00:00 Brian Sozzi
The business of sports has never been better. Women's teams are exploding in popularity and sports betting is changing the industry forever. That, alongside sports teams fetching ever higher valuations for private investors. I want to know what the next big thing is that can shake up sports. And for that, I will be speaking to Ted Leonsis, a tech media industry veteran who has built a sports empire in Washington, DC. His monumental sports and entertainment includes the NHL's Washington Capitals, NBA's Washington Wizards and the WNBA's Washington Mystics, plus the Capital One Arena and Monumental Sports Network. Ted's a busy guy. The whole company is reportedly valued at over $7.8 billion. Ted joins me right now at Invest. Ted, uh, so great to see you. Thank you for doing this again. Talk to us a little bit about the strategy behind monumental and where you are at in that strategy.
01:07 Ted Leonsis
Um, well it's so great to be here and wow, what a lineup of speakers you have. Um, most in the tech business and essentially, I've always looked at our business as being, uh, first AI proof. I think that that's an important thing to mention about sports that we are, we um, we are embracing all of the technologies, but that, you know, you won't be able to replace the feeling of going to a game, uh, with, um, with simulations and AI. There's something about convening and we bring 3 million people, 3 million fans into our arena every year to watch the Caps and the Wizards and Georgetown basketball and and the WNBA Washington Mystics. I basically, I think we're building a SaaS-like business. Um, basically, we, um, we bring in a big, big audience. Uh, we own our IP with the teams, and then we distribute our IP on our own, uh, owned and managed networks, the Monumental Sports Network. Um, when you look at the leagues, we are a global and digital first, um, enterprise. Um, we happen to be situated in a very, very big, important market in Washington, D.C. that goes from Richmond, Virginia all the way to Delaware. It's a 10 million household market. And we think we can build a most important business in Washington, D.C., greater Washington, by combining the technology, um, the outreach from the media side of our business. And at the end of the day, we're about winning sports teams and uplifting our community and I think that's why these teams are valued so highly.
02:44 Brian Sozzi
Ted, you're literally right in DC and of course, we're having an invest the day after, uh, it was signed that the government shutdown, the record setting government shutdown is over. Have you seen an impact from the shutdown in your business? And I'll follow here if I can. Are you tired of these shutdowns? I mean, as an owner of sports teams, you need people in the seats, you need them feeling confident about their finances. I mean, enough is enough already here, no?
03:19 Ted Leonsis
Well, we're a big part of the community and we reached out to many of the government workers and said, um, come to a game on us. Um, here are some certificates to be able to dine. We, um, we gave $100,000, um, last week to one of the local food banks. Um, we, we have empathy and for the community. Um, but yes, I am very, very happy that the political grind on both sides here ended. You know, as we've said and we've reached out to um each White House as it comes in, we're not red or blue, we're red, white and blue, and we're here in service. We understand the central role that we play as owning an arena, um being touching 3 million people physically every year because you know we were um tapped to help host the inaugural um this year. The weather was bad outside and so the president um asked if we would host a lot of the inaugural events and we play a central role. Sports teams, um our media very, very important, but we'll never lose sight of it's our fans and it's our, it's our families uh within the community. And you know, we employ 5,000 full-time, part-time people in this community and so, um, you know, we we feel it every single day. And so yes, I'm relieved that this is past us. I know that it it's only been funded till the end of January. I'm hoping that cooler heads prevail on both sides and that we get back to a more normalized business cadence. I'm certainly, that's why the leagues and teams are so uh valued, right? You know the puck is going to drop at 7:07. You know how many games, you know what the schedule is. There's a, there's a feeling if you will of continuity, of um longevity with the teams and that you know that there's rules and we follow those rules and the fans um rely on us to provide them that kind of um semblance of normalcy every day.
05:32 Brian Sozzi
Ted, this shutdown debacle, is this the opportunity where you say to your team over a drink, over dinner, whatever the case may be, hey, uh, look, I I want to buy another team, but maybe we just do it outside of DC?
05:43 Ted Leonsis
No, I'll never go outside of Washington DC. I don't think that's a a good strategy for for us certainly. Um what we we need is scale. Media companies, technology companies, the ones that build great value have scale and they get some leverage in their business. And we're able to do that by being in our market. Um the way the league rules are written, you know, we're the only basketball team, we're the only hockey team, we're the only women's team in this community. Um there's two baseball teams with the Baltimore Orioles and the Washington Nationals. And um, you know, being able to provide year round programming on one network, uh being able to leverage your ad serving technology, being able to, um being able to focus the organization to get scale and to be able to repurpose the dollars in the right way for these um payrolls for each of the teams, I think is going to become very, very important. How are we going to compete in DC with LA and with New York? Um those two teams, those two markets are 10% of the overall market. And so we want to fight above our weight class, and I think having that concentration in one media market, um that's certainly enough for me, um it's certainly enough for our fans and we want to be able to build Washington DC as a world-class district of champions. Our our mayor is very, very committed to that. Uh we're spending over a billion dollars it looks like now on uplifting our new arena. The city is our partner in that endeavor. Um these are very, very big bets now that you have to make. Um not unlike what you're seeing in AI. You you need to get scale, you need to be able to work with the government, you need to be able to work with um the utilities. We're very, very focused on how our city, you know, through traffic mitigation, through public transportation, how we can all work through that. And the city wants our arena to be the new front door for downtown DC. We have to find ways to bring the 30 million tourists that come annually to Washington DC. We're all focused on in July of this year, it's our 250th birthday, how will we be able to mash up and integrate and bring tourists into downtown, how will we be able to showcase Washington DC as a great city around the world. So, you know, I understand the social responsibility that we have in owning and leading these sports teams. And I also understand how important a role we play for the leagues. The, you know, the NBA is a $100 billion plus enterprise right now. I'd say the NBA, the NFL are the most valuable sports brands around the world. Our commissioners are like CEOs if you will of $100 billion enterprises. So these these have become very, very important assets, very important businesses. But at the end of the day, the fans only care about, are you winning? Are you competitive? Can you win a championship? Can you bring the city closer together through winning sports teams?
09:20 Brian Sozzi
Ted, since we last spoke, there's been several sports gambling incidents, NBA, MLB, players betting on sports. As an owner of several teams, how how concerned are you that the integrity of these leagues has been compromised and then what have you told your teams?
09:48 Ted Leonsis
Um well, certainly we've been um front and center in the movement of regulating sports. Um, you know, all of this happened in Washington DC through in Washington DC with PASPA. Uh Governor Christie was really a central mover on that and the Supreme Court ruled that you could have legal gaming and gambling. Um a lot of new tech companies emerged. Some of those we were investors in like a DraftKings, like um, like um Sport Radar. And the overall feeling there was that there was a hundred billion dollars of illegal gambling being done. And if you could bring that gaming into the sunshine and you could regulate it and you could tax it and you could take care of people who were having issues with if they had a gambling addiction that it would make this look and feel kind of like Wall Street, right? Where you have an SEC and everything is regulated and the technology really is a way to be able to find when there's flaws in the system. That's what I think just happened. I think that the leagues were able to self-report and able to look at anomalies in um in gaming and gambling and that the system worked. Now, unfortunately, because it's such in the spotlight, um, you know, what happened a couple of weeks ago, it shook us all to the core because fans need to trust that they are seeing real-time competition and that the outcomes are fair. The outcomes are based on the talents of the franchise and the players and the coaches and that everything is on the up and up. And so I think the way our commissioner and the league responded in the NBA was totally appropriate. But I want to remind everybody, it was our technology that was able to find it and that sports gaming is really moving into the class like Wall Street is, where you can find something that's happening that is um untoward. Um another part there with the gaming um issues in the NBA had nothing really to do with us and that was the poker games that were being played. Unfortunately, a couple of our former players and a and a coach had some kind of involvement there but it had nothing to do with, you know, the actual game itself. So we take this very, very seriously, but this march towards AI, this march towards um much stronger analytics, um I think um has proven to be uh a great prophylactic in the future and certainly the players have to be warned that um, you know, this is this is unacceptable and you'll get banned for a lifetime. One of our players um who got caught a couple a year ago, he's banned for life. And the dollars that are getting paid to the players is so dramatic. I think that that should be a fair warning to everyone to uh play within the rules.
13:17 Brian Sozzi
Ted, do you as an owner, do you have to put in new protocols for players? Like how do you is there a way to spot this before at the start of of it potentially even happening?
13:24 Ted Leonsis
Yes we we do that every season before the season starts, we have training. We explain to the players. There's signage everywhere and it's not just for the players, it's for everyone in the organization, especially about insider information. Not unlike, you know, not unlike what every company has to do that's going public or about to IPO. You have to treat that information and knowledge as sancrosanct to the the integrity of the game. And we cannot ever lose trust. If you lose trust, the fans can't love you. And um so when a thing like this happens and it happens every day basically on Wall Street, right? It's just not publicized in in this way. And I think over time that's how it'll be um in sports that you know, you get caught, bang, you're you're out. And um, you know, the players I think will really, really understand. Now, the leagues are smart and, you know, I think what baseball just did with the prop betting around pitching and changing it and going to the partners and saying, we don't want, we don't want this kind of prop betting to be acceptable anymore. Um, you know, we'll iterate all of the time. We're in partnership. You know, these gaming companies have become one of the largest advertisers in the media landscape and they're working with the NFL and the NBA and the major media networks. They're working with the RSNs. And so we're in it together and no one wants to do anything that strikes at the integrity of the game because viewership would go down. Fans would stop coming to games. Um and so, so we're we're all in this together to uplift and have the best competition, the best state of play and to find ways through technology for the fans to have these rooting interests. Um certainly the level of engagement and viewership is increasing and a big part of that is because fans, especially younger fans, can use technology and some of these gaming technologies through fantasy gaming and through legal sports betting to enhance their fandom.
15:52 Brian Sozzi
Ted, lastly, I didn't get to ask you this last time we talked to my podcast, but I figured since I have you now, why not? Uh, given the valuations we have seen, I mean the Lakers fetching about a $10 billion valuation, valuations up across the board for sports teams. Is your end game an IPO and an IPO within the next 24 months?
16:11 Ted Leonsis
Um, it's not an end game, but I I am operating our company and I think some other, if you will, central companies like us as if we're a pre IPO company. We have to make sure that um once you bring in big investors, uh be a sovereign wealth fund, be it a private equity fund, that you're going to have to have some kind of preparation to get people liquidity, get investors liquidity. And we're a, we're an interesting industry in that we would have strong retail following, um fans of the team itself, and you would also have strong institutional coverage because we're like a SaaS business. 70, 75% of our revenues is repeatable. We look like salesforce.com or Oracle if you really drill down into our business model where we have 3%, 4%, 5% escalators every year. We have long-term 10, 15 year contracts with our big um big partners. And so these are very, very um important strong businesses, but to date, there's very few public companies and the ones that have gone public are undervalued. And so we we have to right size and retrain Wall Street and retrain who's going to cover us uh because like the Knicks and the Rangers and MSG or public company, it's built into four separate companies, it's way undervalued. Same with um John Malone's Liberty Media. It's a confusing tracking stocks in the like and I think over time we'll have some pure play sports tech companies like ours that are understood and valued appropriately and they'll be valued on their top line growth, on their cash flow, on their Ebitda, but we will look like a salesforce.com or a Oracle and when we get those kinds of multiples, yes, I I would be interested in taking the company public for the benefit of our, our partners, our fans and give everyone the opportunity to share in the value creation that sports and technology are driving.
18:27 Brian Sozzi
One of the most passionate owners in the game, Ted Leonsis, thank you for always making time for Yahoo Finance and me. I really appreciate it.
18:35 Ted Leonsis
Thank you. Great to see you again.
18:37 Brian Sozzi
Thank you.