New Rockets owner says $2.2 billion price tag okay because value will rise

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When it came time to bid on buying the Houston Rockets, like all of you reading this I was a few dollars short. (For the record, I was about $2,199,999,997 short).

Tilman Fertitta wasn’t short — he wanted this team and was not going to get outbid (as he had been in 1993 when Les Alexander bought the team and Fertitta came in second). Last summer, Fertitta paid an NBA record $2.2 billion for a Rockets team that is expensive on the court this season but also a title contender (and should be for a few more seasons at least).

Is there an NBA team value bubble and is Fertitta buying at the wrong time? He doesn’t see it that way, speaking to Sam Amick of USA Today in an interesting interview.

We were hell-bent that we weren’t going to lose (the bidding) this time,” Fertitta said. “But you can’t make somebody sell something to you if they don’t want to sell it. But all we could do is shoot every bullet we could, and I think Tad, you know we did – a lot more than anybody else.”

But did Fertitta – whose team plays in the NBA’s eighth largest media market – pay too much?

“I sure didn’t underpay,” he said. “But you know what, if we look in five to 10 years, and the team is worth $3 billion, which I think it will be, it would have been a great deal. And the joy that it’s given me and my family is – that’s an awful lot. …We’re just happy to be a part of the game.”

The way things are going, NBA team values are going to keep rising. While NFL and other sports are seeing ratings sink, the NBA’s are going up — in part because the league embraced the technology that younger generations prefer rather than sticking with an old-school model. To use the easy example, you can see any NBA highlight you want on YouTube any time of day, but try to do that with the NFL. Add in a social-media friendly crop of new stars and things look good.

That said, the league is going to have to deal with the shift away from cable to streaming — cord cutting is why the NFL ratings are dropping, and the NBA will have to deal with it too. Less money in the next NBA television deal is possible, and that will impact both how much players make and the value of franchises. However, the NBA is better positioned to deal with that — and to grow globally — than other American professional sports leagues.

Fertitta made his bet, and he’s read the market right in other investments plenty of times. I wouldn’t bet against him now.