Case Study: Woody and the Jets The J&J Way
Every time the New York Jets are playing at home, an hour or so before kickoff, Woody Johnson wades across the parking lot towards the football stadium in East Rutherford, N.J. As the team's owner works his way through the sea of tailgaters dressed in green, they stop to greet him. They ask him questions about their season tickets, about the new stadium. He listens. They offer him a burger or a beer. They wish him luck against the day's opponent. He thanks them for their support. Since he bought the Jets in 2000 Johnson has performed the ritual as a way to get a sense of what's up with the fans, his customers. It shows them that they're important. He says it's what his grandfather would have done.
In 1943, just before taking Johnson & Johnson (JNJ) public, Robert Wood Johnson II, Woody's namesake, wrote a credo for the health-care company. The business, he declared, was beholden to four constituencies: customers, employees, communities, and stockholders. Woody Johnson has tried to adhere to that same pledge as he's led the Jets from the basement of the National Football League toward being one of its most valuable franchises. He's retooled the corporate structure. He's installed proven executives in top management. After an initial setback, he's invested in new facilities, which should greatly boost revenue and the team's value. And garnering the goodwill of his most important base, the customers, he recently gambled $12 million to hire quarterback Brett Favre away from the Green Bay Packers.
Shareholders—in this case, that's just Robert Wood Johnson IV, aka Woody, and his immediate family—feel well-treated.
But unless Favre can turn the perennial losers into champs—lifting TV ratings and ad revenue—Johnson could end up with little in return. "If the marketplace is stable, he'll be just fine," says Marc Ganis, president of SportsCorp, a Chicago-based marketing outfit. "If the marketplace comes roaring back, he'll do better than just fine. But if the marketplace continues to deteriorate, it will cause even Woody concern."
A Pricey Purchase
Johnson, 61, has spent a lot to get this far, perhaps too much. In 2000, he paid $635 million for the Jets. The price was more than double what some analysts estimated the team was worth. The club's former owner, oil baron Leon Hess, had never treated the team as a business. Hess kept ticket prices low. He stuck the club with a costly stadium lease and ignored chances to pump up income by marketing the team to potentially millions of local fans. The team's lousy record—the Jets won only four games in 1995 and 1996—didn't help.
A billionaire, Johnson says his reason for paying such a premium was simple: "It was a New York team. When these things become available, you do what you can to get it." The new boss immediately set out to get his money's worth. His first priority was to make winning everyone else's priority. His role models? Johnson mentions Joe Namath, the celebrity quarterback who took the Jets to victory in Super Bowl III. "Here's a guy wearing furs, sunglasses. He's got a swagger," he says. "He guaranteed a win, and he came through." Johnson also brings up Favre and longtime Miami Dolphins head coach Don Shula as others who have that winning confidence. "These are guys you can trust to get the job done," he says.
Johnson then took another cue from his grandfather. Johnson & Johnson had been set up as a collection of virtually autonomous companies. Figuring that a decentralized structure would make everyone from top to bottom feel more in charge, Woody broke the Jets into three smaller entities: stadium, business, and football.
He looked for men with the same drive, and Namath-like egos, to run each. He hired Thad Sheely, a Stanford MBA, from pro basketball's Miami Heat in 2001 to oversee the stadium and related finance operations.
He brought in Matthew Higgins, former press secretary to New York Mayor Rudolph Giuliani, as executive vice-president for business operations in 2004. And he promoted Mike Tannenbaum, a sports lawyer and longtime Jets employee, to general manager of football in 2006. "You can't run a business in Paris if you aren't Parisian," Johnson says, quoting his grandfather. "These are the guys who know the business. They're the experts."
Their workdays are unusually long, because Johnson requires all employees to be active in the community. "It's part of the job description," Johnson says. "It makes us all better citizens." So after hours, executives and players alike often host events for causes like fighting lupus, one of Johnson's pet philanthropies, or childhood obesity.
Long Road to New Stadium
Johnson also has found the Jets something they've never had in their 48-year history—a home of their own. After leasing Shea Stadium from the New York Mets, the team began renting Giants Stadium in 1983. The deal is widely regarded as the worst in pro football, from a renter's perspective. For use of the stadium, the Jets must pay 10% of gross ticket proceeds, or about $7 million annually. What really hurts is that the Jets can’t fully tap into arena revenue—concessions, parking, naming rights, leasing the space for outside events. Ganis says owning a stadium would boost the franchise's value by $500 million.
It has taken the J&J scion a lot longer to build a new stadium than he had thought. He initially proposed constructing a $1.4 billion sports complex in Manhattan, in tandem with the city. But neighbors and other businesses blocked him. After fighting for three years, he conceded and turned to the New Jersey Meadowlands, where he teamed up with the New York Giants to erect and co-own a $1.3 billion stadium next door to Giants Stadium.
Already Johnson has doubled the club's revenue, to more than $200 million. He has had to be creative to get this far. Five years ago, for instance, the team took their radio rights in-house, giving the Jets the leverage to sell packaged sponsorships in radio and TV. Since then, a quarter of the league has copied the Jets, including the Philadelphia Eagles and the Seattle Seahawks. Even so, the team remains in the bottom half of the NFL in revenue. The new stadium will lift it to the top immediately. When the facility opens in 2010, the Jets and Giants will trail only the Dallas Cowboys in value, consultants say. "It will be a life-changer," Sheely says.
New Practice Digs
The stadium isn't Johnson's only capital project. For years, the Jets had practiced at Hofstra University in Hempstead, N.Y., spending about $1.5 million annually for rent, utilities, and upkeep. The team also spent too much time simply reaching the out-of-the-way Long Island facility. After home games, it could take the Jets two hours to get back there, since they had to travel from one side of metro New York to the other. "Opposing teams would get home before we did," Johnson says.
The team now works in a $75 million, 27-acre complex that Johnson built in Florham Park, N.J., 20 miles from the Meadowlands. Higgins was even able to sell naming rights on the new facility to Atlantic Health, creating an annuity that other clubs may try to imitate.
There are subtle tributes to J&J in the combination athletic center/medical facility/head office. Johnson points out the two entrances to the building. At most pro sports headquarters, executives and sales personnel are welcomed through a big, plush lobby, while players and coaches must squeeze through a utilitarian door in the back. "We've made each entrance exactly the same," he says. "Everyone is valuable here."
Hot Commodity: Favre Jerseys
Johnson has spent money for on-field talent, too. In August, the Jets surprised football fans by snaring Favre. Johnson says he didn't know until the last moment whether the 18-year veteran quarterback would accept the Jets' offer. Tannenbaum had pitched Favre on the team's new practice facility, its fan base, and the team itself. Then the club waited for him to call back. "We didn't know what Brett liked and didn't like," Johnson says. "We didn't really know what he was looking for." After midnight, Favre called Tannenbaum to say he wanted to be a Jet. Johnson picked up Favre's $12 million salary for this season, more than 10% of the team's overall total payroll expense, making him the highest-paid Jet by nearly $7 million.
Favre has generated the most excitement about the Jets in decades, and has stolen the spotlight from the Super Bowl champion Giants. Reebok sent 60,000 Favre Jets jerseys into the marketplace. The team sold 3,800 on jetshop.com in the first 24 hours, a single-day record. "Everything that we've been working on for the last eight years is coming into place," Johnson says. The owner feels like one of the Gang Green tailgaters outside the stadium on game day. "I have the same optimism they do," he says. "The Jets are their team just like they're mine."