In economic analysis, it is common to hear words like demand causes a rise in price. It is a proven concept in that when a lot of people want something within the same period; the owners will certainly increase the price. It is despite the fact that many people would think that it is a natural phenomenon. The success of a team and the increase in value is attributed to many factors. A single factor cannot entirely explain why a team is selling for a few hundred million years ago can now be valued at one billion dollars. There are cases where a team doubles in value between seasons. Such cases are attributed to a new sponsors, new players having been signed and continued winnings. The rise in value of a club is attributed to three key points;
The Owners Earn More
The value of an NBA club is estimated by how much the club is earning. It translates to how much the owners are getting from the club as revenues. Over the past few years, the revenues have skyrocketed due to the rights and promotions. By having opportunities to cash in, the club owners are less willing to give away that opportunity to earn. Therefore, as a measure to make huge profits at a single period, the billionaire owners always price the clubs highly.
The shocking part is that however much the price is, there is always a winning buyer. It is an indication that rarely does an investor get losses by purchasing an NBA team. In fact, 2014 saw the NBA grow its revenue by $4.6 billion. It is an indication of how the owners subsequently cash in from such sports. The case was recently seen when Bruce Levenson according to wikipedia sold out the Atlanta Hawks for a value of $730 million.
Star players are common in every sport. There is always an individual that seems extremely talented and scores with ease. The persons have a large following due to the style of game or simply the ability to score and guarantee the fans a win. Players of such status are in high demand in the NBA. Such people change teams more often, and it costs a team highly to keep him. They will need to pay him higher, and maintain him with utmost care. Therefore, having star players will certainly guarantee team success, and prosper team ranking in the NBA. It is the desire of various teams to improve their success and have key players so that companies can come to them with endorsements.
Demand and Supply
NBA teams are in high demand, for the huge funds they make. On the same note, when many people are willing and able to buy a team, and the supply is constant, the price will increase. The NBA teams are having an increased price tag by the day because, a majority is doing well, and the buyers are many.