Saw this on r/NBA.
Doesn't say much that we already didn't know but interesting nonetheless!
Is having Lebron really worth the trouble?
People were interested in seeing how I came up with the value Lebron brings to the Cavs, Dan Gilbert, and Downtown Cleveland as a whole. I've decided to make this thread so those that were interested could see how I arrived at the valuation.
A few days ago an interesting thread arose accusing Lebron of handicapping the Cavs this offseason. Because of his contract demands for his friends, the Cavs could not make many offseason moves. Further, they're having to pay tens of millions in luxury tax just to make this man happy. This prompted
u/jushin33 to ask:
Has anyone looked at how much value Cavs would lose if Lebron left vs the tax savings?
Why is Dan Gilbert so willing to pay out the nose in luxury taxes rather than let Lebron walk and pocket the savings? Surely he's not worth it at this point, right?
Let’s begin by looking at attendance before we get into the financial aspect. How many more faces travel to Quicken Loans Arena to see the King?
Attendance prior to return: 17,329 Return: 20,562 2017: 20,562
Given 41 home games, this is 132,553 more people coming in yearly compared to the most recent season without him.
With playoffs that is at LEAST another 164,496 people whose offseason has not come early provided there is a minimum 8 playoff home games. To get this number I accounted for the fact that QLA would have a patronage of 0 because the team has not made the playoffs without Lebron in the last 20 years, so each home game is an increase by 20,562.
Interesting to note, Quicken Loans Arena max capacity is, you’ve guessed it, 20,562 people. The arena has been sold out every game since Lebron’s return.
Now let's look at revenue:
Year before: $145M Return: $149M 2017: $233M
I’m going to say 2015 was an outlier year. Lebron announced his return in July, 3 months before the NBA season began. The organization may have needed time to adjust to the sudden good fortune. In 2016, after having Lebron for a full regular and offseason, the team took advantage of his prowess, posting a revenue of $191M.
A lot of people asked about playoff revenue. The Cavaliers make an average of $81 per fan at full capacity during the regular season. Assuming a sweep each round, we get 8 hosted home games per post season.
This gives us $13,324,176 a year in revenue brought in SOLELY FROM HAVING LEBRON ON THE TEAM. He’s been a lock to make the finals every year and, for a team that suffered four straight years of zero playoff games, this is literally money they would not see without him.
The Cavaliers had an operating loss of 40m in the 2017 season. I should note that this is the only loss the team has seen since drafting Lebron. This is wholly attributed to the dramatic increase in player expenses this year. In 2016 the team spent 87M on players. In 2017, this number rose to a whopping $131M. Before that, the Cavaliers went from an average operating income of $10m a year without Lebron, to $22.5M a year between 2015-2016. This is interesting to note because, given these figures, the team’s actual operating hit from adding Lebron drops to around $16M.
Mr. Gilbert has suffered a net loss from re-signing Lebron of $16M…so far. Let’s see if he makes it back into the black.
The Cavalier’s player expense hit is a sight to behold. Luxury tax ain’t no joke. However, after this season, the Cavaliers have a lot of salaries coming off the books and will only have $80-90M in owed player expenses. Were Dan Gilbert to resign Lebron, find cheaper talent, and maintain a revenue stream of, let’s say $200M to be conservative, he would make out like a bandit. Lebron would demand a salary higher than Curry’s and Harden’s, yes, but the team also has multiple deals coming in that would offset this. Goodyear, I believe, just signed on a $10m/year logo placement and the local tv deal of ten years at $26m a year ended this past season and is expected to at least double when the new deal is signed. All of that is in the future, however. Let’s look at what Lebron has already brought him.
Edit: Some people are taking issue with his impact on the valuation of the team as a whole. Whether it be the Clippers sale or revenue sharing. It was just a quick thing I noticed while putting this together and thought it would be interesting to add. Has no effect on the amount of revenue Lebron generates yearly. Dude brings in bank. I'll still leave it below, though.
Cavs value year before return: 515M Year of: 915M 2017: $1.2B
Wow. Dan Gilbert’s networth is $5.1B. The team he purchased at $375M has ballooned to become an asset worth $1.2B. Lebron is literally responsible for $825M of his net worth from basketball operations alone.
Basketball operations alone? Donajello, are you saying that Lebron has generated even MORE wealth for Dan Gilbert? Short answer: yes. Long answer: …you should probably sit down for this.
With foot traffic in downtown Cleveland skyrocketing with everyone coming to watch Lebron play, it is only natural that local businesses would reap the rewards. Dan Gilbert is the largest solo investor into the downtown Cleveland economy. He has invested more than $1B into the area and is the owner of 12 local businesses. This includes clubs, bars, and restaurants – all things people look for after a high-octane game. Bar owners in the area, ranging from small to large, have seen an increase in revenue of 30-200% on game nights. Demand for local hotel rooms have risen 8.6% since Lebron’s return. Lebron’s presence “increased the number of restaurants within 1 mile of a stadium by about 12.8% and the number of eating and drinking establishments by about 13.7%” to meet demand per a Harvard study. Employment in the hospitality industry in increased 9.9% upon the King’s return.
How much is all this worth? A study funded by the city of Cleveland along with the Cavaliers that was conducted by The Plain Dealer estimated in 2010 that Lebron James was key to bringing $135 per additional person downtown to see a home game. This includes parking, dinners, occasional hotels, and other expenses. That’s about $600k a night and $18,265,500 a year. The study also estimated that the downtown area sees an increase in foot traffic of 105,000 during playoffs. That gives us $113,400,000 over 8 home games. Note: the original estimate in the study of $180 included ticket prices. I’ve removed the $45 average ticket price because we are solely looking at revenue outside of the stadium. Their number did NOT include concession spending.
TL;DR: Dan Gilbert suffered a $40m loss, $27m of that coming from luxury taxes last season. Lebron increased team revenue by $88M from the highest grossing year without him to today. Outside of the stadium Lebron is responsible for $18,265,500 in spending during the season in downtown Cleveland, and $114,400,000 during playoffs. Dan Gilbert owns the Cavaliers and is the largest investor into downtown Cleveland to the tune of over $1B and 12 businesses.
Lebron has brought in about $219,665,500 a year just by coming back home.
Why would Dan Gilbert and the organization hop, jump, and skip to please Lebron, even to the point of paying exorbitant luxury taxes to sign his friends? Well, the proof is in the numbers. No king has been this profitable since Midas.
