Hear What They Are Saying
We host (and attend) a lot of conferences each year, and one thing we’ve learned is that you don’t take success for granted when it comes to putting on an event that you hope will resonate with the people who pay to be there. So it was exciting and gratifying to see the reaction to our inaugural Dealmakers in Sports conference, held Wednesday in New York at the W Hotel on Lexington Avenue. There were heavy hitters on stage and in the crowd, and the overall vibe was of a group of people who know and understand each other, and were willing to talk openly about successes, failures, hopes and challenges, with the knowledge that the people who were listening would get them, and would understand what they were saying. We left the conference feeling that we had found a keeper for our annual event schedule, and that the 250 people in the room would put this one on their calendar for next year.
THE ART OF OWNERSHIP: There are few clubs that are more exclusive than the ownership ranks of the major sports leagues, and everyone in the room was fascinated by the perspective of the owners who took the stage. Here are our main takeaways from what we heard about team ownership:
First, don’t get in to make immediate money or expecting quick cash flow. Get in for the fun, and take seriously the impact that team ownership can give you on your community, and even on society on a national scale. But, do bring your discipline, acumen and approach to the business, and don’t get stardust in your eyes. Almost universally, the owners on stage Wednesday were open about all of the misconceptions they had and the things they didn’t know when they bought their team.
At the same time, owners are bullish on the long-term value of their assets. Many admitted that they didn’t anticipate media rights becoming as valuable as they are, but now they expect to see major disruption, and continued riches, from new media and tech players. Oh, and some admitted that with today’s franchise values, if they were starting again they wouldn’t even be able to play in this big-money market.
With that, let’s break down what else was seen and heard.
MAKING A DIFFERENCE: Rays owner Stuart Sternberg was open about the challenges that his team has faced in the Tampa-St. Pete marketplace. He talked about covering $150M of the projected $800M cost of a new ballpark, and the chance that he could pay even more depending on the support of the business community. But, he said, “I don’t want to build an edifice to myself. I don’t want to put up a building and have it not move the needle for us at all.” Sternberg projected a commitment to success in his market, but he was clear that he wants to see commitment in return.
NARROWING THE FIELD: MLS Commissioner Don Garber gave us some breaking news at the top of his appearance, officially naming the four finalist cities for the league’s two expansion slots. Garber named Cincinnati, Detroit, Nashville and Sacramento, and said officials from those cities will make formal presentations fo the league’s expansion committee on Dec. 6. The league will hold a full BOG meeting on Dec. 14 in N.Y., where expansion will be a topic of discussion.
FATHER/SON STORIES: A rare two-on-one interview featuring Robert and Jonathan Kraft offered a mix of fun storytelling, management lessons and a unique look at two executives who obviously respect and care for each other as family. Among our favorite moments: Jonathan talking about the joy he and his three brothers felt when their father surprised them with season tickets to the Patriots in 1971 and how, afterward, he heard his parents arguing for the first time he could remember... Stories of sneaking out of Hebrew School on Sunday mornings so Robert could take all the boys to Patriots home games and sitting on cold bleachers while enduring one disappointing season after another...The pressure Robert felt in purchasing the Patriots for a then-record sports franchise price of $172M in 1994 and the reaction from his late wife, Myra ...The story of one of the first NFL owners meetings they attended, when they asked for some financial details but were told by one long-time owner that new owners ‘listen, they don’t speak.’ Understandably, there was a bit of satisfaction in Robert’s voice when he added, “Well, we ended up beating his team over the years. A lot.” ... And, finally, the early, tense relationship between then-head coach Bill Parcells and the Kraft family and what they learned in the early years about what it takes to own a successful franchise.
EARLY INNINGS: Who are we to argue with Michael Rubin when he claims that Fanatics, the company he founded, is still only in the second inning when it comes to potential growth? After all, the company has grown from $12 million in annual revenue 15 years ago to $250 million in 2010 and more than $2 billion today. “I consider the industry to be about a $25 billion business now globally,” he said. “How do we figure out how to make that a lot bigger and get a much bigger share of the entire closet? We have verticalized the business, but what we haven’t done yet is materially grow the industry.”
CELTIC PRIDE: Celtics Managing Partner Wyc Grousbeck is a true fan of the team and of basketball, and it showed in his effective, easy interview with Amercan City’s Andrew Siegel. Grousbeck talked about how he risked everything to buy the Celtics, saying he was looking for something to re-energize him after he was bored in his work at the time. “This wasn’t about making money,” he said. “This was, ‘What if I raised a banner someday with my partners?’ It was done with a far different currency. ... It’s turned out to be a wonderful investment. But it was never about (the money).” Grousbeck said he lost 17 pounds while raising money to buy the team. “It was stress,” he said. “I had mortgaged my house. I was using all the money I had.” If it hadn’t worked out, he said, “I wouldn’t be totally broke, but I’d be broke in spirit.” Of course, it did work. And now, “We are a bunch of fans that own the team,” he said. “I feel very lucky to be here and I’m not too sure how it happened.”
THEY SAID IT:
“My jokes are so bad, I have to tell you when things are a joke.” - Grousbeck, on his sense of humor (or lack thereof).
“I like it when people from Harvard work for me, because I didn’t get in.” - Grousbeck, a Stanford Business School grad, with a laugh.
“If we could have stayed in MLS forever, we would have been tempted to do that.” - Providence Equity Partners Managing Director Josh Empson, expressing disappointment that his company sold its investment in Soccer United Marketing, in a traditional exit, despite the success of the partnership.
“I am bullish on the evolution of the industry. ... The form that it will take is far from clear.” - Empson, on esports
“From an investment perspective, a disaster! But, boy, how much fun did we have!” - Seaport Capital’s Bill Luby, on the U.S. ownership group’s tenure running Derby County, which never got promoted to the EPL during their ownership.
“Because the average age of a baseball fan is about 92.” - Luby, sarcastically, on why he is a “hold” on baseball as an investment, even though he’s been an investor in minor league baseball for years.
“It’s fun as hell.” - WNBA Seattle Storm Managing Member Ginny Gilder, on reasons to invest in the WNBA.
“It turns out that raising equity for hockey in North Carolina is a little more challenging than baseball in Texas or hockey in Pittsburgh or just about any sport anywhere.” - Chuck Greenberg, on his group’s attempts to buy the Carolina Hurricanes.
“This is the ninth year of a bull market. But I would ask the question: Does it feel like a bull market? Because to me, it doesn’t.” - J.P. Morgan’s Dave Frame
SEEN AND HEARD: Delaware North Co-CEO Jeremy Jacobs Jr. stopped by the speaker room to visit with the Krafts, who complimented Jacobs on DNC’S TD Garden hosting the New England Museum’s annual award ceremony on Tuesday night. Jacobs also later made a point to visit with NHL Commissioner Gary Bettman before Bettman took the stage for his one-on-one interview with Proskauer’s Joe Leccese. “Oh, I better be careful what I say if you’re here,” Bettman said, with a laugh. “I don’t want you to report this back to the chairman (Jeremy Jacobs/chairman of the NHL BOG).” ... Bettman (Cornell, class of ’74) was greeted by a fellow Cornell alum, Mike French (class of ’76), who co-owns the NLL New England Black Wolves. ... There was a true power group in the speaker room in the morning. At one time spotted together: Lecesse, Garber, the Krafts, J.P. Morgan’s Scott Milleisen and Brian Kantarian, Jacobs Jr. and Fanatics’ Rubin. ... When Garber left the conference, he was off to Toronto for the playoff game between the Crew and Toronto FC before heading on to Seattle for the Dynamo-Sounders tilt on Thursday. ... NLL Commissioner Nick Sakiewicz was chatting and chilling with a few of his team owners at the post-event reception ... DLA Piper’s Peter White walking with Jonathan Kraft and talking about working together on the financing of Gillette Stadium nearly 16 years ago... Among the interesting faces in the crowd was former MLB third baseman Todd Zeile, who played for 11 teams and hit 253 home runs in a 16-season career between ’89-04. Zeile is now the chief business development officer for Bit Fry Game Studios, a N.H.-based video game developer. The emerging company also has the involvement of seven other current and former MLB players and former Red Sox minority owner Les Otten.
VIP DINNER: The VIP/Speaker Dinner was held Tuesday night at Proskauer’s headquarters at 41st Street and 8th Avenue. Guests met on the 27th floor for cocktails, then had a sit-down dinner with fantastic views of Manhattan. On the menu, a salad of little gem lettuce, roasted pear, blue cheese, radish and crisp shallots, followed by a choice of creekstone beef tenderloin with crushed Yukon gold potato and broccolini or grilled swordfish, capers, pine nuts and shaved zucchini. Dessert was a chocolate mocha brule with ginger snap cookies.
SOCIAL ANIMALS: Thanks to everyone who contributed to the social conversation around the conference. Among the tweets that caught our eye:
@joefav: Rare to hear from @WNBA owner "Performance on court dictates how we do at box office." Ginny Gilder @seattlestorm
@sachdev_ananya: @ginnygilder at #SBJdealmakers-“We live at the intersection of sports business at the WNBA. “ #Word. Having been a basketball player myself, this is relatable when you watch women leave it all out on the court! They deserve more.
@BenFischerSBJ: Providence Equity Partners’ Josh Empson playing buy/sell: “Buy the Winter Olympics. Sell South Korea.”
@EricFisherSBJ: MLS' Garber at our #SBJDealmakers throws cold water on potential of US model of promotion/relegation. Would be a lot of fun for fans, but impossible to manage re media rights, stadium financing, player/union issues, etc.