From Tom Hicks to Jerry Jones to Mark Cuban, Owning a Sports Team Isn't as Easy as it Looks
Psst! Hey buddy, wanna buy a used watch? No? Then how about a broken, if not broke, local professional sports team?
Plenty in stock.
Last December on HBO's failed Joe Buck Live, guest and Dallas Cowboys owner Jerry Jones was asked about his confidence in spending—amidst the worst economic crisis of our lifetime—$600 million of his own money to build Cowboys Stadium.
"Well, to be honest," Jones said, "I'm scared shitless."
To put that in perspective, Jones is in by far the best financial shape of any local owner.
Tom Hicks is suffering a monetary meltdown across the metroplex with the Texas Rangers and Dallas Stars and across the pond with the Liverpool soccer club. Dallas Mavericks owner Mark Cuban is getting sued again, this time not by former coach Don Nelson but by former owner Ross Perot Jr. And prospective, lip-of-the-cup Rangers owner Chuck Greenberg is idling in neutral not because of his debt, but Hicks'.
Growing up, we all answered "What would you do if you won the lottery?" with "Buy a professional sports team, duh." These days the average jackpot wouldn't afford it. Good thing, because it wouldn't be worth the headache.
Jones still hasn't landed a corporate naming rights partner for his new coliseum, and the NFL will likely engage in a work stoppage after next season over a labor disagreement with players. Still, relatively speaking, his house is in order.
"A sports franchise is always a tough partner," Cuban wrote me via e-mail last week. "It's tougher when you have a partner you have zero respect for and whose goals appear to be different than all the other partners."
During his 1996 introductory news conference at Reunion Arena in which he bought the Mavericks from founding father Don Carter, Perot Jr. offered a simple, serious question:
"How many players are on the court?"
Perot Jr. bought the Mavs as a business venture. He wanted a piece of the city's new downtown arena, caring all about his bottom line and little about the team's record. He should get credit for American Airlines Center (and, in fairness, blame for the failed Victory development project), and he made out all right, turning his $125 million investment into mega-profit when he sold the team to Cuban for $280 million in 2000.
Business-wise and being-born-into-the-right-family-wise, Perot Jr. is a genius. Sports-wise, he is a buttoned-up buffoon. Under Perot's leadership the Mavericks were 72-172 and never sniffed the post-season. Under Cuban they have 10 consecutive seasons with 50-plus wins and playoff appearances.
Both are savvy billionaires—Forbes estimates Cuban is worth $2.4 billion, Perot Jr. $1.4—and two of our city's biggest, best and brightest businessmen. But come on, which one would you rather have as your team's owner?
Regardless, does Perot's lawsuit have merit? Is there fire somewhere in his smoke?
He charges the Mavericks under Cuban have been run "in a careless and reckless manner, disregarding sound financial practices" and are "insolvent" or, essentially, broke. Seems crazy, but you probably initially reacted similarly when you heard co-billionaire Hicks' empire could crumble. The lawsuit also claims that under Cuban's direction the team has amassed debt that will this summer top $300 million, and calls for a "court-appointed receiver" to take control of the team.
According to Cuban, there is absolutely "no risk" of insolvency.
I do know that some of Cuban's employees have been asked to take pay cuts in recent years, but it amounts to prudent belt-tightening more than emotional and economic panic. Still, the Mavericks have shown a profit only once during Cuban's decade. How—despite consistent sellouts at American Airlines Center and perennial playoff performances—the Mavericks continue to lose money seems a valid inquiry.
"Because I have lowered ticket prices each of the last five years," Cuban responds. "We have two- and five-dollar tickets, and we do everything possible to keep our prices low. Most other teams look for reasons to raise prices. That plus the luxury tax is why we lose money.
"But, the losses are covered by me. So it's not a problem."
Does Cuban spend money? You betcha. More than $100 million just recently in free-agent signings and trades in a valiant attempt to acquire more help for star Dirk Nowitzki. The Mavericks annually have one of the NBA's highest payrolls, with Cuban undeterred by paying a dollar-for-dollar "luxury tax" for going over the league's salary cap. It's because of Cuban that NBA experts include the Mavericks as a possible destination for free-agent superstars such as LeBron James, Dwyane Wade and Chris Bosh this summer.
With winning as his carrot, money is never an issue to Cuban. That results in debt, but couldn't he cover his team's losses with the change in his car's ashtray? Just as simply—since he owns 76 percent of the team, Perot Jr. only 5—he could buy out his nemesis.
Says Cuban, "The last thing I am going to do is write this guy another check for his shares."
In light of the Mavericks' first-round loss to the San Antonio Spurs and the Spurs ensuing and abrupt dismissal from the playoffs by the Phoenix Suns, if Perot Jr. wanted to allege that the Mavericks were incompetent, he might have a point. But insolvent?
Craziest thing he's said since Carter handed him the keys.
Cuban reminds that if the Mavericks had turned a $1 million profit this season, as a minuscule shareholder Perot Jr. would have "made" only $25,000. He'll likely spend more on attorney's fees filing and following the lawsuit.
"This isn't about money," Cuban surmises. "It's Ross Perot being who he is."
Cuban believes the virtual and legal head-butting is personal; Perot Jr. maintains it's all business.
"It's about the Mavericks, now and in the future," Perot Jr. told the Fort Worth Star-Telegram's Randy Galloway last week. "Mark has got to fix the finances, and he's got to fix the team. What I don't want to see is the Mavericks end up like the Rangers."
Embarking on unprecedented financial trouble for a Major League Baseball team, the Rangers' change-of-ownership from Hicks to Greenberg, which has been on hold for months, now finds itself on the rocks.
Hicks Sports Group—which owns the Rangers, Stars and Liverpool—defaulted on $525 million in loans last March. With unpaid interest, that amount now exceeds $600 million. Not surprisingly, Hicks' creditors—mainly the hedge fund Monarch Alternative Capital—want the most money they can squeeze out of the sale to Greenberg, who is attempting to buy the team along with Nolan Ryan. Because they feel a more lucrative deal exists—via a different ownership group or more money from the Greenberg arrangement—the creditors have yet to approve the sale.
Though it took no official action at its owners meetings last week in New York, MLB will likely this week officially take control of the Rangers. While commissioner Bud Selig could invoke his "best interests of baseball" clause and validate the Greenberg sale, Hicks' creditors would attempt to push the team into court and, eventually, into bankruptcy.
At this point Greenberg still regularly attends Rangers games. But only as a fan.
Psst! Hey buddy, wanna buy a...
On second thought, how about just a ticket to a game?
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