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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
By Bruce Schoenfeld | From 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."

Leonsis also understands that a sports franchise becomes an integral part of a community in a way that a business never can. If a citizen wants to tout his quality of life, he isn't likely to run through the streets praising the virtues of his library system or city government, let alone a Procter & Gamble or Sun Microsystems. But he will cheer for the teams with the name of his metropolitan area on their shirts, letting their success represent his own. "I honestly do think the community owns the teams, that these are public trusts," Leonsis says. "And if you can create a winning team, something the community can be proud of, nothing brings the city closer."

Perhaps most important, nearly all of Leonsis's estimated $675 million personal fortune existed as AOL stock. Buying a team or two was a way to broaden his portfolio. "I figured I could diversify into something I liked, and it would appreciate and I could keep it in my family," he says.

None of that applies to the Thrashers, a second-year NHL expansion franchise that came into being mostly to fill empty dates at Atlanta's Philips Arena. Ask Stan Kasten, who serves as club president for all three of Turner Broadcasting's franchises, why his company has invested in sports, and he offers a wry smile. "I can't tell you that if we didn't own sports teams, there would be the same motivation to go out and buy them today," he says. "A lot has to do with historical events. Everything we did was important to us at the time."

What started as Ted Turner's personal passion became an investment in programming for Turner's television station. "The idea was, he would own the Braves and not have to negotiate for the rights," Kasten says. "Then WTBS became a superstation, and the team took on a value completely unforeseen." Once TBS and Turner Network Television were national cablecasters, the Braves and Hawks served as ways for the company to be involved in the internal decision making of the leagues whose games it broadcast. "You're privy to the inside," says Kasten, "and you have relationships that help you."

That access, in turn, became an asset to be acquired by Time Warner, and later swallowed into the AOL empire. Turner, who spends much of his time on his Montana ranch, remains wildly passionate about his teams, but their value in the combined corporate entity is today only marginally significant. Rather, they offer a way for AOL Time Warner's equities to augment each other. From behind his desk, Kasten pulls out a folder stuffed with papers. "This is my Synergy file," he says. "I have a full-time team, and four separate task forces, dedicated to nothing but synergies."

Leonsis isn't looking to exploit synergies. He's too busy responding to a fan who exhorts the Capitals not to play such loud music during stoppages of play. For Leonsis, owning a team means helping his son make a get-well card for an injured player, then letting him deliver it in the locker room. About all the Capitals and Wizards have to do with his AOL career is his office, and the e-mails he sends on his AOL account.

So it shouldn't be surprising that the owners of the Capitals and the Thrashers will probably concentrate on different issues during negotiations for the league's next labor agreement. Or have different expectations from the next television contract. Or differing opinions about the next marketing agreement. Collude to throw games? They'll have a hard enough time finding common ground on anything, other than wanting the Stanley Cup.

To see these disparate ownership entities make a laughable attempt to come together in some kind of unity, watch what happens when baseball's labor agreement, forged during the near-calamitous work stoppage of 1994-'95, expires this autumn. Labor negotiations in sports are inherent mismatches because all players are basically in the same situation (some are wealthy, others wealthier, and none will play for very long) and can speak with one voice, while owners aren't, and can't. They try to sound united, but they never are.

And who could expect them to be? Each has a different perspective based on his market size, his stadium lease, his payroll and what he wants out of his team. Though most try to do what is in the best interests of the sport, the specifics of what those best interests entail will doubtless provide a point of raucous contention. They always do.

Already, George Steinbrenner, the Yankees' profligate chief executive, has criticized the Texas Rangers' Tom Hicks for the $252 million that he'll be paying shortstop Alex Rodriguez in the coming years. In fact, the Rodriguez deal actually makes sense for the Rangers, at least in a vacuum. The key is that the economics of that franchise -- which has a 2001 payroll of $80 million, substantially less than the $110 million or more of Steinbrenner's Yankees, incidentally -- don't necessarily apply to any others.

Hicks calculates that by signing Rodriguez, the value of the Rangers and his cable TV company, as well as their earnings capabilities, will increase enough to warrant the additional expense. "He has $250 million in television revenue to spend," says Preston R. (Bob) Tisch, a billionaire who owns half of the National Football League's New York Giants and understands the economics of sports as well as anyone. "That's a good investment. For him, it is."

Trouble is, his business decision affects his peers. If Steinbrenner is upset, it's because he'll inevitably have to pay his own players more, as will every other owner. Before this season even started, Frank Thomas, who will earn $9.927 million a year over the next six years from the Chicago White Sox, pronounced himself miffed that his salary is dwarfed by the Rodriguez deal. "It's not about money; it's about respect," he said, but as usual in such cases, respect is conferred by cash or check.

Rodriguez's contract will also be used for comparison in salary arbitration. If another shortstop puts up numbers that equal or exceed what Rodriguez does, his agent will doubtless claim that he deserves similar compensation. He won't get $252 million, but he's sure to get more than he would have, from a team that -- no matter how it tries to hold the line on salaries -- will be obliged to pay him.

Despite what the talk radio guys say, the truth is that owners can't hold the line on salaries when one or more of their peers are pushing ever upward, for whatever the reason. The economic playing field is altered, blatantly or subtly, each time a player is signed. "We are really dependent on the decisions of our competitors for our own decisions," says Kasten. "A bad contract somewhere means I'm pretty much going to be affected by it."

That point was made all too clear when H. Wayne Huizenga built a World Series champion with his 1997 Florida Marlins. He did it by paying free agents far beyond the market rate for their services. He was single-handedly undermining baseball's salary structure, but he didn't care. The year after winning the World Series, he dismantled the team. Then he sold it. "He consciously undertook to lose $30 million," says Kasten, whose Braves' payroll increased markedly as a result of Huizenga's strategy. "He did it, got what he wanted and got out."

The numbers may not have made sense for anyone else, but they made sense for Huizenga, a fiercely successful businessman who has amassed fortunes in businesses as varied as trash removal and video rentals, and who still owns the NFL's Miami Dolphins and the NHL's Florida Panthers. "Wayne did the most fantastic job financially of anyone in the industry," Tisch says. "He will sell his hockey team in the next year and his football team, eventually, for a big, big price. He will make a lot of money." That's good, because making money is, after all, the point of business.

But professional sports, though undeniably a business, is a different animal. Player unions love to invoke the free market, but they're not working under true capitalistic conditions. If you own a toothpaste company and you corner the market on quality toothpaste, you'll make a killing. If you own a sports team and all the other sports teams -- or even a few of them -- go out of business, not only do you not make a killing, but the value of your own equity plummets.

Once sports teams start to fail, the system begins to topple. "It happened to me with World Team Tennis," says Jerry Buss, who owns the NBA's Los Angeles Lakers. "We were extremely successful and we won the championship, but we looked around one day and we didn't have anybody to play."

So Kasten wonders about the impact a domed baseball stadium in downtown Miami will have on the NBA's Heat, and he frets about the huge mortgage payment the San Francisco Giants have to fork over every year. The teams his teams play against every night are his competitors, but they're his partners, too. "We truly are only as strong as our weakest link," he says.

Sports is different in other ways. If a conventional business is failing, or even if it's thriving, and the owner wants to move it to another municipality, he's free to go to where opportunity takes him. If it's a sports team, the city he's leaving will likely react as if he's selling state secrets to the Russians. What's more, his league may not permit him to leave, even if it's clear that he'd do a far better business in Los Angeles, say, than in Seattle, where Ken Behring was forced to sell his Seahawks when permission to relocate to Southern California was denied by the NFL. "Think about that for a minute," says Kasten. "The notion that someone could have a say on whether a team owner can pick up and move is bizarre in any other setting."

In any other business, you can create a niche product that flies below the radar of the category's gorillas. Not in major league sports, at least not in America. Fans of the Cincinnati Bengals have the same hopes, if not the same expectations, as fans of the New York Giants, even if their market is a fraction of the size and the owner is, by comparison, a pauper. In most businesses, success is gauged by the bottom line on the balance sheet at the end of the year, but sports has two bottom lines. Former San Francisco 49ers owner Eddie DeBartolo won championships while losing more money than any of his peers. He might be seen as a bad businessman, but he can hardly be said to have failed as an owner if winning -- just winning -- is what he set out to do.

"And if you make a lot of money and you don't win," Kasten acknowledges, "you don't get an 'A,' but you're also far from failing." That's his opinion, but how many fans are happy that their favorite team turned a profit when it finished in last place?

There's a wood-paneled, member-only lounge underneath the expensive seats at L.A.'s Staples Center where actors, producers, rappers, rock stars and trial lawyers congregate before, during and after Lakers games, paying a fee rumored to be in five figures for the privilege. "It's the most exciting 15 minutes of sports," says Tim Leiweke, president of the arena; but in Indianapolis or Milwaukee, it would be among the dullest.

"There may have been five or six cities where we could have had the same kinds of opportunities, but unquestionably being in Los Angeles has contributed heavily to our success," says Buss, a former chemist and real estate investor who now lives off his Lakers earnings.

Buss was the first owner in professional sports to sense the revenue possibilities inherent in high-end tickets, and the existence of a client base that wants the view and the visibility of courtside seats at whatever the price. Today, that's an industry given. At Miami's AmericanAirlines Arena, for example, luxury seating is responsible for about three-quarters of the annual ticket income of the NBA's Heat. That's a few hundred seats, led by the $500,000-a-year Starboxes that provide ergonomically correct swivel chairs by the court, far outearning the 19,000-odd in the rest of the building. Suffice it to say that doesn't happen to the same extent in San Antonio.

"There's a difference in the value of franchises that reflects that," says Buss. "When I bought the Lakers in 1979, I paid three times what other franchises were going for. So if they were making x, I always felt that I deserved 3x. That's my main argument against revenue sharing."

His team's market's size and demographics color how any owner perceives the economics of sports. And his lease arrangement may be an even more important factor. If it weren't, Los Angeles would have an NFL team. But when you have enough money that profits become immaterial, you become immune from such considerations, and -- in the minds of other owners -- far more dangerous. "Regardless of how much I make in Los Angeles, I'm not the threat that Portland is, even though Portland is a much smaller market, because of who owns Portland," says Buss, referring to the Trail Blazers' billionaire benefactor, Paul Allen. "I can never compete with him, or with Mark Cuban in Dallas, or some of the others. The salary cap helps, but it isn't really a black-and-white issue, like many people think it is. Portland has nearly twice our payroll. And he can afford it."

Buss has done well enough. He's sitting on the couch in his Spanish-style hacienda, overlooking the ocean in Corona del Mar. It's the house that Kareem built, or Magic; a product of the spoils of six NBA championships during his tenure. "We are the winningest sports team in history, all sports," he says. "The highest winning percentage, and I'm very proud of that. Winning takes an awful lot of my concentration as an owner. Making money probably takes 20 or 30 percent, while the effort to win probably takes 70 percent."

Buss doesn't believe he's any different from the vast majority of owners he has seen come through the NBA. "All the owners, with maybe just one or two exceptions, are the most competitive people I've ever dealt with," he says. "They'll do anything, take any advantage they can, to win. You're talking about a group of people that has been enormously successful. They feel they have the intellectual capability to conquer any field they enter, but that can't happen because you're always going to have a certain number of winners and a certain number of losers. And that irks and irritates these people, so they try even harder."

Buss raises a finger, the academic in him emerging. "Therein lies the secret to the runaway salaries," he says. "Everyone involved wants to win at almost any cost."

Winning and making a good living at it along the way aren't all Jerry Buss wants out of the Lakers. Inside his Staples Center suite during a recent game, a party raged that looked like the election night soiree in the 1975 movie Shampoo.

Warren Beatty and Julie Christie weren't there, but two women named Crystal and Candy were. Both seemed to be in their early 20s, and the outfits they wore made the Laker Girls writhing across the hardwood during timeouts seem like Carmelite nuns. As Crystal and Candy disappeared out the door for a cigarette break, a man holding a glass of Scotch turned to his companion and lifted it high. "Isn't this just the best?" he said, as Ron Harper canned a 15-foot jumper below.

Buss, who is single, wasn't at that game. But he acknowledges that the Lakers allow him to enjoy a lifestyle unavailable to even the average real-estate tycoon. "Owning the Lakers is a tremendous amount of fun because of the prestige and power you have," he says. "Recently, [sprinter] Maurice Greene came to the box. I'd never met him. He says, 'Hi, Jerry,' and I say, 'Hi, Maurice.' Now, that's not going to happen unless you own the Lakers. Lennox Lewis comes in, and he literally lifts me up. That's not going to happen otherwise. And that's a lot of fun."

Buss is a unique individual, dedicated to enjoying his life in a grand manner. He needs Lakers revenue to live, but also uses it to live in the style to which he has become accustomed. At the other edge of the continent, ascetically sipping soup in a boardroom inside his New York office, sits Bob Tisch, a man who is so wealthy that his sports holding would barely register as a line item in a corporate report. A man whose game-day stadium box has the collegial but slightly distracted air of a car in a commuter train.

Tisch shares the National Football Conference champion New York Giants with Wellington Mara. The revenue generated by the team not only isn't critical to him, it's downright inconsequential. He well remembers his mindset when he purchased the team from Mara's estranged nephew, Tim, in 1991: "I bought it because I was able to. I could take the $75 million it cost and forget about it, as if I never had it." Not many team owners can say that and mean it.

Tisch is the cochairman of the Loews Corp., which owns hotels, Lorillard Tobacco, CNA Financial Corp., and much of Bulova and Diamond Offshore Drilling, and has a value into the tens of billions. And yet, Tisch spends more time thinking about the Giants than anything else in his business life. He never misses a game, at home or on the road, and attends practices in the chill of the New Jersey autumn an average of twice a week.

"I enjoy it," he says. "I schmooze with the general manager, I schmooze with the coach, I get ready for Sunday. It's a kick."

More than most, Tisch revels in his membership of the very private club of NFL owners, a group of men (and the Rams' Georgia Frontiere, whose husband, Carroll Rosenbloom, died and left her the team) as stodgy and stratified, in their way, as U.S. senators. The Senate has been called the most exclusive men's club in the world, but there are a hundred senators, Tisch points out, and only 32 NFL franchises to own.

Some of the owners of pro sports teams are, like Tisch, among the shrewdest and most astute businessmen in America. Others, surprisingly, aren't. The NFL, especially, is laden with owners who bought in decades ago when entrance requirements weren't so onerous, or inherited teams from their fathers. Many have no business background, no marketing savvy, no idea how to run a company worth as much as $750 million. Yet some of them still manage to win championships, and still manage to make money.

"Running a sports team isn't brain surgery," says Kasten, who has a law degree from Columbia and a psychology degree from New York University, and has put both to good use in his 22 years in sports. "There are plenty of people that can do it. In fact, almost everything else out there is harder."

If some owners don't win or don't make money, let alone do both at once, it doesn't necessarily mean they're stupid. "They could be brilliant and doing the best they can under the circumstances," Kasten says, and he isn't just being an apologist for his peers. When 14 games are played on a full night of NBA activity, he points out, 14 teams will lose. "And when the year's over, 14 owners are going to be losers. They can all make money and be in the basement, although it doesn't actually work out that way, but they'd rather win than make money, as we've established. So they're failing at their mission, right?

"Is that because they're dumb? Or improperly motivated? Or not rich enough? No, no and no! It's simply the way of the industry, which is different than any other."

Fortunately for the future of professional sports, the correlation between spending money and winning is indirect. If it wasn't, everyone would go bankrupt.

It's difficult to win without spending money, as more than half the teams in baseball have learned, but spending it never guarantees success. Paul Allen has never won a championship, nor Disney, nor Fox. New owners study baseball's Baltimore Orioles or hockey's New York Rangers and take their recent big-budget failures as object lessons in the futility of trying to win by writing checks. Of course, spurred on by fan pressure and a competitive urge that has served them well in other endeavors, they usually end up writing them, anyway.

"In basketball, the team that I own 45 percent of has a higher payroll than the Lakers," Leonsis moaned last January, in the middle of another frustrating Washington Wizards season. "We have three All Stars. We pay a guy $18 million a year and two other guys $10 million a year, and it doesn't make us a better team. So my belief system is, you can't buy your way to success. There's no easy way."

Sitting at dinner one night before last season, Washington Redskins owner Daniel Snyder reacted with horror when his guest, a fan of another NFL team, offered that he would be satisfied with a 9-7 record for the coming year. Snyder had amassed football's largest payroll in an effort to mitigate in advance any excuse his charges might have had for not performing.

"9-7?" Snyder said. "I'd kill myself!"

Instead, the Redskins finished 8-8. "And he nearly did kill himself," says Leonsis.

Snyder has always professed to understand that sports was unlike other businesses. He understands it with his mind, but not his heart. Having succeeded at things he knew comparatively little about, such as direct marketing and product sampling, he assumed owning the Redskins, which he'd dreamed of doing since childhood, would be simple enough. "He's a very smart kid, he made more money on his team this year than anyone else, and I give him a lot of credit," Tisch says. "He didn't run a good team this year, yet he's going to make $50 million, even with all his paying out of money."

But because his Redskins didn't even make the playoffs, Snyder would be the first to say that the 2000 season was a failure. Though he has learned a lesson, of sorts, concerning the inexact correlation between spending and success, he -- like other owners -- will doubtlessly spend again. "If you told them a private plane would win a championship, they would do it," Kasten says. "But what we have to deal with, and I know it as a former general manager, is that I'll have a coach telling me, 'Just this one player!' or 'Get this one assistant, because two wins makes a big difference.' At the end of the year, I added it up; we were going to win 187 games."

No formula exists that guarantees a championship, not buying a plane, a player or anything else. So every owner is free to go about it his own way. "I bristle when I hear people talk about owners who meddle, because that's just not an appropriate thing to say," Kasten says. "What do you mean, meddle? They own it! They're each seeking a way to do the best they can, and there's no one way to get the job done."

Kasten walks the concourse of Philips Arena before a Hawks game, pointing out synergies and profit-making opportunities. The hour before the game can be as profitable as the game itself, he knows. "People don't mind spending money if you give them a good reason to," he says.

When he gets to his favorite example of corporate synergy, he walks in. "This is the Cartoon Network store," he says. "We own the network, and we own the network's characters, which kids identify with. But look what we've done." He reaches into a rack and pulls out a T-shirt. "Recognize this? It's the Powerpuff Girls, but in poses of the Hawks and Thrashers logos."

Like those logos, most of the synergies that smart corporate ownership creates are easily visible to an untrained eye. If a television network owns a team, as many do, it can pay whatever it wants, from nothing to above market rate, for the broadcast rights. And it also prevents the competition from acquiring rights. When Charles Dolan of Cablevision realized that the cost of the long-term rights to New York Knicks and Rangers games exceeded the value of the franchises, he did the prudent thing and bought them both.

Kasten makes sure that Hawks schedules are handed out at Thrashers games, Thrashers schedules at Hawks games and both at Braves games. "If you're a season-ticket holder for the Braves," Kasten says, "we're getting to the point where you understand you are really a season-ticket holder for the Hawks and Thrashers, too, but you just don't know it yet. We're going to find a way for you to become a customer."

Other synergies are less blatant. When Time Warner acquired Turner, it became a piece in a larger empire. The security of corporate wealth enabled Kasten to build an arena with a design unlike any that had come before, with luxury suites stacked virtually floor to ceiling along one side. It also let him retrofit Olympic Stadium into a compact, classic baseball park at a cost of hundreds of millions of dollars. Those were gambles, but Time Warner specializes in gambles. "They do hundred-million-dollar movies that are always gambles," he says. "There's the culture here to make the big play. They've figured out there's more to be won on the upside than lost on the downside. I've felt it with Ted [Turner], felt it with Time Warner, and I feel it now with AOL, which has certainly proven it can make the big play."

If your team has just taken out a massive loan to pay for construction of a ballpark, however, you don't feel so kindly about the backing of a huge corporation that enabled a competing team to do it interest free. Not when you have $20 million or more of annual debt service you're paying -- money that the other team can use to sign players.

"The problem with the corporations is, they can say that the synergistic reasons for buying a team work out for their related businesses, so they don't care what they make or lose on their baseball team," says Peter Magowan, the managing general partner of baseball's San Francisco Giants, who financed his own ballpark without public money. "If they contribute to a competitive imbalance problem by spending umpteen million dollars, who cares?"

Yet corporate ownership doesn't always work. Just because there's a synergy doesn't mean it'll make a profit. Disney owns baseball's Anaheim Angels and the NHL's Mighty Ducks of Anaheim, an expansion team it named after one of its movies. The potential synergies ranged from tie-ins with nearby Disneyland to programming for its ABC and ESPN networks. But it seems that Disney corporate culture wasn't made for running sports teams, which have results even less predictable than entertainment programming. "They'll lose $20 million in baseball and $20 million in hockey this year," says Tisch, who insists that Disney would love to sell the franchises, but doesn't want to admit such public mistakes.

Many companies are keenly attuned to short-term shareholder satisfaction and quarterly profits, and a corporation that won't suffer short-term losses is as inadequate an owner as an individual who can't. "Sports needs long-term thinking," Kasten says. "Sometimes that requires a year when you're going to be down and lose a million or five million, and you have to be able to sustain that. You can't be in a mode where that's a catastrophe and sets off a whole range of emergency measures."

And a corporation, ultimately, doesn't have the heart of an individual. It doesn't have the attachment to a sports team that Snyder does to the Redskins or Magowan to baseball's Giants, having grown up with them, and it probably won't understand the emotion inherent in the industry nearly as well. As a child in Boston in 1967, Leonsis followed baseball's Red Sox as they jockeyed for position in a wild, multiteam race. It ended on the final day of the season with their first pennant since 1946. "That's all anyone was talking about all summer," Leonsis says. "You couldn't get them to care about a new public-works project or the school system or any politician. But Jim Lonborg and Carl Yastrzemski -- they had grandmothers, uncles and everyone else talking. Everyone had an opinion."

Sports teams are both more and less than the mere businesses that many corporations try to make them. Franchises have appreciated greatly over the past quarter century, and even George W. Bush received a return on his brief investment in the Texas Rangers that should shame anyone involved in a paltry get-rich-quick scheme such as Whitewater, but there are usually better ways to amass a fortune.

"I don't think you run a sports franchise for maximization of profit like you do other businesses," Magowan insists. "That's what we're supposed to do, but we don't try to make the most that we can. There are economists who say that the Giants could have made $30 million if they'd had a payroll of $30 million instead of $60 million, because we're going to sell out the stadium anyway. Fortunately, those people are just economists and they're not running the team, because that's not what the community expects."

Leonsis agrees. "I've heard people say, 'If it doesn't work, I'll move the team,'" he says. "That's for people who think it's their team. It's not my team; it's Washington's. If I can't make it here, I'll sell it to someone who can."

Sports teams have almost always ended up as good investments. Their appreciation in value invariably made up for any short-term losses. That may no longer be true, however. "I think franchise prices are as high as they'll get," Tisch says. "What's going to drive them up?"

Not television money, which has increased franchise values in the past. Ratings are down for everything, a function of the multitude of entertainment choices in today's society. Because corporate loyalties are never as strong as the fervor of individual fans, that money is the first to disappear during an economic downturn. Today, even smaller markets such as Denver and Phoenix have four major-league teams, and each relies on corporate spending -- in the form of luxury seats, signage and sponsorships -- to stay solvent. "We have something like 106 [pro] teams," Tisch says. "That's too many. We can't support that many."

In many markets, full stadiums and arenas are now a necessity, leaving no margin for error. In the old paradigm, sports teams needed only half-full venues to make money. Now sellouts are imperative, or the economic models of revenue streams don't work. Putting a shopping center on land you own near an arena is only worthwhile if the team playing there draws enough fans.

At the same time, the era of expansion seems to be ending. Baseball, which had 16 teams in 1960, now has 30. Hockey, which had six teams as late as 1967, now has 30. All four major leagues are at or approaching 32, the magic number for alignment and scheduling purposes. No more expansion means doing without the hefty sums that each new team pays existing franchises to join the league. It also provides fewer opportunities to increase franchise value. If you ordain that the next team into the league is worth $200 million, your team -- currently valued at $125 million -- is likely to appreciate because of the comparison. Without expansion to keep raising the bar, the market will dictate what teams are worth.

It all makes sense. Or, rather, it would if the standard economic rules applied. But it seems there will always be individuals who know that a sports franchise is far from the best investment, but want one anyway. Tisch tells the story of Robert Wood Johnson, who purchased the New York Jets last year. Hearing the NFL had set the value of the team at $625 million, substantially above book value, Johnson didn't flinch. "He wanted it so desperately that when we were at NFL headquarters deciding on $625, he called his lawyer or his accountant and walked back in and said, '$635,' just to make sure he got it," Tisch says.

Even if his franchise never appreciates, Johnson probably won't care. Unlike Huizenga, most owners don't buy teams in order to sell them. They're forced to sometimes by outside events, or when an offer on the table is too big to refuse. But most owners have enough money to live as well as they want to; the sports team is part of the way they want to live. "The other day, AOL stock went up a bunch of points," Leonsis says. "I just moved into this beautiful house. I've got a nice wine cellar and good cigars. I have another house in Florida and a boat and a couple of planes. But I thought about it, and I realized that I'm not really happier than I was before. Then we beat the Flyers on Sunday. Man! All was well with the world!"

Perhaps no franchise has appreciated in value like Buss's Lakers, who play in a state-of-the-art arena that has an array of revenue streams. They have a winning tradition, and a national fan base. If the team were a stock, an accountant might advise him that its value had maxed out. Now, he'd be told, is the time to divest.

"They all ask me why I don't sell the team," Buss says. "But let's say I do sell and get all this money, what do I do then? Probably what I do is sit around and say, 'Now, what can I do to have a really good time?' And the answer is right there in front of me. Buy the Lakers! Because what else can you do with money that's as much fun as this?"


Bruce Schoenfeld is a freelance writer living in Colorado.