One Rich White Guy’s Quest for a Pro Sports Team

Mark Goebel

 

What’s a rich guy going to do after he’s made a cool billion or so as private equity honcho or venture capitalist, or sold a business that he started in college for scads of cash, or retired early as a senior executive at a Fortune 50 corporation with a golden parachute?

 

That something new has to be a statement that says, despite his early success and media attention that went with it, he, meaning me, isn’t about to bow out of public life and settle permanently in Palm Beach.

 

The Russians seem to have cornered the market in ultra-expensive penthouses in London and New York and the accouterment that goes with those penthouses (beautiful girls, expensive high-end jewelry, Ferraris, tabloid coverage and body guards). Sounds fun, but so gauche. So, that’s a no-go

 

Richard Branson and his fellow Brits have done well snapping up the world’s most exclusive tropical islands with Boeings to get them there.  Island buying has never been a huge in the U.S.  So that doesn’t make much sense.

 

Sponsoring an America’s Cup yacht at first glance seems pretty appealing. Larry Ellison got a lot of positive press from his team’s impressive “come from behind win” in 2013’s race, securing the Cup for the home team. But, given the low probability of success, high costs, huge lead-time, and a lack of widespread cache, on closer inspection it would be a poor use of my time and money.

 

So what’s a rich red-blooded American with a lot of time and money on his hand supposed to do then?

 

I got it, why didn’t I think of it before. It was right in front of me this morning when I was reading an article in the New York Times about the owner of the Knicks, Jim Dolan, responding to a fan’s critical email by calling him in a return email a pathetic loser of an alcoholic.

 

Man, if that hothead can handle owning a team and not get kicked out of the league for bad behavior, and, on top of it have fun and make money, that’s a gig I want.

 

Who Are These Kings of the Sports Hill?

 

First I’ll do a little research on current owners, see if any of their teams are on the block or rumored to be on the block and, of course, look into the economics of owning a team.

 

Boy these guys (and they are virtually all white guys) are rich. They’re a veritable Forbes who’s who.

 

Wealthiest American Sports Owners

 

Rank               Name                         Worth (billions)        Team(s)

 

1                      Steve Ballmer                        $22.5                           Los Angeles Clippers

 

2                      Paul Allen                   $17                              Seattle Seahawks

                                                                                                Portland Trailblazers

 

3                      Phil Anchutz               $11.1                           Los Angeles Kings

 

4                      Micky Arison              $6.4                             Miami Heat

 

5                      Rich DeVos                $6                                Orlando Magic

 

6                      Stephen Ross             $6                                Miami Dolphins

 

7                      Stan Kroenk               $5.7                             Colorado Avalanche

                                                                                                Denver Nuggets

                                                                                                St. Louis Rams

 

8                      Terry Pegula              $4.6                             Buffalo Sabres and Bills

 

9                      Shahid Khan              $4.5                             Jacksonville Jaguars

 

10                    Ted Lerner                 $4.5                             Washington Nationals

 

All told, there are 21 basketball, 17 football, 10 hockey, and 9 baseball owners worth at least $1 billion, according to my buddies at Forbes, and their combined net worth exceeds $100 billion.

 

And the rest of the gang, meaning those owners with a net worth less than $1 billion, aren’t paupers. So, I’d say that’s a club I would want to belong to even if the price of entry is pretty high.

 

 

Team Values Just Keep on Going Up

 

So, now that I know a little about the people in the club (at least how much they’re worth, and in my world that’s pretty much all you need to you), let’s check out what their golden nuggets are worth.

 

Sports franchise values have gone through the roof in recent years. The massive rise, led by the NBA (values are up 78 percent over last year alone), has been spurred on by the bull stock market, cheap credit, tax breaks, and the continued subsidization of stadium building by municipalities. It seems that rather than buying mansions in Newport, RI or on Long Island’s Gold Coast as the rich did in the last Gilded Age, my fellow plutocrats have decided buying a sports franchise is the way to show that they’ve really made it.

 

NFL

Team Average: $1.43 billion

Total value of 32 teams: $45.7 billion

Top Teams

Dallas Cowboys: $3.4 billion

New England Patriots: $2.6 billion

Washington Redskins: $2.4 billion

New York Giants: $2.1 billion

 

Major League Baseball

Team Average: $811 million

Total value of 30 teams: $24.3 billion

Top Teams

New York Yankees: $2.5 billion

Los Angeles Dodgers: $2.0 billion

Boston Red Sox: $1.5 billion

Chicago Cubs: $1.2 billion

San Francisco Giants: $1.0 billion

 

NBA

Team Average: $1.1 billion

Total value of 30 teams: $33 billion

Top Teams

Los Angeles Lakers: $2.6 billion

New York Knicks: $2.5 billion

Chicago Bulls: $2.0 billion

Boston Celtics: $1.7 billion

Los Angeles Clippers: $1.6 billion

 

The total value of sports franchises in North America’s four major sports (including hockey, which I didn’t break out above in deference to press-shy Canadians) is $115 billion, according to my friend at Forbes.

 

A league of my own

 

So what kind of team should I buy?

 

It seems I’ll probably have to fork over at least $1 billion-and maybe more-for a basketball team-and probably a mediocre one in a small market at that.  With Steve Ballmer paying a record $2 billion for the Clippers, more than twice that was paid for an NBA team before, prices are going to skyrocket.

 

Same with baseball, and once again some deep pockets in L.A. decided to overpay for the City of Angeles’ non–eponymous baseball team, the Dodgers. Again, for $2 billion, and again more than double the previous price paid for a baseball team.

 

What’s in the little water they have left in LA?

 

NFL teams don’t change hands that often.  In fact the league has the most long-term owners by far, some dating back to the 1920s and 1930s when from what I read they were able to buy teams for as little as a few hundred bucks. (Not a typo). In fact there are six owners who bought their teams for less than a hundred grand. Even as recently as the 1970s teams could be had for $10 million or so.  Talk about a great return on investment.

 

Any way, back to today.  According to my research the most recent sales were in 2008 for the Miami Dolphins (purchase price $1.1 billion) and 2102 for the Cleveland Browns (purchase price $1.0 billion).

 

Price inflation clearly hasn’t been tested here, and I don’t think I’ll be the one to kick the tires of a football team in the highly unlikely case one comes on the market. I just don’t think I can afford what would undoubtedly be at least $3 billion for a football team given what NBA teams have gone for lately.

 

Hockey teams seem to be priced right and come on the market fairly often. But, given my general ignorance about the sport and the sport’s lack of cache in the U.S. outside of the Northeast, I don’t think I’ll be holding up the Stanley Cup anytime soon.

 

 

A worthwhile investment?

 

Just what justifies these sky-high prices?  Are teams profitable or should I just consider franchise a trophy prize and hope I break even or don’t lose too much money?

 

Digging a little deeper into the economics of pro sports, it’s clear that the majority of revenue teams generate is from broadcasting rights both national and local.  The NFL is king of the hill having signed deals that brings in the league $5 billion a year.  And that doesn’t include local rights. No wonder the teams are worth so much and stumbling bumbling Roger Goodell is paid so much.

 

The league raked in more than $1.1 billion in sponsorship revenue last year and $1.6 billion in ticket revenue. Tack on $3 billion in merchandize sales and you’re talking about a pretty lucrative business…all told a $10 billion one.

 

Oh the teams have expenses, but with a rock-hard league mandated salary cap it’s not surprising that every team except one (the Detroit Lions) made money with Dallas topping the list with an net operating income of $245 million.  Half the teams had net operating incomes of $40 million or more.

 

You would think that such a ravenous money-making machine would simply want the government to get out of its way. Well you’d be wrong,

 

And it’s not a matter of the government making it harder for those very rich white guys to virtually print hordes of money every Sunday, Monday, Thursday, and an occasional Saturday. No, it seems that the government lends a very big financial hand helping owners minimize their risks and maximize their gains, all courtesy of the taxpaying public.

 

Although it’s tougher to coerce cities to pay the entire cost of building stadiums, they don’t have a problem getting them to shell out several hundred million or so for infrastructure and land.

 

And can you believe it the NFL is considered non-for-profit by the Feds and is tax exempt. That’s the coolest tax break for the rich that I’ve every heard of. 

 

Rich people, especially business owners, love depreciation and the one that applies to sports franchises is definitely a winner from our perspective. It seems that team owners can depreciate a good portion of their team’s purchase price over 10 years. It’s complicated (talk to a tax lawyer), but it has to do with “good will.”  Basically, the law will allow good old Steve Ballmer to write off over 10 years about half his purchase price of the Clippers. 

 

With the cost of franchises going through the roof, we definitely can use a helping hand from Uncle Sam. 

 

Sweet deals. What billionaire wouldn’t want to get in on these government handouts?

 

While baseball and basketball may not be generating as much revenue as football, they are doing pretty well.

 

In fact, baseball had record revenues of $9 billion in 2014 up from $8 billion in 2013 thanks to new broadcasting deals, record attendance, merchandize sales, and corporate sponsorship.  Baseball doesn’t have a hard salary cap like football so player expenses are higher. None-the-less, all but nine teams made money, and other than the Dodgers, who are spending money on players like there’s no tomorrow, their losses were minimal.

 

Baseball has many of the same government benefits as football, so even if prestige-wise football would be the way to go as far as buying a franchise, a baseball team probably could be had for much less.

 

According to Mark Cuban, that things are really cooking in the NBA.  The league just signed a $24 billion ten-year broadcasting contract with ESPN and ABC, had record revenues of $4.8 billion in 2014 record merchandize sales, and inked several very lucrative sponsorship deals. NBA teams have milked governments in many of the same ways their football and baseball brethren have. All of which (and that tax break) may explain Ballmer was willing to pay $2 billion for the Clippers.

 

All but one NBA team made money. The loser, no surprise, was the Brooklyn Nets, wanting to compete with its richer Manhattan neighbor for aging free agent players paid out nearly $100 million in salaries and was saddled with a $70 million luxury tax for going over the league’s salary cap.

 

Unfortunately, it seems like buying an NBA team may be out of my league, even one as poorly managed as the Nets.

 

I almost forgot about hockey. Hum, can’t think of one NHL owner I’ve read about in The Wall Street Journal’s Life and Culture section, saw on TMZ, starred in a movie or reality show, so its seems that group of billionaire sports owners is a bit too boring for my taste. (Sorry Canada.)

 

Well, guess it’s baseball for me as long as I can find an owner willing to sell, a city willing to build a stadium modeled off the Starship Enterprise, and I can change the name of the team to the Vulcans.

 

Oh one last thing before I let you go. I’d like to share with you some of the stories about owners that I heard while traveling around the country:

 

Too Fabulous For Words

Dallas Mavericks’ owner Mark Cuban has appeared in numerous TV shows, including Dancing with the Stars, Entourage, The Benefactor, and WWE Survivor Series. Think he’s starving for attention? Just check out his behavior during a Mavericks’ game.

 

Owners Behaving Badly

Cowboys’ Jerry Jones was sued last year for sexually assaulting an exotic dancer in 2009.

Atlanta Hawks’ owner Bruce Levinson said he would sell his controlling interest in the team following a racially insensitive email he sent to the team’s president.

The aforementioned Mark Cuban has been fined more than $2 million through last year for critical comments about the league, players, and referees.

 

The Worst Owners

What does it take to be considered among the worst owners by Rolling Stone Magazine?  Among other things, hiring and continuing to employ a General Manager with a history of sexual harassment, saddling the City of Miami with $2.5 billion of debt to build a mausoleum of a stadium, and crying like a scorned lover when your team’s best player decides to take less money to play in Miami because their owners were willing to supply him with a supporting cast, then forgetting it all happened in the first place when the aforementioned greatest player since Michael Jordon decides to return to Ohio to win his home city’s first sports title in more than 50 years because you have no shame.

What do Russia’s indigenous people think of Dan Snyder?

Seems Washington’s football team’s owner is good at imitating Russian President Putin.  Dan Snyder sued Washington City Paper for slander for publishing a satirical piece on his tenure as owner of the team.  Since the piece was deemed accurate and this is the U.S. not Russia the suit went nowhere.  Oh, and the aforementioned Snyder, with the continued backing of the NFL, will not change the team’s insulting name despite calls from political and Indian leaders to reconsider.  Snyder topped Rolling Stone’s list of worst sports team owners.

 

Author Bio:

This piece was ghostwritten by Mark Goebel, a contributing writer at Highbrow Magazine,  for an undisclosed rich white guy looking for a new plaything. 

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