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The Power Brokers of Sports

Team owners may be living a dream, but disparate goals have them in a financial neverland
Bruce Schoenfeld
From the Print Edition:
Raquel Welch, Jul/Aug 01

The tidy corner office looks much like every other office inside America Online's drearily antiseptic campus near Dulles Airport. Only the framed photos of Ted Leonsis with Michael Jordan hint at a difference. Leonsis is the vice chairman of AOL Time Warner and a close confidant of the chief executive, Steve Case. He also happens to own most of the National Hockey League's Washington Capitals and 45 percent of both the National Basketball Association's Washington Wizards and Washington's MCI Center, where both teams play. Jordan, who also owns more of the hockey team than he does of the basketball team, is his business partner.

From this AOL office, Leonsis runs his sports domain by phone, fax and -- more than anything -- e-mail. "I get hundreds a day," he says while punching out his response to yet another. With help from several minority partners two years ago, Leonsis paid $200 million to Washington businessman Abe Pollin for a percentage of the two teams and the arena. He had amassed a list titled "101 Things to Do Before I Die," shortened by him long ago to The List. "Own a sports franchise" was right there at No. 40.

He has spent much of his time in the past year learning how to run the Capitals, though he keeps his day job. He'd better, the way his teams are losing money. "I planned by essentially thinking that success is breaking even," he says. "And we are a million miles from breaking even."

And yet, earlier this year Leonsis helped engineer a deal that made him a minority owner -- granted, we're talking about a tiny percentage -- of three more sports franchises. By buying out Time Warner in a multibillion-dollar transaction that Leonsis helped sell to both shareholders and government regulators, AOL also acquired its Turner Broadcasting subsidiary, which includes the NBA's Atlanta Hawks, the NHL's Atlanta Thrashers and Major League Baseball's Atlanta Braves.

Leonsis had sold off some of his AOL stock to finance his sports acquisitions, but he still has plenty of it left, enough so that NBA commissioner David Stern and NHL commissioner Gary Bettman each called to discuss possible conflicts of interest. Never before, each told him, has a corporate entity owned one franchise in a league at the same time that an employee and shareholder of that entity owned a competing franchise.

Leonsis lifts his eyebrows in merriment when presented with possible scenarios that could lead to trouble. "What's going to happen?" he asks. "Is Steve Case going to send me an e-mail telling me to have my team throw a game?"

What's telling here isn't the potential conflict of interest, but the idea that owning a sports franchise is viable for both Ted Leonsis and the conglomerate that employs him.

For every big-league owner, there's a particular reason why the investment made sense -- or why it didn't make sense, but he made it anyway. Some bought their teams for ego gratification, some for profit, some for synergy (or some combination of the three), and some inherited the family business. Some are successful businessmen with all the money they'll ever need, longtime fans who bought in as a way to enjoy their mature years. Others sweat every nickel because they live off the profits. Some are public corporations with a mandate to keep share prices high; others are private consortiums beholden to their investors.

Ownership, like labor, may be a monolithic concept, but that sound you hear emanating from every league meeting ever held is a cacophony of voices. In fact, it's fair to say that other than numbering Ted Leonsis among their owners and playing in the same division, the Washington Capitals and Atlanta Thrashers have almost nothing in common.

Leonsis loves the romantic notion of The List, but admits that he bought the Capitals for three reasons, all of them logical. Like many businessmen, he's unusually competitive, and sports provides the ultimate arena. "In business, it's unclear whether you're the best at something," he says. "In sports, it isn't. When you talk with Michael Jordan, on occasion you'll be arguing about something and he'll put up six fingers, as if to say, 'I have six rings. I know what I'm talking about.' My competitive side says there's something really wonderful about that."

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