost a whopping $144 million, most of it to the league’s punitive luxury tax for going over the salary cap, a result of dishing out ill-advised contracts to aging stars in an effort to win as soon as possible.
There were smart reasons for trying to build a winning team through reckless spending: the Nets’ move to Brooklyn represented a unique opportunity to bite into the hegemonic share of basketball fandom previously enjoyed by the Knicks. Although the Nets, as currently constructed, are woebegone and terrible, there are signs indicating that effort has paid off: the Brooklyn Nets are middle-of-the-pack in attendance after years near the bottom in New Jersey, and merchandise still sells well. Forbes lists the team as the fifth-most valuable in the NBA.
That gets at another reason Prokhorov might sell the team: It’s going to prove to be a very prudent investment. NBA franchises have exploded in value in the last few years, thanks to expanding popularity here and abroad, and new, lucrative TV contracts. Last year, the freakin’ Milwaukee Bucks, 30th on the Forbes list, sold for $550 million, and the Los Angeles Clippers sold for $2 billion. The Clippers example is instructive: like the Nets, they’re the “second” team in a huge market. But the NYC-area market is even bigger, and as we well know, “Brooklyn” has become shorthand for “sellable cool.” It’s not a stretch to say that bidding for the entire franchise might top $2 billion.
The Bloomberg News story that broke the news of Prokhorov’s intent to sell mentioned that his 45 percent stake in the Barclays Center is not on the market. A valuations expert named Peter Schwartz estimated that the team is worth $1.3 billion, making Prokhorov’s 80 percent share worth a little more than a billion dollars. NBA franchises are, of course, scarce commodities, and bidding would surely rise above that number. That’s a handy return on a $223 million buy-in, and now might be a good time for Prokhorov to cash out, particularly given the Russian Ruble’s decline.
Nets CEO Brett Yormark, general manager Billy King, and executive vice president and chief communications officer Barry Baum have all denied Bloomberg’s report. Prokhorov, uncharacteristically, has remained quiet.
Follow Phillip Pantuso on Twitter @phillippantuso.