business

The Owner's Box Gets Wired

High-tech wealth begins pouring into professional sports

What's left in life once you've created a billion-dollar brand, built the 10-bedroom mansion, had the 2.1 children, and endowed the technology chair at your alma mater? For a dot-com tycoon, the answer, increasingly, is: Splurge on a sports franchise.

Techies are pouring money into pro sports in a major way--even buying an entire league. Computer Associates International Chairman Charles Wang, who nabbed hockey's New York Islanders in April, is the latest addition to a list that includes Microsoft co-founder Paul Allen (Portland Trail Blazers, Seattle Seahawks), America Online exec Ted Leonsis (Washington Capitals, Washington Wizards), Web marketer Daniel Snyder (Washington Redskins), Broadcast.com founder Mark Cuban (Dallas Mavericks), and software designer Chris Peters (Professional Bowlers Assn.).

Now that they're in the game, how are these entrepreneurs changing the rules? Many are capitalizing on message boards, chat rooms, e-mail, and the like to boost their fan bases. And their influence is spreading. In a nod to Net fans, the NBA's Vancouver Grizzlies, for example, occasionally designate a section in their arena for regular visitors to the team Web site.

Next question: As the power of the Web grows, will these owners find ways to turn team sites into profit centers selling everything from tickets and T-shirts to team-sponsored Net access? Some predict big revenues, but "there's a vanity to that," says John A. Moag, managing director of Legg Mason Inc.'s sports industry group. "You have to give credit to the existing sports professionals out there who've been trying every trick in the book to put new bodies in the seats. Just because someone has been in the Internet business doesn't automatically mean they've figured out new revenue streams."

Try telling that to the dot-com guys.

Call Me Mr. E-Mail

Know this about Mark Cuban. Despite the dreamy predictions of a sports world in the throes of an Internet revolution, the tech billionaire-cum-owner of the NBA's Dallas Mavericks isn't one to speak his mind.

More often, he types it.

For this article, like other recent ones about him in the national press, Cuban declined to be interviewed in person or by telephone. "Best is to answer question via e-mail. m" he tapped out in the first of a series of electronic exchanges.

The next day, he was holding firm. "What is the problem with e-mail?" Four days later, he dashed off a new message restating his opposition to phone and face time: "It's time to try something different."

Having given not one inch, Cuban got his wish--a list of e-mailed questions to which he responded promptly and thoughtfully. So what's the big deal, ask his NBA colleagues? "We communicate 99.9% by e-mail," says Commissioner David Stern. "That's his style. I get a kick out of it. Half the time, I'm online at the same time and bite back."

Although Cuban posts his e-mail address on the Mavericks' Web site (mark.cuban@Dallasmavs.com) and figures he has responded to 5,000 messages since buying the team in January, he is no keyboard recluse. Cuban is a boisterous fan, but he'll need to do more than hoot for the Mavs. The estimated $280 million Cuban paid for the team is "at the upper end of the value spectrum," says Dean Bonham of sports-valuation experts Bonham Group in Denver.

So between games, Cuban plots ways to make his down-and-out franchise move at Net speed. But the swift can get burned. Nudged by Cuban, the team acted too fast this season in signing bad boy Dennis Rodman. The Worm lasted all of 12 games.

Off court, Cuban, who amassed his fortune at Broadcast.com, the company he co-founded and later sold to Yahoo! Inc. for $4.9 billion, is the prototypical man in a hurry. It's nothing for Stern to have an e-mail from Cuban waiting for him in the morning. "With Mark, there's a complete sense of the importance of doing things in Internet time, which is now," says Stern. "So if the plane that Mark's team is on gets stuck on the runway at 2 in the morning--guess what?--there's an e-mail sent at 2:29."

"That is working in real time," Cuban typed in an e-mail missive. "No meetings, no B.S., get to the point, get the solution, move forward as quickly as you can so you can get results while the other guys are still scheduling a meeting."

For all his New Wave thinking, Cuban has surprisingly conventional ideas about how to build his business. While team Web sites may be money machines of the future, his focus is filling seats in the Mavs' downtown arena and, in the 2001-02 season, the $300 million, state-of-the-art American Airlines Center in which he has 50% equity. "One thing that 99.9% of Internet-related companies don't do well is sell," types Cuban, 41. "They forget that without revenues, they won't survive. The same applies to an NBA team....[I]f you look to the Web as a salvation for an inability to sell tickets and advertising the old-fashioned way, you are in deep [trouble]."

Stern jokes about the NBA's good fortune in having an Internet brain of Cuban's size. "It's good to have one in-house," smiles the commish. And Cuban, with a slight swagger of his typing fingers, agrees. "I focus a lot on knowing what is happening technology and businesswise in the Internet space....What business models work and don't work. What Internet companies are real and which are VC fantasy games...."

But Cuban argues that the most important consulting role he has played thus far has been as Net adviser, saving players from hollow deals and Web charlatans. "They all read about the Internet riches, they see what I have, and, of course, they want a piece of it. It's the NBA version of Who Wants to be a Billionaire," Cuban notes. "I have spent a lot of time warning people that these are mostly get-rich-quick schemes."

If you're really looking for a way to make a killing, Cuban offers this suggestion: Go work for the Mavs. "When we sold Broadcast.com, we created more than 300 millionaires. I'm more proud of that fact than any other. For the Mavs, my hope is that everyone in the organization makes ungodly amounts of money as well. From the receptionists, to the sales people, to the front office." And maybe the owner himself.

Life After Microsoft

For most of his working life, Chris Peters was a bookish Microsoft techie who dreamed up indispensable office software like Excel. Now the self-effacing computer whiz has taken on a very different challenge. In March, he and two friends with high-tech fortunes of their own purchased the Pro Bowlers Assn., hoping to use their Net savvy to restore the league to its former glory.

Talk about 7-10 splits. The PBA and its weekly tournament circuit, the Pro Bowlers Tour, have been in a ratings decline since the 1970s, when legends like Earl Anthony and Johnny Petraglia were mowing down pins and Chris Schenkel was the voluble voice of the lanes. In those days, ABC's weekly bowling shows reliably pulled in a Nielsen's rating of 8. As of last year, CBS' tour coverage had slipped to a 1.3 rating.

Enter Peters and partners Robert Glaser, CEO of RealNetworks Inc., and Mike Slade, former chairman and CEO of Starwave Corp. The fortysomething tech stars bought the PBA for roughly $3 million, plus an additional $1 million they'll post as prize money for coming tournaments--less than the going rate for some minor-league baseball clubs. "I feel very humbled," says Peters, 42. "The PBA is not a toy. It's something I'll have to work very hard to be successful at. It's a 100-year-old sport, a 42-year-old pro league, and a sport that means a lot to millions of people."

And not only in America. Bowling has a global audience, with pockets of rabid fan interest in Japan and Korea, where U.S. bowlers are mobbed for autographs. Of a half-million hits that the PBA Web site gets each month, 30% are generated by fans living overseas.

The PBA's current status as a nonprofit has made it difficult to spend liberally on marketing or to pump up its tepid Web site. Peters hopes to convert the PBA to a profit-making enterprise and then roll in major changes, leading with an overhaul of its cyber-strategy.

One futuristic idea that Peters has: Webcasts of early rounds of PBA events in which cameras would be trained on three dozen bowlers simultaneously. Visitors to the site could choose any bowler in the field to watch--their favorites or an unknown closing in on a 300-game.

That kind of high-tech ingenuity has impressed veteran bowlers and earned Peters, a newcomer with no experience as a sports promoter, a warmer-than-expected welcome. An offer to make many bowlers his partners--by handing them stock options when the PBA becomes a for-profit enterprise--also helped. "If there were any concerns about where our best interests lie, they ended there," says Chris Barnes, 1998 PBA Rookie of the Year.

Until recently, Peters never thought about investing in a pro sports venture and, before 1998, had only a passing interest in bowling. That year, he took a leave of absence from his job at Microsoft and began getting serious about the sport. His father had been an avid bowler, and Peters decided to put some time in at the alleys. "When I left Microsoft, I had two goals: bowling 200 and winning a bowling trophy," says Peters. In eight months, he had bagged the 200 game. ("I'm a slow learner, most people could have done it faster," he wisecracks.) Peters even played in a national amateur event, finishing a respectable third.

Does the new PBA owner think about qualifying for the tour himself? "I can't play with these guys," he says. "They're inhuman in their ability."

The NHL's Prophet?

It was the final night of the Washington Capitals hockey season, though Ted Leonsis didn't know that. The first period of a nip-and-tuck game against the Pittsburgh Penguins had ended and rather than remain cloistered in the owner's box with pal and business partner Michael Jordan, Leonsis slipped away to a paneled conference room in the bowels of the MCI Center.

In seconds, the Caps majority owner was hunched over a laptop, stroking his goatee, and pecking out correspondence with two index fingers. A camera crew trundled in and, suddenly, millions of Caps fans were sharing in one of the more improbable scenes of the National Hockey League season: a team owner duking it out in an Internet chat room on live TV.

The chat wasn't all about stick work, either. "Somebody just asked if I...would go out with Anna Kournikova," Leonsis announced, half-embarrassed. "My wife's here, and she's better looking."

ON TARGET? Welcome to the new, connected world of sports ownership in which Leonsis is a leading impresario. Some may sniff at his showmanship, which this night included a jaunty pregame stroll through the arena concourse to greet startled fans and sign autographs. But there's little doubt that the gregarious tycoon is intent on harnessing the Web to turn on Caps fans. "Ted Leonsis may be the prophet who leads the NHL out of the wasteland," says valuation expert Bonham. "He's a guy who understands the potential of the Internet and is going to exploit it."

When Leonsis, president of AOL Interactive Properties Group, and partners Jonathan Ledecky and Raul Fernandez bought the Caps last July, they mapped a strategy to turn around the money-bleeding franchise in three years. They're on target, Leonsis says, even after losses estimated at $10 million to $12 million this season. That's on target?

The team is closing the gap fast, says Leonsis, who says revenues grew 25% this year while losses shrank 50%. Leonsis slashed the player payroll this year--while producing the second-winningest team in Caps history--and dramatically boosted season-ticket sales, more than tripling the number of Caps full- and partial-season ticketholders.

Leonsis, 44, has left the most fingerprints in cyberspace. In the past year, he has transformed washingtoncaps.com into a hockey bazaar where aficionados go to discuss yesterday's short-handed goal and tomorrow's snow report from Calgary. He has added AOL features like chat rooms and messages boards where fans speak directly to their skating heroes--they hope. The players often don't respond, despite frequent nudges from Leonsis, who presented each with a laptop computer and AOL account.

The owner himself has, by his reckoning, responded to some 10,000 messages. He answers before 6 a.m., at lunch, and in the middle of the night--including holidays. On Easter, a fan who attended the Caps' final game sent a brief message congratulating Leonsis for having received a bigger cheer when his picture flashed on the arena scoreboard than when the camera was trained on Jordan. It took Leonsis all of 94 minutes to fire off a brief but personal reply: "If that is so, I am honored.--Ted."

For Leonsis, the goal is to gather an Internet audience too large to fit into 500 MCI Arenas. In three years, he foresees the site generating more money than his local TV contract, which pays an estimated $8 million. Already, corporate sponsors on the Caps Web site include Nortel, Travelocity, Motley Fool, and Amazon.com. "The hockey demographic is a dot-com advertisers' dream: young, suburban, educated, and already using computers," Leonsis says.

"REAL THING." So far, Leonsis, who also owns 44% of the NBA Washington Wizards and the MCI Center with partners who include Jordan, has played a behind-the-scenes role in advising NHL Commissioner Gary Bettman on leaguewide Internet matters. "Consultants are great, but I got the real thing," gushes Bettman. Still, the Caps owner has served notice that he will be more outspoken if the league were to consolidate Internet rights--the model used by the NBA and Major League Baseball. "The only way to build a community of interest is to be in contact with it," Leonsis says. "What people do in Dallas is different than what they do and like in Portland and Manhattan. I don't see how you build a local passionate community of interest with a centralized [authority]."

Already, Leonsis has run afoul of an NHL policy banning the sale of merchandise on team Web sites. He claims he thought he was living within league strictures when he cut a deal with an advertiser who sold Caps clothing on the site. "The line between what is advertising and what's e-commerce is very blurry," he says. Clearly, Bettman and Leonsis will talk again. Probably via e-mail.

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