February 13, 2025 • 47 mins
In this episode of The Deal, Alex Rodriguez and Jason Kelly sit with Ted Leonsis, founder of Monumental Sports and Entertainment, to discuss how he came to dominate the Washington DC sports scene. Leonsis shares what he learned from the “world’s worst deal” at AOL and how he’s helping the US capital become a “super city” by investing in its teams.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:13):
Hi, I'm Jason Kelly and I'm Alex Rodriguez. On this
episode of The Deal. Ted leonsis all right. So ted
leonsis Alex. He is the founder, Chairman, CEO of Monumental
Sports and Entertainment the Capitals of the NHL, the Mystics
of the WNBA and the Wizards of the NBA, plus
E Sports plus the Arena. This guy has built a
(00:36):
literal sports empire in the nation's capital.
Speaker 1 (00:39):
He has, Jason, and it's what I call the most
impressive flywheel of sports with all these blue chip assets
in what he calls a super city, which was very
educational for us. And I just think he does an
incredible job. The most impressive part he's done it all
under the umbrella of Washington, d C. One of the
great cities in the world.
Speaker 2 (00:58):
Yeah, and he's leaning into that act. He has made
a career. He even set it himself of looking just
around the corner and whether that is selling his small
company to AOL and then becoming the president of AOL,
being a part of the biggest and maybe worst deal
in all of corporate history, but then seeing before many did,
(01:21):
how to make a business out of sports and even
bringing institutional capital, and he touches all of it.
Speaker 3 (01:29):
All.
Speaker 2 (01:29):
Right, here's Ted Leonsis. So we like to start the
show by having our guests introduce themselves and tell us
what you do.
Speaker 3 (01:47):
I'm Ted Leonsis. I'm a founder and chairman of Monumental
Sports and Entertainment, and we own the Washington Capitals, the
Washington Wizards, the Washington Mystics, Little One Arena, and the
Monumental Sports RSN Network, amongst some other sports properties.
Speaker 2 (02:07):
All right, we're going to get into all of that,
but before we do, we also want to know what
would you consider your signature deal.
Speaker 3 (02:15):
So far, I don't think I have one signature deal,
although I was a participant in the world's worst big deal,
so maybe yeah. Talk was AOL bought Time Warner and
it was the largest acquisition in history. AOL was the
(02:38):
first Internet company to go public. We were the fastest
growing company there was a decade. We were the number
one performing stock. I did the deal with Google, they
were a part of us. We invested in Amazon, we
were it, and we bought Time Warner. The cultures couldn't
(02:59):
have been more different. The dot com bomb happened. Basically,
it destroyed value, it destroyed web one. Oh so I
guess the signature deal that I would be involved with
would be the Aol Time Warner merger. I think I've
(03:20):
done dozens of smart deals to build relationships, build platforms
and the like. And you know, I've always been not
about the transaction but the relationship.
Speaker 1 (03:36):
So what Ted, What did you learn from that deal?
What were some of the lessons you took away.
Speaker 3 (03:40):
It's better to be about Main Street than Wall Street.
That deal was driven by investment banks. You know, the
CFOs of the offices we went from. Remember in fact,
I have the sign in my office. I stole it
off of the walls when I retired. You're going to
(04:02):
build the medium that is more valuable, more important, more
secure than the medium before US television and radio. And
we announced the merger and our corporate mission became generate
eleven billion dollars of EBITA. I don't have an employee,
I don't have an associate a partner who gets up
(04:24):
in the morning and says, I'm going to go generate
EBITA today. I need that cash flow. And so if
you stay true to a mission and you make great products,
and you have an authentic relationship with your partners, with
your board, with your with your community. The success comes.
(04:48):
You can't measure and build from ebita out from cash
flow out. And you know, I've seen that happen. You know,
Time Warner Then was bought by eighteen T. They spun
it out pretty fast. Time Warner Then was bought by
(05:09):
Discovery David Zaslov. And it's a hard business to run.
And all we think about on some of these companies
is their cash flow is there even as their earnings
per share? You kind of lose your way. So I'm
now at a stage of my life where i have
just focused on is the product great? Is the service great?
(05:33):
Do they love what we do? Everything will flow from that.
Speaker 2 (05:37):
And so what's the moment where you decide, you know,
what I want to be in sports?
Speaker 3 (05:42):
Well, I grew up in Brooklyn, New York. My dad
was a Greek immigrant, and he of course became a waiter.
And I'm an only kid, and my mom had to
work and she was a secretary piary secretary, which was
temp firm. And I'd go to school and I'd get
(06:04):
out at three o'clock and they would get home about
six thirty, So there was at three and a half
hours and you had a study and you had to
play sports, and if you didn't, you got in trouble.
And so I played Little League baseball, I played club basketball,
(06:24):
I played touch football. And my mom worked as a
temp at the Tops Baseball card Company in Brookland. Right
we're the Nets practice now. And then she got a
job working for Jonathan Bush at G. H. Walker and Company,
and they owned the Mets. They were part owners and
(06:45):
the Mets, and we couldn't afford going to Yankees games
or New York Giant Football games, and he would give
my mother tickets, and so I grew up going to
Mets games, and then my dad. My biggest Christmas gift
was season tickets to the New York Jets. Seven dollars
(07:07):
a ticket, wow, ninety nine dollars for full season. Wow.
And it was sixty eight, nineteen sixty nine. Jets won
the Super Bowl, Mets won the World Series, and I
lived in this very interesting neighborhood by the Sunset Park,
and the teams brought the community together. I mean when
(07:32):
the Jets won the Super Bowl, everyone came out of
their apartments and beeping the horns and hugging and crying.
And it's the only day I remember my mom and
dad allowing me not to go to school because they
had to work. You had to go to school so
they could go to work. And we went to the parade,
(07:53):
And when we won the Stanley Cup, I told all
our play the Washington One. We had a huge parade
and half a million people on the mall, and I
told all our players, you make eye contact with every kid,
because that was me, you know, I was like you,
(08:14):
Matt Snell, and it was so vivid. So when the
opportunity came and I had the means to buy the team,
I you know, that's what compelled me. So sports had
always been an important part of my life, you know,
I had built a business career, and then you could
(08:35):
just see the crescendo. If you will, love sports is
about sports to the fans. Sports is about unity and
holding a mirror up to the people that you serve
in the community. That's like politicians are always around sports,
but it's becoming a really big business and it was
(08:58):
way undervalued until the last decade, I would say, And
so you know, I'm at that point in my life
and career where I can integrate all of those experiences
and try to build something that you know, can build
a great legacy for the fans. I mean when you
win a championship, as you know, the fans, the mothers,
(09:22):
the fathers, the sons, the daughters, the best friends, it's
their reference point. I was there when, yeah, you win
a championship. It's a mortal yeah, and the fans share
in that. I've taken companies public. I've launched products that
are billions of dollars. No one cares, okay, but my
(09:44):
name's on the Stanley Cup. I have you know a
ring in the NHL. You get the World Series ring?
Speaker 2 (09:50):
You so tortality.
Speaker 3 (09:52):
Yeah, and it's that's that's the thrill of the business
to you.
Speaker 1 (09:56):
Talk about integration. But before there, I've I've had the
great four to sit in a seat as one of
the governors in the NBA and watch what a foresh
you are in that room. What a great leader. I
grew up in Miami and there was a gentleman by
the name of wayn Heinzinger, Yeah, who was way ahead
of the curve and a pioneer. Healed the Panthers, the
Dolphins and the Marlins. Won a championship with the Marlins.
But one thing is buying one team. But you're creating
(10:17):
this incredible flywheel that I think all of us look
at you as kind of the north star and our
mentor that we want to follow. What makes you go
from one team to the integration of the whole flywheel
that you've created.
Speaker 3 (10:29):
Well, it's interesting you mentioned Wayne Heisinger. I started my
first company in Florida. IBM was introducing the PC and
they moved to boker Ratone, Florida, and I met Wayne,
and Wayne started a sanitation company. That's where he made
his money. And then he bought the Miami Dolphins and
(10:52):
the Marlins, right, and the Panthers, and then Blockbuster and
then yeah, and so someone sets up a meeting It
was probably twenty eight to twenty nine years old with them,
and he said, what business do you think I'm in?
And I said, you're in those sports business and the
movie rental business. And he said, nope, come here, and
(11:13):
he walks me to the window, puts his armorund me,
and he says, look down that alley and there was
a dumpster in the alley, and he said, I sold
the landlord in that apartment building, that dumpster thirty years
ago we rented. I'm in the rental business. I've been
(11:40):
billing him twenty eight dollars a month for thirty years
for that piece of metal, Blockbuster. I'm in the rental business.
I take a movie and I pay for it once
and then I rented out to viewers. And he said,
in a way, that's the business I'm in. With sports,
(12:03):
I'm about renting seats. I paid for the stadium and
I rent seats. And he was a thematic investor, and
I said, I think that's going to work everywhere. I
don't know how that's going to work in sports because
as a fan, you don't say I'm renting my seat today.
(12:24):
It's like I'm those seats. They get passed down generation
this generation to me, ye need in sports. I think
you can have a thesis in any business, but sports,
that's only half the thesis. There's the business side, but
the product. Do you have to have passion? And I
didn't really sense Dwayne had passion about.
Speaker 2 (12:46):
Sports, but you did clearly.
Speaker 3 (12:49):
Yeah. Alex asked an interesting question about do you want
to own a sports team or do you want to
win championships and do you want to own a sports
team or do you want to build a platque form
that moves up the value chain in terms of business model.
And when I first came into pro sports, I bought
(13:09):
one hundred percent of a hockey team and then forty
four percent of the building and an NBA team, And
we didn't have a media property. We were not a principal.
We were licensing for resale our IP and at America Online,
I was president of America Online. I learned about reoccurring
(13:32):
revenues and software is service businesses and having a platform,
and with the platform you can move eyeballs and fingertips
around by doing cross promotion. And so I started to
(13:53):
explain to people that we want to be aligned in
a big market, super city and be the largest, most
valuable sports enterprise. But no one buys a ticket for
monumental sports and entertainment. We hold almost three hundred events
(14:17):
a year in our building, but they come to see
Lady Gaga and you too, and Alex Ovechkin and the
Washington Capitals.
Speaker 2 (14:27):
And sometimes even the Georgetown Hoyas.
Speaker 3 (14:29):
Sadly Georgetown plays in our building. And we can talk
about the law of unintended consequences because the Supreme Court
change the collegiate sporting world forever in a majority vote,
and everyone celebrated but didn't consider the law of unintended consequences. Well,
(14:52):
everything's changed. How do we look at now college and universities.
They have agents, the players agents.
Speaker 2 (15:00):
And are being paid for their name, image and likeness.
Everything is Georgetown.
Speaker 3 (15:04):
We won a Big East tournament, and four of the
five starters transferred that offseason. They got better offers from
other colleges. In fact, one of the young men transferred back.
I mean it's I mean, having unlimited free agency in
your college years probably wasn't what people were thinking. But
(15:28):
a Supreme Court justice probably didn't know the ins and
outs of basketball and NCAA. He was looking at it
through you know, his lens, his or her lens.
Speaker 2 (15:54):
I do want to ask you, Ted, before we get
too far from it. This whole notion of you know,
Washington is your home. It also is an incredible sports city.
I mean, is that just you were lucky to be there? Like?
Why is DC the place you just that? Because you
had the means to go just about anywhere to do it?
But why did Washington ultimately make sense?
Speaker 4 (16:15):
For you.
Speaker 3 (16:15):
So there's a theory about our country's important, or are
economic regions important. So there's this theory that there's going
to be ten super cities, and a supercity is defined
by some unique ingredients. That you have a minimum of
(16:39):
five research oriented universities. University is incredibly important Georgetown, You
and I or a lums seventeen eighty nine. It represents
longevity in the community. It graduates IP it's students. It
attracts students, young people from all over the world, and
(17:04):
then they stay in your city. They become additive. We're
blessed in DC. We've got Johns Hopkins. We've got University
of Maryland. We've got University of Virginia. We have that
ingredient that you have a minimum of three major international airports.
We've got Baltimore, We've got National We've got dulles that
(17:29):
you've got green space. We've got the National Mall in DC,
we have the most iconic green space in the country.
That you have iconic real estate, We've got the monuments,
We've got memorials. You also need a defining business community.
(17:50):
We have the federal government. Were the largest customer, largest
spender on the planet. So I've always been an evangelist,
an advocate for Washington d C. But d C is
in a state we don't exist. If we do it right,
(18:11):
will be a supercity. And the final ingredient of supersitis
is winning sports teams. You close your eyes and you
think of New York. You go, oh, the Yankees, Oh,
the Knicks.
Speaker 2 (18:24):
Well, he does, but.
Speaker 3 (18:28):
It's in the fabric. It's why it's a great city.
Oh it has great sports teams. Oh, and it has
great iconic real estate. Oh it has Columbia University. It's
got right.
Speaker 2 (18:39):
But Ted I mean on that note, I mean it's
it's interesting to think about the sports component of it, though,
because when you start sort of building this platform of
monumental to Alex's point, that's not obvious. It's not obvious
that sports is going to be anything beyond you know,
you wake up thinking of the Yankee. People weren't thinking
(19:01):
about it as a big business.
Speaker 3 (19:03):
You were people who weren't thinking of the Internet as
a good business.
Speaker 2 (19:07):
And so what did you see in sports that convinced
you that this was a good investment.
Speaker 3 (19:12):
Great and deep and passionate and durable fan interest families
pass on fandom generation, the generation. You don't see that
in any other consumer product. It's not like, oh, my
father drove an osmobile, I'm going to drive an osmobile
(19:33):
right right. In fact, they ran a campaign this is
not your father's Osmobile. I said, Oh, the end is
near for that company. I saw in the tech business,
the subscription business. What was AOL? Why were we so
highly valued? We got people to pay us nineteen ninety
(19:56):
nine a month, and we became aim a must have product.
People wanted their mail, people wanted their instant messaging, and
we spent billions of dollars to renew customers. We renew
in the NHL and the NBA a bad year, eighty
to eighty five percent of our season ticket hold. Well,
(20:19):
when you have a great team, you have a waiting list.
You sell out and then you develop a waiting list
of people who want to come and fill the stands.
And because you have that kind of demand, then you
can raise your prices. Once you have a big, big audience,
then you can start to monetize the secondary revenue streams.
(20:43):
You can sell advertising, you can do sponsorships, you can
sell suites to corporations who really are saying they're an
owner of the team. They're buying the suite for ten years,
and now they're giving seats as gifts right to their
customers and their partners. And you want the best software
(21:07):
companies in the world, Oracle Salesforce dot Com. They say,
this is how many big customers we have. They have
the best balance sheets, and we're able to build into
the contract annual increases three percent, four percent, five percent
(21:28):
per year. So I looked when I bought into the leagues,
I said, holy macl we are the world's biggest best
SaaS companies software as a service. And who are partners? Disney, ESPN, Comcasts,
Capital One Arena has the naming rights, They're one of
(21:51):
the biggest banks in the world. You just you go
down and you see there's not a lot of variability
in the business. It's repeatable and you know who the
customers are and how the growth gets built in. So
I've just become a spokes person, if you will, for
the category. And I thought, one day, private equity, one day,
(22:16):
smart money is going to come into this business because
to date it's mostly been family run businesses. You bought
a sports team for five million dollars, you know, fifty
years ago.
Speaker 2 (22:30):
Alex Is like, did you say five million?
Speaker 3 (22:33):
The Washington Capitals weren't expansion team. I think it was
five million dollars fo.
Speaker 1 (22:40):
So, speaking of that, Ted, I was reading that you
might be interested in the Nationals. So I was hoping, like,
if there's an opening as a bopend coach or first
base coach'll be available for you. But why the Nationals?
Speaker 3 (22:51):
So first, I'm a season ticket holder for the Nationals,
and I played baseball growing up. I played third base, Alexy, Okay,
I couldn't do shortstop, but third base I could hand
on coordination. And the owners of the Nationals, the Learner family,
they're spectacular family, real estate people. Their bedrock in the community,
(23:16):
and they're small investors in monumental sports. And we're friends.
And the stakes have gotten higher and higher in sports,
and in baseball. They have to compete with the Yankees,
you have to compete with the Mets, you have to
compete with the Dodgers, and these big, big markets, bigger
markets right now, they have the resources to go get players.
(23:41):
That's why the cbas for leagues dry value right The
NHL has a hard cap. We had a lockout. We
came back with a hard cap system. It means every
team in the NHL thinks it can win the Stanley
Cup when the new season starts.
Speaker 2 (24:01):
Because they're all spending the same amount of money.
Speaker 3 (24:04):
Play and the playoffs. Everyone thinks the playoffs are attainable.
And once again the playoffs, anything can happen. And that's
why attendance is fantastic in the NHL. The game's never
been in better shape. CBA was very instrumental in that.
(24:25):
Basketball has a great CBA as well. Teams can make
the decision to spend more than the cap, but they
get penalized for that, and those dollars go into a
pot and they go to the smaller market teams, which
make the smaller market teams feel when it's time we
(24:48):
will compete. We'll go into the tax if we think
that's the right thing. But it gives you rules of
the road. In baseball it has CBA, but you've got
teams that spend three hundred million dollars in teams that
spend thirty million dollars. Well, if you're a fan in
(25:09):
one of those markets, it's tough to go with enthusiasm
because you go it's very unlikely, right, and you know
the Marlins. We're talking about Wayne Heiinger. They won the
championship one year and then he dismantled the team. He
was losing money. Ye most teams that win a championship
(25:29):
and pay attacks, they lose money in their championship winning year. Right.
So with the Nationals, I look and I go, well,
we have a platform. We just bought our network. Everyone's
going to streaming. Streaming is about subscriptions. If you want
to have a subscription, like at AOL back in the heyday,
(25:51):
you didn't have mail available for nine months out of
the year, you have to have a year round subscription.
So I have felt that from a business standpoint, having
a platform and having winter and summer programming is going
to be critical to build value for the network because
(26:18):
you won't get the churn. Right, Oh, you lost in
the first round of the playoffs in April, I'm going
to cancel my subscription and I'll sign back up when
the new season starts. If you're in the playoffs and
baseball is started, you're going to have a real good,
strong subscription base. So from a business standpoint, it's very compelling.
(26:41):
And then to be able to sell advertising indoors outdoors
on television cross promote. But the real reason you want
to do it is you want to win championships. And
I think in this new world where there's all this
money coming in, the sports teams and sports teams are
being valued incredibly high. A football team in Washington, DC
(27:08):
just sold for six billion dollars to the smartest, wealthiest
people who had to syndicate they couldn't afford it themselves.
Speaker 2 (27:18):
Were you shocked by that price, No, I.
Speaker 3 (27:20):
Think it's undervalued. Steve Bomber, who I respect very much
and I consider a friend and with like the same age,
and we competed, you know for decades.
Speaker 2 (27:31):
Bears rivals back in the day, Yeah, and now rivals
in a different way.
Speaker 3 (27:35):
Miss He certainly kicked my ass twenty places. But he
paid two billion dollars for the Clippers, and everyone was
shocked and laughed at him. Yeah, And he's a smart guy.
And he bought hundreds, if not thousands of companies for
Microsoft that were SaaS businesses that you pay ten times
(28:01):
revenues for a software company when you acquire it. So's
say a basketball team was doing two hundred million dollars
and you had a new media deal on the horizon,
and you had naming rights partners, and so Steve knew
he wasn't overpaying for it. Thank God for Steve Bomber.
(28:24):
It was very helpful because Mark Cuban entered the league
the same time that I did, and we were tech
people and we would be advocating it, but Steve actually
did it. And now, yes, someone well, what's an NBA
team worth? Oh, it's ten times revenue? Right, what's a
hockey team worth? Oh? Seven, eight, nine times revenues? I
(28:46):
think the Brooklyn Nets, it was reported they traded it
fourteen times revenue. They brought in partners, and it's not overvalued.
But this belief that the tree these automatically will continue
to grow to heaven is dangerous. Right, We're in the
(29:08):
red line right now of danger because if Josh Harris
and Mitrails and Eric Schmidt, all these people have to
come together to reach to buy a football team, does
that mean in five years, ten years the investors are
going to get five times their money on six billion?
(29:33):
How you're going to get thirty billion? That's why private equity.
I brought the first sovereign wealth fund into sports, the Guitaris, right, yeah,
And it was simple. Their belief was my belief. We
want to put our money into a safe, durable, almost
family like business in a big, important market. So where
(29:57):
do they invest in New York and London, in Washington, DC,
safe harbor for their money.
Speaker 2 (30:05):
How did that deal come together? Tell us about that.
Speaker 3 (30:08):
I was introduced to them through my investment Revolution and
then your venture firm, my venture firm with Steve case
so I knew of them, and then they were doing
the World Cup and private equity companies were reaching out
to us. Was where an attractive company. We do a
(30:29):
lot of revenues and a big market reaching monumental, but
private equity isn't investing their money. They get LPs limited partners,
limited partners and they've got five to seven year horizons.
Usually my horizon is the rest of my life and
(30:52):
then my beyond and a sovereign wealth fund. That's what
they're attracted to. Oh, we want to be in a
safe city with a lead investor who has a lot
of skin in the game and isn't going to do
crazy things and is strategic and smart and will support you.
(31:18):
And oh, you want to buy the baseball team. If
I think if we had said, oh, I want to
buy any baseball team. I want to buy a soccer
team in South America. Well, that's that's off. Strategy of
strategy is build the world's most valuable regional sports and
(31:40):
entertainment company on the planet. Get it to a ten
billion dollar market cap maybe one day. This is a
asset class, and companies are going to have to start
going public once private equity came in. They want out
at some point.
Speaker 2 (31:58):
It's inevitable.
Speaker 3 (31:59):
It's inevitable. So you know, my I don't have very
many gifts, but I have been good at peering around
the corner a little bit and seeing what's out there.
And so yeah, we were maybe the first to really
advocate this is software a service. Like business analysts, media
(32:21):
people who covered the business of sport will get it.
Bloomberg will, We'll get it. You're in the subscription Bloomberg's
in the subscription business business model and they subscribe. And
I bet you Mike Bloomberg has subscribers from day one.
Who took his first terminal and you know, cant like
(32:44):
Wayne izinga.
Speaker 1 (32:46):
So it said obviously in the news has been private
equity entering the world of the NFL, but only at
a ten percent clip which they're doing their last, but
they're also being very conservative. What are your thoughts about
the NFL and private equity and that kind of merger.
Speaker 3 (32:59):
I can't speak of the NFL. I don't own a team,
but it's pretty clear that there's not a lot of
people left that can buy six eight. I saw the
Cowboys are valued at ten billion.
Speaker 2 (33:11):
Dollars, right, yeah, and then that's probably on the low end.
Speaker 3 (33:15):
So it unlocks another pool. But the NFL is conservative
and they're very wise. They've built, you know, the the
city on the hill if you will, for all sports.
And my bed is over time they'll change. You have
to be able to adapt to whatever the new reality is.
(33:37):
And just because they did ten percent, I don't think
that'll be a forever number. Maybe well, but it probably
has some leeway. The NBA, we were pioneers. We're like
a venture backed in the company.
Speaker 2 (33:52):
The NBA is a league.
Speaker 3 (33:53):
Yeah, I'd say we've been in the growth stock the tree,
growth to heaven. Everyone says, oh, it's going right at
the NBA. The media deals are great, well, the local
media deals are great. Right. We're really struggling, right, and
it's hard work. It's no different serving on a committee
(34:15):
of the leagues as it is a serving on a
committee of a big public company. I'm on the board
of American Express right down the street from here, so
regulated business and the governance of the company. In the
board's role and what we do in the committees is
it plays a vital role. So we're all concerned and
(34:39):
working really really hard to figure out it's not our
product that isn't of interests. Locally, our ratings are up
while viewership of television is way down, so that means
we are taking the interest from other networks, other shows,
(35:01):
other pieces of content. But it's a very tough pivot.
As young people remember, cable was the last big exponential
boost for sports teams, right, So the media industry is
changing radically. I'm chairman of the Media committee at the
(35:23):
NBA and the NHL, and you have to stay on trend.
You have to understand what's going on. You can't blame people,
you can't blame consumers. A kid goes to college, kid
grows up at home and he's watching over the air
television or cable, and then he goes to college and
(35:46):
there's no cable. Everything is wireless. So when he or
she graduates from college. I'm not going you're not calling
the cable company, right, You're getting your iPhone and you're
rolling your own now all of a sudden, and so
so you've gotta you've gotta watch all those trends, and
(36:08):
then you have to figure out who do I partner with,
who can mutually value what we have. And you know
the thing about pro sports, I mean, here's a superstar
player with charisma who's now in chapter two of his
(36:29):
career and people will watch him on air, but his
star was so bright he brought people to watch the
games in the stadium and on television. You know, Michael
Jordan was my partner form and you could just see
(36:52):
in the interactions. You know. I was once in a
hotel lobby with Michael Jordan and we had to walk
through the whole and people said Michael Jordan's and I said,
I could have been naked on fire with an axe
in my head to see that naked guy with the
(37:16):
I don't see right. So sports brings that together and
a winning team with stars, the engagement level is like
no other business. And that's what advertisers want, That's what
sponsors want, that's what mayors want. That's what governors want.
(37:37):
They they want that that shine. So it's such a
unique business and we still have a lot of upside,
if you will, because I think streaming is in killing sports.
I think streaming is going to be ultimately a big
positive right for teams. It's amazing to me, again being
(38:00):
a tech executive. I guess in my background, the data
is all we lived on at AOL. Google one is
built the second or third most valuable company on the
planet because they have the data, they know where you're going.
(38:21):
When we just bought our RSN, I asked the people
that Comcast NBC, a very important media company, who are
the customers? Men, go, really, that's how we can do better?
How old? Well eighteen fifty? You don't know who your
(38:44):
customers are? Why? Because the cable company gets the customer
and then they buy the programming from the RSN and
the RSNS and people don't realize in all the changes,
they were enjoined by Congress that the cable company couldn't
(39:06):
share the names because of privacy. So when I bought
our Regional Sports network, I didn't know who one customer,
one viewer was. No RSN does Wow, isn't that crazy. Wow,
that's incredible. If you go direct to consumer, you're streaming
on OTT, you're like the cable company. You get the
(39:30):
relationship with those people. And then the other thing that
blows my mind and being counterintuitive, I think that's where
fortunes get made. I'd hear from cable companies. I just
saw on analysis. Can you believe it's seven hundred dollars
if you wanted to watch every NFL game and you
(39:50):
had to subscribe, and you and I go, we charge
twenty five hundred dollars a game for one ticket in
the dream seats at the Wizards, and fans will arrive
late and leave early, right and go get something needed
(40:10):
halftime and you see the empty seats. I go, it's
twenty five hundred dollars a seat. What could be more important?
And they're having a beer and you know, being with
some friends, and so I go, we have to change
that as a mindset. Now that cable was offering you
(40:34):
all the video, all the audio, all the data for
one thousand dollars a year, and people didn't think it
was worth it. But they'd pay a thousand dollars for
one ticket for Minnesota Timberwolves camping so I think a
part of our next upside is going to be will
(40:54):
be the bundler. The sports teams will be the buntings themselves. Yeah,
and we're selling a seat and you'll get a jersey,
you'll play golf with the team, and you'll get Uber
Eats credits, and you'll get discounts for publication. And we
(41:15):
have to be the bundler and a part of the bundle,
just like Prime. Think about what Amazon did. I'm sending
you stuff that you bought, and I'm going to give
you free delivery, but you're going to pay me a
monthly subscription. And now I'm going to start to put
(41:37):
things into the bundle. And now Prime Video is the biggest.
I think they have ninety million subscribe unbelievable. So subscriptions,
building passionate audiences and having those reoccurring revenues, I think
is what our business about.
Speaker 2 (42:00):
All Right, we're gonna do a quick, rapid fire. I'm
with you, and so the like one to two word
answers for all of this. All right, what's one word
to describe your deal making style?
Speaker 3 (42:10):
I use niceness as a competitive weapon.
Speaker 1 (42:14):
What's more important gut or data?
Speaker 3 (42:17):
I don't think either works alone. But if I had
to pick one at where I am in my life
and career, I'd say, gut, I've seen it all.
Speaker 2 (42:28):
Who's your dream deal making partner?
Speaker 3 (42:31):
Peter Goober? Peter Goober, we were competing for a deal.
We didn't know about it, and at the last second
we told each other and he said, oh, we're friends.
Let's do the deal together. And I'll never forget this.
He said. We'll laugh together, we'll cry together, but we'll
(42:53):
have a great journey as friends. And he's the greatest.
Speaker 1 (42:58):
This is this is a second try at this question.
But what is the greatest deal you've ever made.
Speaker 3 (43:02):
In terms of money?
Speaker 1 (43:06):
Sure?
Speaker 3 (43:07):
Well, I sold my company, my little startup, to America Online,
and I got ten percent of AOL and what was
called the polling of interest, if you can believe it,
AOL was four hundred million dollars. I got forty million
dollars of stock, and nine years later the company when
(43:31):
we bought Time War, it was worth one hundred and
seventy billion dollars, which back then that was real money. Wow,
if there were no trillion dollar market capital, it.
Speaker 2 (43:40):
Feels like real money.
Speaker 3 (43:41):
Away.
Speaker 2 (43:42):
What's the best piece of advice? You've ever received on
deal making or business.
Speaker 3 (43:46):
Don't get too high with the highs and too low
with the lows.
Speaker 1 (43:49):
What's your hype song when you go into a big
negotiation or a meeting?
Speaker 3 (43:53):
My hype song. People laugh at this, but I used to.
I used to be a punk and I go to
CBGB's and Talking Heads were my favorite band, and so
probably once in a lifetime by the talking Heads.
Speaker 2 (44:12):
I love it. You can only watch one sport for
the rest of your life, which one is it? This
is a good one for you.
Speaker 3 (44:16):
I'm going to surprise people, but hockey is the most
honest game. You can't you can't hide in hockey. You
don't skates, and you have to go one hundred percent
full out. You can't run out of bounds, you can't
hold your knees doing a file shot. It's It's an honest,
(44:39):
honest sport. And I've really come to enjoy the live experience,
you know.
Speaker 1 (44:44):
Congrats to our mutual friend and champion Vinie Viola.
Speaker 3 (44:49):
Jenny's the best, the greatest, and he deserves his Stanley Cup,
his immortality.
Speaker 1 (44:55):
What team do you want to win a championship more
than any other?
Speaker 3 (44:59):
I have real c I already have thought of what
I have to accomplish in the next twenty five years,
or you'll be scarred. I've won championships everywhere, taking companies public,
but I haven't broken the code in the NBA, and
so I have to make the Wizards. And you know
from last year how hard it is to get from
(45:21):
round to round to round, and the furthest I've gotten
in the playoffs is Game seven lost to Celtics and
semi finals of the East, and you think, oh, I
got a young team. It's just got to keep going
from there. And then injuries and bad trades and all
of a sudden you're rebuilding and careers are short, and
(45:44):
you know, you learn, and I want to build it
the right way. But we have to win a championship
for the fans, for the Wizards.
Speaker 2 (45:51):
All right, Well, this has been really fun. Ted leonsis
thank you so much.
Speaker 3 (45:54):
Thank you, Thanks guys.
Speaker 4 (46:02):
The Deal is a production from Bloomberg Podcasts and Bloomberg Originals.
The Deal is hosted by Alex Rodriguez and Jason Kelly.
Our producers are Ana Maazarakis, Stacey Wong, Lizzie Phillip and
Victory Veyees. Original music and engineering by Blake Maples. Our
managing editor is David E.
Speaker 1 (46:21):
Ravella.
Speaker 4 (46:22):
Our executive producers are Jason Kelly, Brendan Francis, Neonham, Jordan Opplinger,
Trey Shallowhorn, Kyle Kramer, Andrew Barden, Kelly Laferrier and Ashley Hoenig.
Sage Bauman is our head of podcasts. Additional support from
Rachel Scaramazino and Elena Los Angeles. Joshua Devaux is our
(46:43):
director of photography. Rubob Shakir is our creative director. Art
direction is from Jacqueline Kessler. Casting by Julia Manns. Our
associate producer is Natasha Abelard, Camera operation by Ryan Cavtero,
Jesse Ridner and Sumahussin. Our gaffer is Alex Brown, and
our grip is Max Garstak. Our production assistant is Gabriella Dematase.
(47:08):
Alex Diaconus is our video editor. Listen to the Deal
on Apple Podcasts, Spotify, or wherever you get your podcasts.
You can also tune into The Video Companion on Bloomberg
Originals and on Bloomberg TV. Thanks for listening.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:13):
Hi, I'm Jason Kelly and I'm Alex Rodriguez. On this
episode of The Deal. Ted leonsis all right. So ted
leonsis Alex. He is the founder, Chairman, CEO of Monumental
Sports and Entertainment the Capitals of the NHL, the Mystics
of the WNBA and the Wizards of the NBA, plus
E Sports plus the Arena. This guy has built a
(00:36):
literal sports empire in the nation's capital.
Speaker 1 (00:39):
He has, Jason, and it's what I call the most
impressive flywheel of sports with all these blue chip assets
in what he calls a super city, which was very
educational for us. And I just think he does an
incredible job. The most impressive part he's done it all
under the umbrella of Washington, d C. One of the
great cities in the world.
Speaker 2 (00:58):
Yeah, and he's leaning into that act. He has made
a career. He even set it himself of looking just
around the corner and whether that is selling his small
company to AOL and then becoming the president of AOL,
being a part of the biggest and maybe worst deal
in all of corporate history, but then seeing before many did,
(01:21):
how to make a business out of sports and even
bringing institutional capital, and he touches all of it.
Speaker 3 (01:29):
All.
Speaker 2 (01:29):
Right, here's Ted Leonsis. So we like to start the
show by having our guests introduce themselves and tell us
what you do.
Speaker 3 (01:47):
I'm Ted Leonsis. I'm a founder and chairman of Monumental
Sports and Entertainment, and we own the Washington Capitals, the
Washington Wizards, the Washington Mystics, Little One Arena, and the
Monumental Sports RSN Network, amongst some other sports properties.
Speaker 2 (02:07):
All right, we're going to get into all of that,
but before we do, we also want to know what
would you consider your signature deal.
Speaker 3 (02:15):
So far, I don't think I have one signature deal,
although I was a participant in the world's worst big deal,
so maybe yeah. Talk was AOL bought Time Warner and
it was the largest acquisition in history. AOL was the
(02:38):
first Internet company to go public. We were the fastest
growing company there was a decade. We were the number
one performing stock. I did the deal with Google, they
were a part of us. We invested in Amazon, we
were it, and we bought Time Warner. The cultures couldn't
(02:59):
have been more different. The dot com bomb happened. Basically,
it destroyed value, it destroyed web one. Oh so I
guess the signature deal that I would be involved with
would be the Aol Time Warner merger. I think I've
(03:20):
done dozens of smart deals to build relationships, build platforms
and the like. And you know, I've always been not
about the transaction but the relationship.
Speaker 1 (03:36):
So what Ted, What did you learn from that deal?
What were some of the lessons you took away.
Speaker 3 (03:40):
It's better to be about Main Street than Wall Street.
That deal was driven by investment banks. You know, the
CFOs of the offices we went from. Remember in fact,
I have the sign in my office. I stole it
off of the walls when I retired. You're going to
(04:02):
build the medium that is more valuable, more important, more
secure than the medium before US television and radio. And
we announced the merger and our corporate mission became generate
eleven billion dollars of EBITA. I don't have an employee,
I don't have an associate a partner who gets up
(04:24):
in the morning and says, I'm going to go generate
EBITA today. I need that cash flow. And so if
you stay true to a mission and you make great products,
and you have an authentic relationship with your partners, with
your board, with your with your community. The success comes.
(04:48):
You can't measure and build from ebita out from cash
flow out. And you know, I've seen that happen. You know,
Time Warner Then was bought by eighteen T. They spun
it out pretty fast. Time Warner Then was bought by
(05:09):
Discovery David Zaslov. And it's a hard business to run.
And all we think about on some of these companies
is their cash flow is there even as their earnings
per share? You kind of lose your way. So I'm
now at a stage of my life where i have
just focused on is the product great? Is the service great?
(05:33):
Do they love what we do? Everything will flow from that.
Speaker 2 (05:37):
And so what's the moment where you decide, you know,
what I want to be in sports?
Speaker 3 (05:42):
Well, I grew up in Brooklyn, New York. My dad
was a Greek immigrant, and he of course became a waiter.
And I'm an only kid, and my mom had to
work and she was a secretary piary secretary, which was
temp firm. And I'd go to school and I'd get
(06:04):
out at three o'clock and they would get home about
six thirty, So there was at three and a half
hours and you had a study and you had to
play sports, and if you didn't, you got in trouble.
And so I played Little League baseball, I played club basketball,
(06:24):
I played touch football. And my mom worked as a
temp at the Tops Baseball card Company in Brookland. Right
we're the Nets practice now. And then she got a
job working for Jonathan Bush at G. H. Walker and Company,
and they owned the Mets. They were part owners and
(06:45):
the Mets, and we couldn't afford going to Yankees games
or New York Giant Football games, and he would give
my mother tickets, and so I grew up going to
Mets games, and then my dad. My biggest Christmas gift
was season tickets to the New York Jets. Seven dollars
(07:07):
a ticket, wow, ninety nine dollars for full season. Wow.
And it was sixty eight, nineteen sixty nine. Jets won
the Super Bowl, Mets won the World Series, and I
lived in this very interesting neighborhood by the Sunset Park,
and the teams brought the community together. I mean when
(07:32):
the Jets won the Super Bowl, everyone came out of
their apartments and beeping the horns and hugging and crying.
And it's the only day I remember my mom and
dad allowing me not to go to school because they
had to work. You had to go to school so
they could go to work. And we went to the parade,
(07:53):
And when we won the Stanley Cup, I told all
our play the Washington One. We had a huge parade
and half a million people on the mall, and I
told all our players, you make eye contact with every kid,
because that was me, you know, I was like you,
(08:14):
Matt Snell, and it was so vivid. So when the
opportunity came and I had the means to buy the team,
I you know, that's what compelled me. So sports had
always been an important part of my life, you know,
I had built a business career, and then you could
(08:35):
just see the crescendo. If you will, love sports is
about sports to the fans. Sports is about unity and
holding a mirror up to the people that you serve
in the community. That's like politicians are always around sports,
but it's becoming a really big business and it was
(08:58):
way undervalued until the last decade, I would say, And
so you know, I'm at that point in my life
and career where I can integrate all of those experiences
and try to build something that you know, can build
a great legacy for the fans. I mean when you
win a championship, as you know, the fans, the mothers,
(09:22):
the fathers, the sons, the daughters, the best friends, it's
their reference point. I was there when, yeah, you win
a championship. It's a mortal yeah, and the fans share
in that. I've taken companies public. I've launched products that
are billions of dollars. No one cares, okay, but my
(09:44):
name's on the Stanley Cup. I have you know a
ring in the NHL. You get the World Series ring?
Speaker 2 (09:50):
You so tortality.
Speaker 3 (09:52):
Yeah, and it's that's that's the thrill of the business
to you.
Speaker 1 (09:56):
Talk about integration. But before there, I've I've had the
great four to sit in a seat as one of
the governors in the NBA and watch what a foresh
you are in that room. What a great leader. I
grew up in Miami and there was a gentleman by
the name of wayn Heinzinger, Yeah, who was way ahead
of the curve and a pioneer. Healed the Panthers, the
Dolphins and the Marlins. Won a championship with the Marlins.
But one thing is buying one team. But you're creating
(10:17):
this incredible flywheel that I think all of us look
at you as kind of the north star and our
mentor that we want to follow. What makes you go
from one team to the integration of the whole flywheel
that you've created.
Speaker 3 (10:29):
Well, it's interesting you mentioned Wayne Heisinger. I started my
first company in Florida. IBM was introducing the PC and
they moved to boker Ratone, Florida, and I met Wayne,
and Wayne started a sanitation company. That's where he made
his money. And then he bought the Miami Dolphins and
(10:52):
the Marlins, right, and the Panthers, and then Blockbuster and
then yeah, and so someone sets up a meeting It
was probably twenty eight to twenty nine years old with them,
and he said, what business do you think I'm in?
And I said, you're in those sports business and the
movie rental business. And he said, nope, come here, and
(11:13):
he walks me to the window, puts his armorund me,
and he says, look down that alley and there was
a dumpster in the alley, and he said, I sold
the landlord in that apartment building, that dumpster thirty years
ago we rented. I'm in the rental business. I've been
(11:40):
billing him twenty eight dollars a month for thirty years
for that piece of metal, Blockbuster. I'm in the rental business.
I take a movie and I pay for it once
and then I rented out to viewers. And he said,
in a way, that's the business I'm in. With sports,
(12:03):
I'm about renting seats. I paid for the stadium and
I rent seats. And he was a thematic investor, and
I said, I think that's going to work everywhere. I
don't know how that's going to work in sports because
as a fan, you don't say I'm renting my seat today.
(12:24):
It's like I'm those seats. They get passed down generation
this generation to me, ye need in sports. I think
you can have a thesis in any business, but sports,
that's only half the thesis. There's the business side, but
the product. Do you have to have passion? And I
didn't really sense Dwayne had passion about.
Speaker 2 (12:46):
Sports, but you did clearly.
Speaker 3 (12:49):
Yeah. Alex asked an interesting question about do you want
to own a sports team or do you want to
win championships and do you want to own a sports
team or do you want to build a platque form
that moves up the value chain in terms of business model.
And when I first came into pro sports, I bought
(13:09):
one hundred percent of a hockey team and then forty
four percent of the building and an NBA team, And
we didn't have a media property. We were not a principal.
We were licensing for resale our IP and at America Online,
I was president of America Online. I learned about reoccurring
(13:32):
revenues and software is service businesses and having a platform,
and with the platform you can move eyeballs and fingertips
around by doing cross promotion. And so I started to
(13:53):
explain to people that we want to be aligned in
a big market, super city and be the largest, most
valuable sports enterprise. But no one buys a ticket for
monumental sports and entertainment. We hold almost three hundred events
(14:17):
a year in our building, but they come to see
Lady Gaga and you too, and Alex Ovechkin and the
Washington Capitals.
Speaker 2 (14:27):
And sometimes even the Georgetown Hoyas.
Speaker 3 (14:29):
Sadly Georgetown plays in our building. And we can talk
about the law of unintended consequences because the Supreme Court
change the collegiate sporting world forever in a majority vote,
and everyone celebrated but didn't consider the law of unintended consequences. Well,
(14:52):
everything's changed. How do we look at now college and universities.
They have agents, the players agents.
Speaker 2 (15:00):
And are being paid for their name, image and likeness.
Everything is Georgetown.
Speaker 3 (15:04):
We won a Big East tournament, and four of the
five starters transferred that offseason. They got better offers from
other colleges. In fact, one of the young men transferred back.
I mean it's I mean, having unlimited free agency in
your college years probably wasn't what people were thinking. But
(15:28):
a Supreme Court justice probably didn't know the ins and
outs of basketball and NCAA. He was looking at it
through you know, his lens, his or her lens.
Speaker 2 (15:54):
I do want to ask you, Ted, before we get
too far from it. This whole notion of you know,
Washington is your home. It also is an incredible sports city.
I mean, is that just you were lucky to be there? Like?
Why is DC the place you just that? Because you
had the means to go just about anywhere to do it?
But why did Washington ultimately make sense?
Speaker 4 (16:15):
For you.
Speaker 3 (16:15):
So there's a theory about our country's important, or are
economic regions important. So there's this theory that there's going
to be ten super cities, and a supercity is defined
by some unique ingredients. That you have a minimum of
(16:39):
five research oriented universities. University is incredibly important Georgetown, You
and I or a lums seventeen eighty nine. It represents
longevity in the community. It graduates IP it's students. It
attracts students, young people from all over the world, and
(17:04):
then they stay in your city. They become additive. We're
blessed in DC. We've got Johns Hopkins. We've got University
of Maryland. We've got University of Virginia. We have that
ingredient that you have a minimum of three major international airports.
We've got Baltimore, We've got National We've got dulles that
(17:29):
you've got green space. We've got the National Mall in DC,
we have the most iconic green space in the country.
That you have iconic real estate, We've got the monuments,
We've got memorials. You also need a defining business community.
(17:50):
We have the federal government. Were the largest customer, largest
spender on the planet. So I've always been an evangelist,
an advocate for Washington d C. But d C is
in a state we don't exist. If we do it right,
(18:11):
will be a supercity. And the final ingredient of supersitis
is winning sports teams. You close your eyes and you
think of New York. You go, oh, the Yankees, Oh,
the Knicks.
Speaker 2 (18:24):
Well, he does, but.
Speaker 3 (18:28):
It's in the fabric. It's why it's a great city.
Oh it has great sports teams. Oh, and it has
great iconic real estate. Oh it has Columbia University. It's
got right.
Speaker 2 (18:39):
But Ted I mean on that note, I mean it's
it's interesting to think about the sports component of it, though,
because when you start sort of building this platform of
monumental to Alex's point, that's not obvious. It's not obvious
that sports is going to be anything beyond you know,
you wake up thinking of the Yankee. People weren't thinking
(19:01):
about it as a big business.
Speaker 3 (19:03):
You were people who weren't thinking of the Internet as
a good business.
Speaker 2 (19:07):
And so what did you see in sports that convinced
you that this was a good investment.
Speaker 3 (19:12):
Great and deep and passionate and durable fan interest families
pass on fandom generation, the generation. You don't see that
in any other consumer product. It's not like, oh, my
father drove an osmobile, I'm going to drive an osmobile
(19:33):
right right. In fact, they ran a campaign this is
not your father's Osmobile. I said, Oh, the end is
near for that company. I saw in the tech business,
the subscription business. What was AOL? Why were we so
highly valued? We got people to pay us nineteen ninety
(19:56):
nine a month, and we became aim a must have product.
People wanted their mail, people wanted their instant messaging, and
we spent billions of dollars to renew customers. We renew
in the NHL and the NBA a bad year, eighty
to eighty five percent of our season ticket hold. Well,
(20:19):
when you have a great team, you have a waiting list.
You sell out and then you develop a waiting list
of people who want to come and fill the stands.
And because you have that kind of demand, then you
can raise your prices. Once you have a big, big audience,
then you can start to monetize the secondary revenue streams.
(20:43):
You can sell advertising, you can do sponsorships, you can
sell suites to corporations who really are saying they're an
owner of the team. They're buying the suite for ten years,
and now they're giving seats as gifts right to their
customers and their partners. And you want the best software
(21:07):
companies in the world, Oracle Salesforce dot Com. They say,
this is how many big customers we have. They have
the best balance sheets, and we're able to build into
the contract annual increases three percent, four percent, five percent
(21:28):
per year. So I looked when I bought into the leagues,
I said, holy macl we are the world's biggest best
SaaS companies software as a service. And who are partners? Disney, ESPN, Comcasts,
Capital One Arena has the naming rights, They're one of
(21:51):
the biggest banks in the world. You just you go
down and you see there's not a lot of variability
in the business. It's repeatable and you know who the
customers are and how the growth gets built in. So
I've just become a spokes person, if you will, for
the category. And I thought, one day, private equity, one day,
(22:16):
smart money is going to come into this business because
to date it's mostly been family run businesses. You bought
a sports team for five million dollars, you know, fifty
years ago.
Speaker 2 (22:30):
Alex Is like, did you say five million?
Speaker 3 (22:33):
The Washington Capitals weren't expansion team. I think it was
five million dollars fo.
Speaker 1 (22:40):
So, speaking of that, Ted, I was reading that you
might be interested in the Nationals. So I was hoping, like,
if there's an opening as a bopend coach or first
base coach'll be available for you. But why the Nationals?
Speaker 3 (22:51):
So first, I'm a season ticket holder for the Nationals,
and I played baseball growing up. I played third base, Alexy, Okay,
I couldn't do shortstop, but third base I could hand
on coordination. And the owners of the Nationals, the Learner family,
they're spectacular family, real estate people. Their bedrock in the community,
(23:16):
and they're small investors in monumental sports. And we're friends.
And the stakes have gotten higher and higher in sports,
and in baseball. They have to compete with the Yankees,
you have to compete with the Mets, you have to
compete with the Dodgers, and these big, big markets, bigger
markets right now, they have the resources to go get players.
(23:41):
That's why the cbas for leagues dry value right The
NHL has a hard cap. We had a lockout. We
came back with a hard cap system. It means every
team in the NHL thinks it can win the Stanley
Cup when the new season starts.
Speaker 2 (24:01):
Because they're all spending the same amount of money.
Speaker 3 (24:04):
Play and the playoffs. Everyone thinks the playoffs are attainable.
And once again the playoffs, anything can happen. And that's
why attendance is fantastic in the NHL. The game's never
been in better shape. CBA was very instrumental in that.
(24:25):
Basketball has a great CBA as well. Teams can make
the decision to spend more than the cap, but they
get penalized for that, and those dollars go into a
pot and they go to the smaller market teams, which
make the smaller market teams feel when it's time we
(24:48):
will compete. We'll go into the tax if we think
that's the right thing. But it gives you rules of
the road. In baseball it has CBA, but you've got
teams that spend three hundred million dollars in teams that
spend thirty million dollars. Well, if you're a fan in
(25:09):
one of those markets, it's tough to go with enthusiasm
because you go it's very unlikely, right, and you know
the Marlins. We're talking about Wayne Heiinger. They won the
championship one year and then he dismantled the team. He
was losing money. Ye most teams that win a championship
(25:29):
and pay attacks, they lose money in their championship winning year. Right.
So with the Nationals, I look and I go, well,
we have a platform. We just bought our network. Everyone's
going to streaming. Streaming is about subscriptions. If you want
to have a subscription, like at AOL back in the heyday,
(25:51):
you didn't have mail available for nine months out of
the year, you have to have a year round subscription.
So I have felt that from a business standpoint, having
a platform and having winter and summer programming is going
to be critical to build value for the network because
(26:18):
you won't get the churn. Right, Oh, you lost in
the first round of the playoffs in April, I'm going
to cancel my subscription and I'll sign back up when
the new season starts. If you're in the playoffs and
baseball is started, you're going to have a real good,
strong subscription base. So from a business standpoint, it's very compelling.
(26:41):
And then to be able to sell advertising indoors outdoors
on television cross promote. But the real reason you want
to do it is you want to win championships. And
I think in this new world where there's all this
money coming in, the sports teams and sports teams are
being valued incredibly high. A football team in Washington, DC
(27:08):
just sold for six billion dollars to the smartest, wealthiest
people who had to syndicate they couldn't afford it themselves.
Speaker 2 (27:18):
Were you shocked by that price, No, I.
Speaker 3 (27:20):
Think it's undervalued. Steve Bomber, who I respect very much
and I consider a friend and with like the same age,
and we competed, you know for decades.
Speaker 2 (27:31):
Bears rivals back in the day, Yeah, and now rivals
in a different way.
Speaker 3 (27:35):
Miss He certainly kicked my ass twenty places. But he
paid two billion dollars for the Clippers, and everyone was
shocked and laughed at him. Yeah, And he's a smart guy.
And he bought hundreds, if not thousands of companies for
Microsoft that were SaaS businesses that you pay ten times
(28:01):
revenues for a software company when you acquire it. So's
say a basketball team was doing two hundred million dollars
and you had a new media deal on the horizon,
and you had naming rights partners, and so Steve knew
he wasn't overpaying for it. Thank God for Steve Bomber.
(28:24):
It was very helpful because Mark Cuban entered the league
the same time that I did, and we were tech
people and we would be advocating it, but Steve actually
did it. And now, yes, someone well, what's an NBA
team worth? Oh, it's ten times revenue? Right, what's a
hockey team worth? Oh? Seven, eight, nine times revenues? I
(28:46):
think the Brooklyn Nets, it was reported they traded it
fourteen times revenue. They brought in partners, and it's not overvalued.
But this belief that the tree these automatically will continue
to grow to heaven is dangerous. Right, We're in the
(29:08):
red line right now of danger because if Josh Harris
and Mitrails and Eric Schmidt, all these people have to
come together to reach to buy a football team, does
that mean in five years, ten years the investors are
going to get five times their money on six billion?
(29:33):
How you're going to get thirty billion? That's why private equity.
I brought the first sovereign wealth fund into sports, the Guitaris, right, yeah,
And it was simple. Their belief was my belief. We
want to put our money into a safe, durable, almost
family like business in a big, important market. So where
(29:57):
do they invest in New York and London, in Washington, DC,
safe harbor for their money.
Speaker 2 (30:05):
How did that deal come together? Tell us about that.
Speaker 3 (30:08):
I was introduced to them through my investment Revolution and
then your venture firm, my venture firm with Steve case
so I knew of them, and then they were doing
the World Cup and private equity companies were reaching out
to us. Was where an attractive company. We do a
(30:29):
lot of revenues and a big market reaching monumental, but
private equity isn't investing their money. They get LPs limited partners,
limited partners and they've got five to seven year horizons.
Usually my horizon is the rest of my life and
(30:52):
then my beyond and a sovereign wealth fund. That's what
they're attracted to. Oh, we want to be in a
safe city with a lead investor who has a lot
of skin in the game and isn't going to do
crazy things and is strategic and smart and will support you.
(31:18):
And oh, you want to buy the baseball team. If
I think if we had said, oh, I want to
buy any baseball team. I want to buy a soccer
team in South America. Well, that's that's off. Strategy of
strategy is build the world's most valuable regional sports and
(31:40):
entertainment company on the planet. Get it to a ten
billion dollar market cap maybe one day. This is a
asset class, and companies are going to have to start
going public once private equity came in. They want out
at some point.
Speaker 2 (31:58):
It's inevitable.
Speaker 3 (31:59):
It's inevitable. So you know, my I don't have very
many gifts, but I have been good at peering around
the corner a little bit and seeing what's out there.
And so yeah, we were maybe the first to really
advocate this is software a service. Like business analysts, media
(32:21):
people who covered the business of sport will get it.
Bloomberg will, We'll get it. You're in the subscription Bloomberg's
in the subscription business business model and they subscribe. And
I bet you Mike Bloomberg has subscribers from day one.
Who took his first terminal and you know, cant like
(32:44):
Wayne izinga.
Speaker 1 (32:46):
So it said obviously in the news has been private
equity entering the world of the NFL, but only at
a ten percent clip which they're doing their last, but
they're also being very conservative. What are your thoughts about
the NFL and private equity and that kind of merger.
Speaker 3 (32:59):
I can't speak of the NFL. I don't own a team,
but it's pretty clear that there's not a lot of
people left that can buy six eight. I saw the
Cowboys are valued at ten billion.
Speaker 2 (33:11):
Dollars, right, yeah, and then that's probably on the low end.
Speaker 3 (33:15):
So it unlocks another pool. But the NFL is conservative
and they're very wise. They've built, you know, the the
city on the hill if you will, for all sports.
And my bed is over time they'll change. You have
to be able to adapt to whatever the new reality is.
(33:37):
And just because they did ten percent, I don't think
that'll be a forever number. Maybe well, but it probably
has some leeway. The NBA, we were pioneers. We're like
a venture backed in the company.
Speaker 2 (33:52):
The NBA is a league.
Speaker 3 (33:53):
Yeah, I'd say we've been in the growth stock the tree,
growth to heaven. Everyone says, oh, it's going right at
the NBA. The media deals are great, well, the local
media deals are great. Right. We're really struggling, right, and
it's hard work. It's no different serving on a committee
(34:15):
of the leagues as it is a serving on a
committee of a big public company. I'm on the board
of American Express right down the street from here, so
regulated business and the governance of the company. In the
board's role and what we do in the committees is
it plays a vital role. So we're all concerned and
(34:39):
working really really hard to figure out it's not our
product that isn't of interests. Locally, our ratings are up
while viewership of television is way down, so that means
we are taking the interest from other networks, other shows,
(35:01):
other pieces of content. But it's a very tough pivot.
As young people remember, cable was the last big exponential
boost for sports teams, right, So the media industry is
changing radically. I'm chairman of the Media committee at the
(35:23):
NBA and the NHL, and you have to stay on trend.
You have to understand what's going on. You can't blame people,
you can't blame consumers. A kid goes to college, kid
grows up at home and he's watching over the air
television or cable, and then he goes to college and
(35:46):
there's no cable. Everything is wireless. So when he or
she graduates from college. I'm not going you're not calling
the cable company, right, You're getting your iPhone and you're
rolling your own now all of a sudden, and so
so you've gotta you've gotta watch all those trends, and
(36:08):
then you have to figure out who do I partner with,
who can mutually value what we have. And you know
the thing about pro sports, I mean, here's a superstar
player with charisma who's now in chapter two of his
(36:29):
career and people will watch him on air, but his
star was so bright he brought people to watch the
games in the stadium and on television. You know, Michael
Jordan was my partner form and you could just see
(36:52):
in the interactions. You know. I was once in a
hotel lobby with Michael Jordan and we had to walk
through the whole and people said Michael Jordan's and I said,
I could have been naked on fire with an axe
in my head to see that naked guy with the
(37:16):
I don't see right. So sports brings that together and
a winning team with stars, the engagement level is like
no other business. And that's what advertisers want, That's what
sponsors want, that's what mayors want. That's what governors want.
(37:37):
They they want that that shine. So it's such a
unique business and we still have a lot of upside,
if you will, because I think streaming is in killing sports.
I think streaming is going to be ultimately a big
positive right for teams. It's amazing to me, again being
(38:00):
a tech executive. I guess in my background, the data
is all we lived on at AOL. Google one is
built the second or third most valuable company on the
planet because they have the data, they know where you're going.
(38:21):
When we just bought our RSN, I asked the people
that Comcast NBC, a very important media company, who are
the customers? Men, go, really, that's how we can do better?
How old? Well eighteen fifty? You don't know who your
(38:44):
customers are? Why? Because the cable company gets the customer
and then they buy the programming from the RSN and
the RSNS and people don't realize in all the changes,
they were enjoined by Congress that the cable company couldn't
(39:06):
share the names because of privacy. So when I bought
our Regional Sports network, I didn't know who one customer,
one viewer was. No RSN does Wow, isn't that crazy. Wow,
that's incredible. If you go direct to consumer, you're streaming
on OTT, you're like the cable company. You get the
(39:30):
relationship with those people. And then the other thing that
blows my mind and being counterintuitive, I think that's where
fortunes get made. I'd hear from cable companies. I just
saw on analysis. Can you believe it's seven hundred dollars
if you wanted to watch every NFL game and you
(39:50):
had to subscribe, and you and I go, we charge
twenty five hundred dollars a game for one ticket in
the dream seats at the Wizards, and fans will arrive
late and leave early, right and go get something needed
(40:10):
halftime and you see the empty seats. I go, it's
twenty five hundred dollars a seat. What could be more important?
And they're having a beer and you know, being with
some friends, and so I go, we have to change
that as a mindset. Now that cable was offering you
(40:34):
all the video, all the audio, all the data for
one thousand dollars a year, and people didn't think it
was worth it. But they'd pay a thousand dollars for
one ticket for Minnesota Timberwolves camping so I think a
part of our next upside is going to be will
(40:54):
be the bundler. The sports teams will be the buntings themselves. Yeah,
and we're selling a seat and you'll get a jersey,
you'll play golf with the team, and you'll get Uber
Eats credits, and you'll get discounts for publication. And we
(41:15):
have to be the bundler and a part of the bundle,
just like Prime. Think about what Amazon did. I'm sending
you stuff that you bought, and I'm going to give
you free delivery, but you're going to pay me a
monthly subscription. And now I'm going to start to put
(41:37):
things into the bundle. And now Prime Video is the biggest.
I think they have ninety million subscribe unbelievable. So subscriptions,
building passionate audiences and having those reoccurring revenues, I think
is what our business about.
Speaker 2 (42:00):
All Right, we're gonna do a quick, rapid fire. I'm
with you, and so the like one to two word
answers for all of this. All right, what's one word
to describe your deal making style?
Speaker 3 (42:10):
I use niceness as a competitive weapon.
Speaker 1 (42:14):
What's more important gut or data?
Speaker 3 (42:17):
I don't think either works alone. But if I had
to pick one at where I am in my life
and career, I'd say, gut, I've seen it all.
Speaker 2 (42:28):
Who's your dream deal making partner?
Speaker 3 (42:31):
Peter Goober? Peter Goober, we were competing for a deal.
We didn't know about it, and at the last second
we told each other and he said, oh, we're friends.
Let's do the deal together. And I'll never forget this.
He said. We'll laugh together, we'll cry together, but we'll
(42:53):
have a great journey as friends. And he's the greatest.
Speaker 1 (42:58):
This is this is a second try at this question.
But what is the greatest deal you've ever made.
Speaker 3 (43:02):
In terms of money?
Speaker 1 (43:06):
Sure?
Speaker 3 (43:07):
Well, I sold my company, my little startup, to America Online,
and I got ten percent of AOL and what was
called the polling of interest, if you can believe it,
AOL was four hundred million dollars. I got forty million
dollars of stock, and nine years later the company when
(43:31):
we bought Time War, it was worth one hundred and
seventy billion dollars, which back then that was real money. Wow,
if there were no trillion dollar market capital, it.
Speaker 2 (43:40):
Feels like real money.
Speaker 3 (43:41):
Away.
Speaker 2 (43:42):
What's the best piece of advice? You've ever received on
deal making or business.
Speaker 3 (43:46):
Don't get too high with the highs and too low
with the lows.
Speaker 1 (43:49):
What's your hype song when you go into a big
negotiation or a meeting?
Speaker 3 (43:53):
My hype song. People laugh at this, but I used to.
I used to be a punk and I go to
CBGB's and Talking Heads were my favorite band, and so
probably once in a lifetime by the talking Heads.
Speaker 2 (44:12):
I love it. You can only watch one sport for
the rest of your life, which one is it? This
is a good one for you.
Speaker 3 (44:16):
I'm going to surprise people, but hockey is the most
honest game. You can't you can't hide in hockey. You
don't skates, and you have to go one hundred percent
full out. You can't run out of bounds, you can't
hold your knees doing a file shot. It's It's an honest,
(44:39):
honest sport. And I've really come to enjoy the live experience,
you know.
Speaker 1 (44:44):
Congrats to our mutual friend and champion Vinie Viola.
Speaker 3 (44:49):
Jenny's the best, the greatest, and he deserves his Stanley Cup,
his immortality.
Speaker 1 (44:55):
What team do you want to win a championship more
than any other?
Speaker 3 (44:59):
I have real c I already have thought of what
I have to accomplish in the next twenty five years,
or you'll be scarred. I've won championships everywhere, taking companies public,
but I haven't broken the code in the NBA, and
so I have to make the Wizards. And you know
from last year how hard it is to get from
(45:21):
round to round to round, and the furthest I've gotten
in the playoffs is Game seven lost to Celtics and
semi finals of the East, and you think, oh, I
got a young team. It's just got to keep going
from there. And then injuries and bad trades and all
of a sudden you're rebuilding and careers are short, and
(45:44):
you know, you learn, and I want to build it
the right way. But we have to win a championship
for the fans, for the Wizards.
Speaker 2 (45:51):
All right, Well, this has been really fun. Ted leonsis
thank you so much.
Speaker 3 (45:54):
Thank you, Thanks guys.
Speaker 4 (46:02):
The Deal is a production from Bloomberg Podcasts and Bloomberg Originals.
The Deal is hosted by Alex Rodriguez and Jason Kelly.
Our producers are Ana Maazarakis, Stacey Wong, Lizzie Phillip and
Victory Veyees. Original music and engineering by Blake Maples. Our
managing editor is David E.
Speaker 1 (46:21):
Ravella.
Speaker 4 (46:22):
Our executive producers are Jason Kelly, Brendan Francis, Neonham, Jordan Opplinger,
Trey Shallowhorn, Kyle Kramer, Andrew Barden, Kelly Laferrier and Ashley Hoenig.
Sage Bauman is our head of podcasts. Additional support from
Rachel Scaramazino and Elena Los Angeles. Joshua Devaux is our
(46:43):
director of photography. Rubob Shakir is our creative director. Art
direction is from Jacqueline Kessler. Casting by Julia Manns. Our
associate producer is Natasha Abelard, Camera operation by Ryan Cavtero,
Jesse Ridner and Sumahussin. Our gaffer is Alex Brown, and
our grip is Max Garstak. Our production assistant is Gabriella Dematase.
(47:08):
Alex Diaconus is our video editor. Listen to the Deal
on Apple Podcasts, Spotify, or wherever you get your podcasts.
You can also tune into The Video Companion on Bloomberg
Originals and on Bloomberg TV. Thanks for listening.
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