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