Why Ted Leonsis Is Bullish on Women's Sports

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00:00You were on a panel talking about valuations. What do valuations in sports teams look to you like?

00:07I think right now they're fully valued, but the upside still in sports is I think the tree can

00:17grow to heaven still. And NBA teams are being valued at 8, 10, 12 times multiple on revenues,

00:26not on EBITDA or cash flow. And NHL teams are in the 5, 6, 7 times. But companies like mine,

00:34which are platform companies where we own the teams and the venue and the network,

00:41we get a higher valuation simply because we're in a big market and we can get some synergy by

00:49cross-promoting, having one CFO, one head of marketing for the company. And so right now,

00:58I think we'll do three quarters of a billion dollars in revenues, and we're probably valued

01:05at $7.5 billion. That's impressive. Your business model is actually quite impressive because you're

01:10concentrated, of course, on DC sports team. What's next? What do you want to buy?

01:15Well, I declared my major. I don't want to do a roll-up. I don't want to buy a soccer team in

01:23London. The only thing I'd be interested in buying is what could go onto the platform and where we

01:31could leverage our IP and our infrastructure. So there's two baseball teams in town, the Baltimore

01:37Memorials. David Rubenstein from Carlisle now owns it, and the Nationals. And we've been in and out of

01:47discussions there. And then DC United, which is MLS. And it would make sense to add more scale to our

01:57platform and extend the programming to go from winter deep into summer to fall, especially as you go direct

02:07to consumer with your subscriptions. It costs a lot of money to get a customer. And then if you don't

02:15make the playoffs or you lose in the first or second round like we just did, customers will cancel

02:21because they're not going to be able to watch games until the next season. If you had a baseball team

02:28or a soccer team, you could extend that and you could offer a year-round pass, if you will. And I also

02:35think it's a way to be competitive on the field or the pitch because we're competing, even though we're

02:43a big market, against LA, against New York. And in baseball, the Yankees, the Mets, the Dodgers,

02:50they can spend whatever they want. If a baseball team was a part of our conglomerate, if you will,

02:59we probably could be more competitive and spend to what those big market clubs do.

03:04Going back to valuations, I mean, you say, look, valuations are, I guess, priced to perfection,

03:09but they still can go higher. Why is this? An increased interest in certain sports?

03:13Well, the way our model works is that we sign long-term deals with the bluish chip of companies

03:21and they have built-in accelerators on them. So our latest media deal in the NBA, just round numbers,

03:31this year is the last year of the deal and every team in the NBA gets $105 million.

03:38The deal is for 11 years with accelerators. And in the last year of the deal, every team gets $280

03:48million. So we look like a software or service business. About 80% of our contracts are renewable.

03:59They're on long-term and they're with, you know, Capital One, Amazon, Comcast. They're with blue chip

04:08companies. And so if you look at SaaS businesses, software businesses, they can be valued at 10 to 20

04:16times. We've just gotten to that 10 times multiple. And I think we're even better than a SaaS business

04:25because in Washington, D.C., there won't be another basketball team. There won't be another hockey team.

04:32And so that selectivity, if you will, or that ability to own your market, I think is very valuable.

04:43You've said you wouldn't buy a London football team. Why not? There are so many Americans, actually,

04:48that if everyone in the Premier League who is American-owned came together, you could, you know,

04:54change price caps on salaries and even gains.

04:58Well, I think right now that you can either be in a transactional relationship with your team in

05:05the fan base or a long-term relationship. And, you know, we played a Wizards game against the Knicks in

05:14London. And I looked at a couple of teams and I said, this would be very inauthentic to us. It would

05:22offend our fan base. Oh, I'm going to be spending time going to London. I never played soccer,

05:29football. How many games am I going to get to go to? And I think you walk into a fan base

05:40that's not in your market. That's very skeptical. You're like a carpetbagger, if you will.

05:47And so I just said to thine own self, be true. We want to build the world's most valuable,

05:55most important regional sports and entertainment company. We're in Washington, D.C., a top five

06:01market. We own multiple teams, the venue and the network. And so we'll stick to our knitting.

06:08Even though I like to innovate and be first to market, baseball team or soccer team in that

06:16market would be just fine with us. But if you were to advise maybe an international businessman

06:22or businesswoman who wants to get into the business of sports, where would you tell them to go? Women's

06:27sports? Women's sports right now is the growth stock. In what sport? Well, I'm very knowledgeable about

06:33basketball. And the WNBA is growing very, very fast. We just got a new, very lucrative media deal.

06:42Attendance is booming. And the quality of the game and the way the game is being presented

06:50is now looks like the NBA, if you will, the production value, the level of talent, the coaching.

06:59And so I think that there's a lot of upside still in the WNBA. There's expansion that's been happening

07:07in a good clip. We bring in really, really good new owners. The quality of play in the NCAA is very,

07:14very high. And so if I were right now looking at what would I buy, it'd be a women's basketball team

07:22or women's soccer team. Yeah. And again, does this change with the quality of playing or just

07:27fans being more drawn to these kinds of competitions? I think the media now is given permission

07:36for if you love basketball, it's okay to love women's basketball in the NCAA and women's basketball

07:45in the WNBA. And now there's these other offshoot leagues and they're getting carriage on

07:53on the major network. So the exposure is much higher and the respect that the media is paying.

08:00There's no more. Well, this is they're not really good athletes. I think everyone respects the

08:07quality of play. And, you know, that was all driven by Title IX back in the 70s saying,

08:15you've got to treat women athletes and the women's departments at universities the same way you do the

08:22men. And it's taken a couple of generations, but now it's really, really serious athletes pursuing

08:30basketball. Hockey is going to become a very, very important sport for women. And so if I were making

08:39a bet now, I've said Washington, D.C. should be the women's capital of professional sports.

08:47Right now we only own a WNBA team, but I would look at a hockey team. I would look at professional

08:53volleyball. I would have loved to have bought the women's soccer team, Michelle Kang, who's the

09:00greatest. She owns that. But I think we'll see that core for sport just developing. And the women's

09:10game will be highly compensated, big media deals, well attended. Young girls growing up will want to

09:17aspire to be professional athletes. That spiral is going to go up for a long, long time.

09:24Ted, thank you so much for joining us. Great. Thank you.

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