Welcome to our series ECON: 901.  These publications delve into economic subjects close to home where we live, work, and play.  Please feel free to provide feedback or suggestions for any local topics that could be worthwhile to explore (IMG@dwassetmgmt.com).  After all, these pieces are for you, written by one of you.   

Memphis Grizzlies:  Top 5 Most Valuable NBA Franchises

Memphis has always punched above its weight.  These 324 square miles located at the start of the Mississippi Delta first influenced the world with cotton and lumber and provided encores in the way of music, food, and logistics.  Yet, for anyone that has lived in the Bluff City knows that there is one thing that brings the city itself together – the love of basketball. 

The Grizzlies came to town in 2001 and the love affair between the organization and Memphians began.  According to Forbes magazine, that first year the Grizzlies were valued at $160 million.  Fast forward to today and that number stands at $1.03 billion, less than a third of the most valuable franchise (the New York Knicks, $3.6 billion).  The disparity in franchise values makes sense because New York is a much bigger market with more resources and potential fans. Given that the New York market is well over three times that of Memphis, we asked which franchise is more valuable given its size?  In keeping the boxing parallel, how do the Memphis Grizzlies compare in the NBA on a pound-per-pound basis?

Turns out, very favorably.  By incorporating elements reflective of market size such as area GDP and population, the Grizzlies are, in fact, one of the most valuable franchises.  Devil’s advocates might counter with theories such as revenue sharing or the existence of other sports teams in larger markets.  

For our first relative valuation metric, we take the franchise values according to Forbes and compare them to metropolitan population per the US Census to arrive at a per capita franchise value.[i][ii][iii][iv]What really stands out in the data, other than the rapid rise over the years in franchise values themselves, is the proliferation of smaller market teams at the top of the rankings.  While the Grizzlies make a strong showing in the top five, they do not rank quite as high as when they first showed up on the Memphis scene.  It is worth noting that the two of the cities that jumped the Grizzlies (Salt Lake City and New Orleans) recorded a lower population in 2017 than in 2000 whereas Memphis gained residents.


Next, we look at franchise values with respect to each city’s metropolitan area gross domestic product (GDP).[i]  When the Grizzlies came to Memphis, its franchise value to area GDP put them as the fourth most valuable franchise.  Fast forward to today and, in regard to its relative economic size, the Grizzlies can claim to be the second most valuable NBA franchise.  Take that for data!


[i]https://www.stlouisfed.org/

IMPORTANT NOTES AND DISCLOSURES

This piece is being made available for educational purposes only and should not be used for any other purpose.  Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources.  Duncan Williams Asset Management believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Opinions expresses in these materials are current only as of the date appearing herein and are subject to change without notice.  The information herein is presented for illustration and discussion purposes only and is not intended to be, nor should it be construed as, investment advice or an offer to sell, or solicitation of an offer to buy securities of any type of description.  Nothing in these materials is intended to be tax or legal advice, and clients are urged to consult with their own legal advisors in this regard.

[i]https://www.forbes.com/forbes/2002/0204/062tab2.html#564dc4d959ee

[ii]https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk

[iii]For Toronto population we referenced Wikipedia

[iv]https://www.forbes.com/sites/kurtbadenhausen/2018/02/07/nba-team-values-2018-every-club-now-worth-at-least-1-billion/#34593c4f7155

Author: Kyle Gowen

Kyle has worked in the investments industry for over ten years, previously at Raymond James Financial Services and Duncan-Williams, Inc., and served in both client services and investment research roles.
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