The Psychic and Financial Benefits of Jay-Z’s Minority Nets Ownership
If you didn’t/don’t already know and had to guess, what would you estimate Jay-Z’s minority stake in the Brooklyn Nets to be?
25%? Lower.
15%? Lower.
5%? Keep going.
1%? Still not even close.
According to David Halbfinger’s New York Times profile on Jay-Z and the Nets, H.O.V.A. invested $1 million nine years ago and currently owns 1/15 of 1%–less than one-thousandth!–of the team. If you were to measure his influence by his actual equity, he might as well be a Packers shareholder.
But it actually goes much deeper than that. Jay-Z is the Nets’ public face and tastemaker as they move 18 miles southeast from New Jersey to Brooklyn. From the NY Times piece, here are some of his contributions:
- “He helped design the team logos and choose the team’s stark black-and-white color scheme, and personally appealed to National Basketball Association officials to drop their objections to it.” (The NBA allegedly thought that African-Americans are not telegenic in black uniforms. Unsurprisingly, the NBA denied this claim. This likely will not be the last you hear of this accusation.)
- He pushed for more modern music to be played on the PA system during games.
- He advised arena executives on the optimal way to screen spectators for weapons. (ed note: I swear I didn’t make this up.)
He’s also tangentially involved in basketball operations. Free agents take his call. He once gave Vince Carter a supposedly effective motivational talk that inspired a 37-point playoff performance. (To be a fly on the wall during that conversation: “Hey Vince, I know that sulking and coming up small in big games is sort of ‘your thing,’ but if you could somehow stop embarrassing yourself and me, I’ll give you a private room at the 40/40 Club with all the amenities.)
Most significantly, though:
Mr. Carter’s involvement frustrated opponents of Mr. Ratner’s development plans in Brooklyn who saw the arena and proposed residential and office towers as a subsidized land grab that could ruin the neighborhood. They complained that residents who might have been wary of Mr. Ratner’s promises to create jobs, nonetheless trusted Jay-Z, who invoked his roots and insisted he could never support “anything that’s against the people.”
“Bringing in someone who grew up in public housing, with a rags-to-riches story, who could identify with Brooklyn and African-Americans, that was slick,” said City Councilwoman Letitia James, a critic of the project. Mr. Ratner played down Mr. Carter’s importance in overcoming opposition. “Had Jay-Z not come along,” he said, “we’d still have an arena.”
(“We would have found some way to grease local politicians and community leaders and ultimately gotten this shit done,” Ratner was thinking–and implied–but didn’t say.)
A savvy businessman, Jay-Z is getting a pretty hefty ROI from his comparatively small ownership stake. He gets access to one of the Barclays Center’s 11 exclusive “Vault” suites that retail for $550,000 a year.
The real financial kickers?
Suite owners will have access to a Champagne bar serving Armand de Brignac, an expensive bubbly that Mr. Carter promotes and in which he holds a financial interest, according to a biography by a writer for Forbes. The arena will contain a 40/40 Club, an iteration of his sports-bar-style nightclub chain. There will be a Rocawear store, selling his clothing line, on the arena’s exterior. Even the advertising agency used by the Nets, Translation, is half-owned by Mr. Carter.
The multitude of ways that Jay-Z will generate personal income from the Nets and Barclays Center is something that sole NBA franchise owners should be envious of. Consider that Miami Heat owner Mickey Arison said that the team has lost several hundred million dollars since opening the American Airlines Arena and would be “lucky to break even” in a season that it won the NBA title. Jay-Z gets all these financial benefits while Russian magnate Michael Prokhorov bears the brunt of the financial risk.
Perhaps even more valuable, however, are the intangible benefits that Jay-Z derives from his role. Malcolm Gladwell wrote about these “psychic benefits” of NBA ownership on Grantland:
Pro sports teams are a lot like works of art. Forbes magazine annually estimates the value of every professional franchise, based on standard financial metrics like operating expenses, ticket sales, revenue, and physical assets like stadiums. When sports teams change hands, however, the actual sales price is invariably higher. Forbes valued the Detroit Pistons at $360 million. They just sold for $420 million. Forbes valued the Wizards at $322 million. They just sold for $551 million. Forbes said that the Warriors were worth $363 million. They just sold for $450 million. There are a number of reasons why the Forbes number is consistently too low. The simplest is that Forbes is evaluating franchises strictly as businesses. But they are being bought by people who care passionately about sports — and the $90 million premium that the Warriors’ new owners were willing to pay represents the psychic benefit of owning a sports team. If that seems like a lot, it shouldn’t. There aren’t many NBA franchises out there, and they are very beautiful.
Once again, Jay-Z gets to reap these benefits without having to foot the bill; he’s on a pay-as-you-go plan and the Nets are happy to accept his likeness in lieu of cash. The general public assumes he owns much more of the Nets than he actually does and he happily plays along with this assumption, appearing, as pictured in the New York Times piece, in front of and in equal size to Prokhorov on a Nets billboard near Madison Square Garden.
As the featured face of the Nets franchise on this billboard, Jay-Z represents the polar opposite to Knicks owner James Dolan–Jay-Z’s self-made, hyper-aware, entrepreneurial, and a talented musician while Dolan comes from extreme wealth, is defiantly tone deaf, and had to overpay talented musicians to play in his band JD and the Straight Shot.
If Jay-Z’s taste and reputation successfully lure affluent fans away from the Knicks, the Nets might ultimately be getting the better end of the deal. Deron Williams, Brook Lopez, Joe Johnson, and the rest of the Nets roster must do their part as well.
Photo via Bossip