How the Rockets are the latest example of a flawed valuation system

The Houston Rockets were recently listed as the eighth-most valuable NBA franchise, according to Forbes’ annual valuations. Here’s why that was far too low, and an example of a flawed system.

The Houston Rockets have had rising stock over the years, as they’ve won at least 50 games in five of the last six seasons. They’re also on pace to win 51 games this season as well. This has certainly raised the Rockets’ value, which is evident by the hefty $2.2 billion price tag current owner Tilman Fertitta paid for the franchise upon purchasing it in 2017.

This was a drastic increase compared to the $85 million former owner Les Alexander paid for the franchise when he bought it in 1993. Although this represents an increase in value over the years, the Rockets are still largely undervalued.

On Tuesday, Forbes listed their valuation of each NBA franchise and the Rockets’ ranking is a bit of a surprise. The Rockets came in at $2.475 billion, which makes them the eighth-most valuable NBA franchise in the league. The Rockets came in behind the New York Knicks, Los Angeles Lakers, Golden State Warriors, Chicago Bulls, Boston Celtics, Los Angeles Clippers, and the Brooklyn Nets, which is certainly off-base.

What’s even more disturbing is the fact that the Rockets came in as nearly the same worth as the Dallas Mavericks, who haven’t made the playoffs since the 2015-16 season. This shouldn’t come as a surprise however, because valuations aren’t based on the product on the court, which is a major flaw in this system. It would seem like the on-court success should factor into the equation, but if that were the case, the Knicks, Bulls, Clips and Nets would all be far behind the Rockets.

But shouldn’t winning count for something in this? Shouldn’t the fact that the Rockets have had the second-best record in the entire league over the course of the last two years factor into this? Or the fact that the Rockets have been equipped with multiple All-Star caliber players for the past three years?

Unfortunately the answer is no, and the reasoning is simple. Value is based off the brand, which is heavily based off the size of the media market. This is why dismal teams like the Bulls and Knicks are higher than the Houston Rockets are on this list. Regardless of the wins and losses, the Knicks, Lakers and Bulls will always be atop the list due to them being big-market teams. The media markets have built their brands exponentially.

It’s the same reason why the Nets and Clippers are valued higher than the Rockets, although the Rockets are better than both teams in spite of the recent roster adjustments each team has made this past offseason. On top of that, neither team has won more championships than the Houston Rockets, but that doesn’t matter.

At the end of the day, there’s no point in complaining about this because it’ll always be this way due to media market sizes, but it’s unfortunate because on-court success shouldn’t be ignored.