LeBron James has signed with the Cleveland Cavaliers, his first NBA team, after four seasons and two titles with the Miami Heat.

Upshot: The Cavaliers are worth $100 million more and the Heat $100 million less.

Just for the moment, put aside luxury suite rentals and arena sponsorships and focus on television. The Cavaliers currently average about $25 million a season from Fox Sports Ohio. But that deal was signed before James left and ends in two years. Ratings for the Cavaliers tanked after James left.

A new cable deal, with James and the much higher ratings, will average at least $40 million a year. Applying a multiple of five to the discounted future value of that revenue stream would add $100 million in value to the Cavaliers.

As for the Heat, in 2008 the team, coming off a 15-67 season, signed a 10-year television deal with Fox-owned Sun Sports, worth just $20 million a year. The Heat’s television ratings on Sun Sports doubled during James’ first year in Miami and were third-highest in the NBA this past season.

The boost in television ratings is important for the team’s value going forward because the Heat’s deal, grossly undervalued by today’s standards, expires after the 2017-18 season. With James, the next deal would potentially have been worth between $80 million to $100 million a season. Now, maybe the team’s next television deal is worth only $50 million or so.
A great day to be Cavaliers owner Dan Gilbert. A not so great one for Heat owner Micky Arison.

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