Cavs’ valuation jumps to $1 billion

  • By Scott Soshnick Bloomberg News
  • Friday, July 11, 2014 5:34pm
  • SportsSports

NEW YORK — LeBron James makes the Cleveland Cavaliers a billion-dollar franchise, double what the NBA team would be worth without the four-time Most Valuable Player.

“Certainly the brand itself, as well as the revenue that the team is able to generate, is much stronger with him — to the point of a billion-dollar franchise,” said valuation expert Peter Schwartz, managing director of venture capital at Boston-based Christie &Associates.

In January, Forbes valued the Cavaliers at $515 million.

The addition of James, the league’s biggest star and a worldwide marketing force, will boost the team’s revenue in all areas, including ticket and merchandise sales and sponsor value, said Chad Estis, a former chief marketing officer of the Cavaliers.

When James, a native of Akron, Ohio, joined the Cavs as the No. 1 pick in the 2003 draft they were in the “low, low, low end” of league revenue, Estis said. Eventually, he said, the club climbed into the top 10.

The team’s top corporate partners include the Cleveland Clinic, Akron-based FirstEnergy Corp., Columbus, Ohio-based Huntington National Bank, Pepsi Americas Inc., Toyota and Horseshoe Casino Cleveland, which is a joint venture between Caesars Entertainment Corp. and Gilbert’s Rock Gaming.

Those sponsors will benefit from the arrival of James, who makes the Cavs must-see programming, Estis said.

Last season, the Cavaliers made one appearance on ESPN and one on TNT. James’ former team, the Miami Heat, were on ABC six times, ESPN 10 times and TNT nine times. Add NBA TV, and the Heat made the maximum 35 national TV appearances.

“Whatever you have to pay LeBron, it’s more than worth it for the franchise,” Estis said.

James, 29, whose endorsement partners include Nike, Coca-Cola and McDonald’s, can receive a four-year contract with a starting salary of about $20.7 million. Separately, he reaped about $30 million for his stake in Beats Electronics, which Apple acquired last month for $3 billion.

According to Sports Illustrated, James is the second- highest-earning athlete this year behind boxer Floyd Mayweather, taking in $57 million in salary and endorsements. His marketing company, LRMR, represents Cleveland Browns quarterback Johnny Manziel.

James spent his first seven seasons in Cleveland, which reached the NBA Finals in 2007, losing to the San Antonio Spurs. He joined the Heat in 2010, making four straight appearances in the Finals, winning two championships and becoming the face of the NBA in the U.S. and abroad.

Rev. Peter Matthews, executive director of the Wesley Foundation in Cincinnati, said it’s “mind-blowing” to think of the power and influence James can exert in Ohio and beyond.

“For a young black man to come back to Ohio and exercise influence economically, and perhaps politically, to win a championship in the state, he would have a level of influence that we haven’t seen since Jim Brown,” said Matthews, referring to the former Cleveland Browns football player who has been outspoken on social matters.

James told SI that his decision wasn’t about rosters or organizations.

“I feel my calling here goes above basketball,” he said. “I have a responsibility to lead, in more ways than one, and I take that very seriously.”

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