Net moguls snap up sports teams
May 21, 1999
by James Ledbetter and Steve Viuker
(IDG) -- Playoff season in the National Hockey League is known for an often lugubrious pace, but this year it's been spiced up by the sudden onslaught of Internet executives.
On May 12, America Online interactive group president Ted Leonsis purchased the Washington Capitals hockey team in a deal reportedly worth $200 million.
About the same time, it was widely reported that Broadcast.com executive Mark Cuban is backing a group that is trying to buy the Pittsburgh Penguins. And Net players are interested in football as well: Interactive ad executive Dan Snyder, whose Snyder Communications recently announced a tracking stock for its Net properties called circle.com, is the leading candidate to buy the Washington Redskins.
Maybe the trend is nothing more than a natural, boys-will-be-boys extension of the Internet's newfound wealth (a perception Leonsis fed when he said that one reason he bought the team was "because I can"). But is the attraction greater than that? Are there specific strategic overlaps between Internet companies and sports franchises?
It's not far-fetched: both professional sports and Internet companies serve heavily male audiences concentrated in the 15-to-35 age group. And moguls from more traditional media companies have long argued that sports teams enhance news and entertainment properties, whether it's Time Warner/Turner (Atlanta Braves and Hawks), Murdoch's News Corporation (Los Angeles Dodgers), or Disney (the Mighty Ducks and Anaheim Angels).
To hear Leonsis tell it, the fit between the Internet and a hockey team is natural. "When you're young and you buy entertainment-oriented businesses, you do it so you can package them in a way that enhances their value," Leonsis told The Standard. "I've always believed that to build the Internet you build a community of interests. Then you supply content to strengthen the sense of community - and a hockey team is content."
Cuban agrees, calling a sports team "a great testbed for digital enabling of content in unique ways...I would make everything that I could accessible to fans, try to create as much interaction between fans, the team and players and try to figure out new apps as well."
Some sports world observers think that Internet moguls have an expansive vision to push Net businesses to high-end sports fans. Although the Capitals purchase was financed by Leonsis personally and not by AOL, Bill Dorsey, executive director of the Association of Luxury Suite Directors, assumes that AOL will want to place itself before the fans.
"You can have an AOL presence in the suites and promote it in other areas of the arena," hypothesizes Dorsey. "The suite consumer will have more amenities than ever before: on-line dining options that will allow the patron to order via the Internet before arriving at the event; hi-definition televisions in the suite; e-mail access and what are called 'smart seats,' which allow the patron to view replays and even gamble. Ted Leonsis is perhaps involved in a different media than is a Ted Turner or Rupert Murdoch,but the synergy is there."
Leonsis insists that his agenda, at least for the moment, is more modest, pointing out that he will be a minority partner in the Capitals' arena - the MCI Center - until the current owner decides to pull out. "One day when he's ready, then I can think about deals like that," Leonsis said.
In Cuban's case, the synergies may be more immediate. Cuban confirmed to The Standard that he is involved with Mario Lemieux's bid to buy the Pittsburgh Penguins hockey team. Although the Penguins made the NHL playoffs this year, their franchise is in danger of losing its National Hockey League affiliation if it does not find a viable way out of bankruptcy.
Cuban's attraction may stem largely from the fact that he grew up in the Pittsburgh suburb of Mount Lebanon. But a major part of what made Cuban's Broadcast.com into a business worth billions (at least to Yahoo) is its use of the Web to broadcast sporting events. Owning a professional team could, sports analysts say, be Cuban's first step toward building an Internet sports broadcasting network. Broadcast already has the live-game Net audio broadcast and video highlight rights to NHL games and playoffs through the 1999-2000 season, and a similar agreement with Major League Baseball.
Adding a team and a stadium could give Cuban and Broadcast substantial leverage in future negotiations with professional leagues. But Cuban cautioned against any hypothesis that he has a grand Internet broadcast scheme, saying: "That would get awful expensive."
It's likely to be a long time before managers start trading players over eBay. In the meantime Internet executives accustomed to thrice-annual stock splits and zooming valuations may find the very down-to-earth sports business a terrific cash drain. But there's always Leonsis' bottom line evaluation: "Your kids think you're really cool."
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