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Speaker 1: Hello, and welcome to the Bloomberg Business of Sports podcast,

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Speaker 1: where we explore some of the many issues the world

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Speaker 1: of sports. I'm Michael Barnes, I'm Scarlett so Don Damien say,

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Speaker 1: oh my, look who we have from the Atlanta Hawks

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Speaker 1: Senior VP of Finance, Lester Jones. We're talking basketball. Hello,

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Speaker 1: Lester Jones, Welcome to the Bloomberg Business of Sports. Hey,

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Speaker 1: good morning, thanks for having me. Let's start with probably

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Speaker 1: the big story that that we're hearing that the NBA

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Speaker 1: is thinking now of. I guess the way you want

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Speaker 1: to call it is a hardcap spending limit in a

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Speaker 1: new agreement with the n b p A. What have

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Speaker 1: you heard about that? Do you agree with it? What

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Speaker 1: are your thoughts? Oh? Yeah, so it is a hot topic.

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Speaker 1: I will say there's a lot of uncertainty around, you know,

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Speaker 1: whether they can actually achieve it or not. Initial conversations

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Speaker 1: definitely been you know, a little bit of pushback from

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Speaker 1: a player perspective. But I mean my personal and individual

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Speaker 1: thoughts would be I get it right. So, anytime you're

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Speaker 1: entering a season where luxury tax payments are expected to

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Speaker 1: be this astronomical amount and you just don't want teams

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Speaker 1: to continue to jack up spending, you try to go

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Speaker 1: and do something like a hardcap. But I also see

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Speaker 1: the players side where you may you know, limit the

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Speaker 1: upper earning potential of the guys in the top tier.

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Speaker 1: So you know, I think both sides have a very

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Speaker 1: good argument and hopefully they can come to some sort

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Speaker 1: of resolution, you know, with the new cb A looming.

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Speaker 1: So it's it's it's an interesting concept just depending on

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Speaker 1: which side you fall on. But from a business perspective,

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Speaker 1: you know, player salaries is one of your highest expensive

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Speaker 1: single line item expense that you have. Do you want

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Speaker 1: to manage it? Do you want to go into the

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Speaker 1: tax You know, you have those conversations all the time,

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Speaker 1: and you know, a cap hardcap, we're pretty much do

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Speaker 1: away with that. So especially as the CFO of the

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Speaker 1: Atlanta Hawks, which is more of a I guess a

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Speaker 1: mid market team as opposed to say, Golden State Brooklyn

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Speaker 1: the next dl A Clippers, I'm curious to get your

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Speaker 1: take on how inflation is going to affect these negotiations.

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Speaker 1: You mentioned players salaries is one of the biggest expenses.

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Speaker 1: Clearly they will keep that in mind, but how do

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Speaker 1: you see this changing the contour of the discussions. I

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Speaker 1: think it's gonna have a significant impact. Uh, anytime you're

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Speaker 1: talking any inflation, you know area rate that's you know,

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Speaker 1: depending on what stat you go with, eight year over year,

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Speaker 1: that's going to have significant impact to especially a middle

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Speaker 1: market to lower market team where you know you already

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Speaker 1: are trying to manage your expenses as best as possible.

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Speaker 1: So when that bubbles up, I think the NBA has

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Speaker 1: to take the position that they represent all thirty teams, right,

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Speaker 1: and so you're gonna have thirty different points of view.

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Speaker 1: But for those that are in that middle market, you're

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Speaker 1: really looking at, Hey, inflation is going to hurt on

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Speaker 1: top of the fact that basketball related income is going

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Speaker 1: to go up, but is it going to go up

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Speaker 1: in correlation to inflation? And if it doesn't, then you

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Speaker 1: know how and you just keep having these astronomical player salaries.

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Speaker 1: So then you start to have and it starts to

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Speaker 1: shape your opponent of view around Look, this is what's

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Speaker 1: really happening to my bottom line. So you start doing

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Speaker 1: you know, your cash flow projections on what happens if

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Speaker 1: we do go into you know, a hardcap, and then

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Speaker 1: what happens if you don't. But it all comes down

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Speaker 1: to inflection, it really does. It's gonna have a significant

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Speaker 1: impact on the conversation. Well, let me first apologize on

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Speaker 1: behalf of Scarlett to Tony Wrestler for calling Atlanta mid

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Speaker 1: market teams. So, Tony, if you're listening out there, you know,

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Speaker 1: we really we like very New York centric. So I'm

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Speaker 1: just kidding. I'm defending it. So so so ter tell them,

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Speaker 1: tell me about how this all changes. I mean, like,

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Speaker 1: you know, you've gotta build. You know, you've got to

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Speaker 1: build the Atlanta Hawks. You know, you you know, you

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Speaker 1: effectively don't have as much money um as some of

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Speaker 1: these other teams like Golden State, like the Brooklyn that's

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Speaker 1: you know, what's the strategy there? What are you and

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Speaker 1: Tony talking about? Like, how do you how are you

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Speaker 1: looking to build the Hawks? To me, We've got Trey Young,

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Speaker 1: Jonathan Murray. I mean what comes next for the Hawks?

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Speaker 1: I mean, honestly, at the card liquidity positions actually very strong.

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Speaker 1: So I think that any team that's looking to you know,

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Speaker 1: potentially go into the tax you actually have to start

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Speaker 1: years before. And so what you want to do is

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Speaker 1: try to solidify your bottom line and your liquidity position

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Speaker 1: to make sure that you have significant cash on the books,

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Speaker 1: uh to where your business is not handicapped by going

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Speaker 1: into the tax. So the conversations, you know, start years prior,

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Speaker 1: and so if you've been able to successfully manage that

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Speaker 1: bottom line as you're going into it, and yeah, you

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Speaker 1: know you got Trey and and Dejonte, But as you're

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Speaker 1: resigning guys like you know, DeAndre Hunter, you know, to

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Speaker 1: their extensions coming off of their rookie deals. You know,

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Speaker 1: everything starts to become a little bit more expensive. So

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Speaker 1: you just try to make sure that as you're growing

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Speaker 1: that top line expense that they're offsets, right. You have investments,

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Speaker 1: you have other avenues of business that you're able to

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Speaker 1: capitalize off of. These guys also, you know, they bring

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Speaker 1: in significant revenue to the organizations, so you have to

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Speaker 1: leverage that and make sure that how you're able to

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Speaker 1: capitalize on the assets that you have that you're spending

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Speaker 1: is in line with that. And I think that sometimes

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Speaker 1: when teams get out of pocket, it's because they do

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Speaker 1: the reverse, right, they don't they don't manage to cash

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Speaker 1: on their books, they don't manage their bottom line. They

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Speaker 1: jump into the tax and then they just become you know,

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Speaker 1: tax laton. Now you're committed. Now you're in it, and

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Speaker 1: you just have to pay those significant expenses and then

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Speaker 1: try to make it up on the back end. So

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Speaker 1: the conversations with Tony are literally around how can we

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Speaker 1: insulate ourselves and where is our risk? So you want

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Speaker 1: to mitigate risk. Some risk is good risk, but you

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Speaker 1: want to mitigate it as often as possible, but identify

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Speaker 1: those risks. So we just talked, you know, what's the

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Speaker 1: risk of the plan, what's the risk of the budget,

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Speaker 1: and you manage accordingly. So many things I want to

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Speaker 1: talk to you about, but one thing I want to

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Speaker 1: bring up is that the Hawks you made a commitment

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Speaker 1: to working with black and minority owned businesses. Uh, and

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Speaker 1: that was back in partnered with the National Black Bank Foundation.

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Speaker 1: Tell us a bit about that and how that has

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Speaker 1: benefited the entire community and your team. Uh. Great question,

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Speaker 1: and I think it definitely supports you know, how we've

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Speaker 1: been able to both throw our bottom line in our

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Speaker 1: liquidity position as well. Uh. So back during the time

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Speaker 1: of uncertainty and the League was facing you know, the

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Speaker 1: country was facing some you know, sensitivities around civic unrest

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Speaker 1: and just trying to figure out what we can do

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Speaker 1: post you know, George Floyd, there were a lot of um,

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Speaker 1: a lot of people were taking to the streets, a

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Speaker 1: lot of people who were forcing their opinions. And as

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Speaker 1: we were out and about in our community, as we

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Speaker 1: were out and about talking to the leaders, you know,

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Speaker 1: we often wondered what more could we do to help

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Speaker 1: boast our community and help be that community asset. We

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Speaker 1: had a relationship with you know, Ashley Ashley Bill actually

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Speaker 1: uh he's the CEO of the new Ready Life platform,

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Speaker 1: but he's also the co founder of the National Foundation

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Speaker 1: and working with the National Black Banks. When we were

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Speaker 1: asking the question of him, as we, you know, are

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Speaker 1: marching side by side as partners or what more could

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Speaker 1: we do? He had an excellent idea and he pitched

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Speaker 1: to us, you know, going to a syndicate of Black

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Speaker 1: banks and like, you know, looking at our entire portfolio,

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Speaker 1: how can we invest in the community. So we actually

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Speaker 1: moved one of our pieces of debt on our practice

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Speaker 1: facility UM over to the Syndicate of Black Banks, with

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Speaker 1: Curve State Banks being the lead bank and acting there.

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Speaker 1: And he was phenomenal, I mean him and his team

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Speaker 1: and the Black Bank Foundation coming together and showing us

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Speaker 1: a normal course of business, what we're able to do,

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Speaker 1: what we do anyway, moving that piece of debt over

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Speaker 1: to them, how it could actually impact the community, how

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Speaker 1: we get resources and and into the hands of people

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Speaker 1: in the community that are underserved or that may not

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Speaker 1: be able to have access to those resources of those funds. So, yes,

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Speaker 1: that was the deal that we were able to execute.

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Speaker 1: You just described the benefits of that deal. Can you

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Speaker 1: talk a little bit about how the key to getting

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Speaker 1: a yes from the Hawks leadership was to also address

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Speaker 1: the risks, lay them out and discuss how the risks

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Speaker 1: would be mitigated. Yes. So you know, with any business

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Speaker 1: deal that you're gonna do, there are going to be risk,

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Speaker 1: and so going into that room and being able to

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Speaker 1: to tail ownership, Hey, here's the risk of this potential deal.

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Speaker 1: Here's you know, what could potentially be at stake. But

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Speaker 1: you hit the nail on the head with the mitigation

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Speaker 1: piece going in with the solution instead of just you

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Speaker 1: know the potential problem and what were the risk um,

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Speaker 1: So instead of dealing with one you know bank where

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Speaker 1: we were servicing our debt, having to go to a

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Speaker 1: syndicate where each of those banks may have limited loan capacity,

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Speaker 1: and so the maximum loan that you know, one bank

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Speaker 1: could give you as ten million dollars and then other

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Speaker 1: banks are two point five and five million. We're used

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Speaker 1: to going to a larger bank, right, and a larger

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Speaker 1: bank can give you the debt thirty five million, which

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Speaker 1: is what this deal was. And say, yep, one bank,

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Speaker 1: I'm dealing with one bank. I don't have different customers.

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Speaker 1: You start to look at that and go, well, what

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Speaker 1: happens if one of the banks falls off? What happens

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Speaker 1: if the bank is absorbed in another deal? What happens

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Speaker 1: if you know, since they have such you know, low

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Speaker 1: access to those resources, what then are we in the fault?

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Speaker 1: Like looking at your bank covenants, are the bank covenant's

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Speaker 1: going to be more stringent because they have less long

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Speaker 1: capacity and they don't have the assets to be able

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Speaker 1: to extend across their organization. And so you start to

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Speaker 1: talk about those things because coming outside of the pandemic,

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Speaker 1: bank covenants and uh on debt were a hot topic

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Speaker 1: for a lot of businesses, and so you want to

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Speaker 1: make sure that you can hit your covenants. You're not

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Speaker 1: going to be in default and at the same time,

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Speaker 1: the partner that you're dealing with is going to be

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Speaker 1: around to do business for a significant period of time

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Speaker 1: or at least you know, the linked to the deal.

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Speaker 1: So those were probably two of the biggest that that

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Speaker 1: we faced and trying to get the deal done. Spoken

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Speaker 1: like a former auditor p WC and Arthur Anderson, now, Lester,

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Speaker 1: I just have to ask you this. I mean, there

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Speaker 1: are a lot of different avenues for new growth and revenue.

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Speaker 1: You know, obviously the Hawks are looking at and and

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Speaker 1: for me, you know, it's difficult to ignore the emergence

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Speaker 1: of sports betting, of sports gambling, right And I'm just curious,

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Speaker 1: you know where that fits into your calculus, you know,

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Speaker 1: do you see opportunities for the Hawks too to evolve

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Speaker 1: along with that industry and specific or I mean like,

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Speaker 1: how are you working with some of these sports books,

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Speaker 1: How are you working with ESPN? How are you working

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Speaker 1: with your partners and collaborating with them to try and

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Speaker 1: build that experience for your audience and for you viewers. Oh? Absolutely,

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Speaker 1: I think that sports bidding could have a significant impact

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Speaker 1: on not just the business, but even the community as well.

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Speaker 1: I think, um, we've already started to run, you know, simulations,

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Speaker 1: You're looking at other you know, teams and states that

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Speaker 1: it's legal, and you start to look at the revenue

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Speaker 1: potential there to be pretty significant, and so just trying

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Speaker 1: to understand the entire landscape of it. We've been talking

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Speaker 1: to our partners to make sure that we understand, you know,

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Speaker 1: what are the triggers, what are the risk what are

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Speaker 1: our potential upside? How can we better educate ourselves to

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Speaker 1: capitalize significantly, you know, hopefully if it's it's approved in

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Speaker 1: the state of Georgia. I've always said the thing that

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Speaker 1: changed everything on the landscape of sports, not just the NBA,

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Speaker 1: but the NFL, Baseball, and I could go on the

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Speaker 1: NHL was fantasy sports. Because now what happened is that

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Speaker 1: a fan is forced not only to be a homer

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Speaker 1: for their own team. Is like you know, rah, al right,

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Speaker 1: go Detroit Pistons, this that whatever, But now you gotta

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Speaker 1: look at every player. Yeah, Nick fan written for Tray

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Speaker 1: Young and you gotta look and you know it's I

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Speaker 1: think to me, that's the thing that took this brought

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Speaker 1: sports way into like the extreme mainstream that you know

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Speaker 1: that people are sagement. Yeah, across the point yeah, your

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Speaker 1: thoughts about that, Oh absolutely, I think you're spot on

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Speaker 1: when you say you're Knicks fan and you have to

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Speaker 1: root for Trade Young? Uh you know, um, you know,

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Speaker 1: So do you sit Trade Young when he's playing the

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Speaker 1: Knicks if he's on your fantasy team? Of course you don't.

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Speaker 1: You know, you you go, I want Trade to go

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Speaker 1: for sixty, but I want the Knicks to win by one, right,

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Speaker 1: And so, like you're that awareness across sports only benefit sports.

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Speaker 1: Then you start to have not just you know, in

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Speaker 1: your local region, you start to have generational fans across

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Speaker 1: the country because now people are rooting for sports, they're

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Speaker 1: rooting for more individuals as opposed to just hey, I'm

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Speaker 1: a die hard Hawks fan. Now it's yeah, I'm a

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Speaker 1: diehard Hawks fan, but I am boosting the overall business

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Speaker 1: of the NBA because I'm going for different players in

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Speaker 1: markets that I perhaps wouldn't have known about prior to fantasy.

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Speaker 1: And so fantasy, I think it's something that you can

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Speaker 1: capitalize on in a meaningful way and that you can

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Speaker 1: grow your landscape of the business by you know, advertising

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Speaker 1: that putting that out there and letting people know increase

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Speaker 1: your awareness of the players across these different markets, and

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Speaker 1: I think it will only bring back dividends for the league.

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Speaker 1: You have to I have to say, you have the

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Speaker 1: number one advice when you're betting or you're playing fantasy sports.

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Speaker 1: Don't bet with your heart, that with your head. And

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Speaker 1: I'm not talking about it. You got to take the

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Speaker 1: emotion out of it. Because my wife crossing in the NFL,

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Speaker 1: she's a big forty Niners fan, and I forgot the

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Speaker 1: game that I bet against the forty Niners. He said,

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Speaker 1: why did you bet against the forty Niners. I said,

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Speaker 1: they're not going to win now. Sleeping on that couch

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Speaker 1: that night was very good. But after that, and that's

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Speaker 1: that's the main thing I'm on to say, Scarlett, is

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Speaker 1: that you know, like you said, take the emotion out

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Speaker 1: of it, especially if you're playing fantasy sports and bet

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Speaker 1: spoken like a true expert. UM I gotta ask you, Lester.

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Speaker 1: You mentioned that fantasy allows um fans from different cities,

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Speaker 1: different regions, different countries to um latch onto players on

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Speaker 1: your team, and why didn't your fan base? Can you

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Speaker 1: give us some demographics, some numbers on what the Atlanta

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Speaker 1: Hawks fan base looks like now as a result of

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Speaker 1: things like fantasy sports, sports betting all that. I'll even

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Speaker 1: thinking one step further, and we were able to participate

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Speaker 1: in the Global Games and we played the Milwaukee Bucks

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Speaker 1: and Abu Dhabi right for preseason, we played two games there.

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Speaker 1: And just the reception that the team received and just

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Speaker 1: the fan base in general, you actually be surprised maybe

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Speaker 1: by the fact that our internationally are our number one

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Speaker 1: fan base is actually in Thailand, and so Thailand, Thailand

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Speaker 1: of all places, right, and so as we're running those demographics,

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Speaker 1: like I would say, prior to the last three years,

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Speaker 1: approximately of mentions follows were in the Southeast region for

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Speaker 1: the Atlanta Hawks, and and now uh, internationally, our up

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Speaker 1: ticket has been almost i would say across the country

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Speaker 1: in the region as the emergence of trade and and

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Speaker 1: now especially with the gene and the team coming together, uh,

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Speaker 1: now our mentions are up over three across the country.

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Speaker 1: And so just in that you start to look at

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Speaker 1: it and you start to see, well, where is it

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Speaker 1: coming from. It's coming through platforms such as you know,

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Speaker 1: the fantasy sports, and you're starting to see more people

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Speaker 1: place a few more bets on the Hawks to to

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Speaker 1: cover games, and you know, point spreads and differentials, and

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Speaker 1: so that's coming out of you know, Vegas primarily. You

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Speaker 1: start to look at that and you're looking at partnering

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Speaker 1: with somebody that is in that space. Those analytics speak

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Speaker 1: for themselves. You're talking triple digit growth and mentions and awareness.

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Speaker 1: It's not a coincidence that you start to see the uptick.

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Speaker 1: I mean, prior to you know, Trey has been a

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Speaker 1: long time since we've had somebody with the top one

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Speaker 1: hundred Jersey sales in the NBA, and so it's trade

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Speaker 1: starts to break into that upper stratosphere as now we have,

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Speaker 1: and he's in that upper stratosphere. You start to look

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Speaker 1: at that and those analytics, they they're pretty compelling. I'm

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Speaker 1: still stuck on the Thailand thing. I mean, it's the

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Speaker 1: only matter of time before someone signs a big endorsement

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Speaker 1: deal with PTT or Bangkok do some medical services at

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Speaker 1: this point and playing some um exhibition games in Chang

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Speaker 1: Lai Leicester. You know, before you go, I have to

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Speaker 1: ask you just one question. Um. You know, obviously Tony Wrestler,

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Speaker 1: you work closely with him, you know, Grant Hill, he's

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Speaker 1: another owner of the team. Sarah Blakeley Spanks co founder.

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Speaker 1: You know she's she's an owner. Jesse Eisler, my man,

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Speaker 1: Jesse Eisler. Have you ever run and Driveway to Hell

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Speaker 1: with Jeffrey Eisler? Have you ever done a half marathon

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Speaker 1: with the man himself? I have not, Um, but Jesse

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Speaker 1: is phenomenal. H. We also serve on the Atlanta Hawks

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Speaker 1: Foundation board together, Uh and Jesse. He's definitely committed to

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Speaker 1: overall wellness and foundations and and and he um. He

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Speaker 1: had an idea, probably getting mad for telling, but he

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Speaker 1: had an idea, but he kind of theme song for

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Speaker 1: the Atlanta Hawks. Now I'm just kidding. No, it was

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Speaker 1: he wanted to do, you know, a marathon event that

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Speaker 1: ended at the arena and give tickets to people who

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Speaker 1: participated in the marathon. And it was like, we probably

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Speaker 1: might want to do with the day boring if then

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Speaker 1: the tickets to the game instead of running to the

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Speaker 1: arena and having them enter. Yeah, it's fast. Atlanta Hawks

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Speaker 1: Senior VP of Finance, Lester Jones, you are so kind

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Speaker 1: to talk with us and lay a whole bunch of

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Speaker 1: knowledge on us on the Bloomberg business of sports. Thank

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Speaker 1: you so much, first sir for talking with us, no problem.

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Speaker 1: Thank you guys for having me. This has ben the

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Speaker 1: Bloomberg Business of Sports podcast where we explore some of

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Speaker 1: the big money issues in the world of sports on

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Speaker 1: Michael Bar. You can follow me on Twitter at Big

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Speaker 1: Bar Sports. I'm at Scarlet Food on Twitter. I'm Damian

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Speaker 1: Sassar at The Sassur on Twitter. You can get our

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Speaker 1: podcast because hey, we broadcast him every Monday, Wednesday and Thursday.

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Speaker 1: Download the show wherever you get your podcasts.