So you think you know Washington’s big-time sports moguls?
Snyder. Leonsis. Lerner.
You probably never heard of Bruce Levenson and Ed Peskowitz, two quiet area businessmen who own the largest share of an Atlanta sports empire that includes the NBA’s Hawks and NHL’s Thrashers and the operating rights to their home, Philips Arena.
I have been bugging Levenson for an interview for years, wondering what kind of business threw off enough cash for them to buy the Atlanta professional teams in 2004. The teams together are worth almost half a billion dollars, according to Forbes magazine.
Now I know where they got the money.
Levenson, 61, and Peskowitz, 65, created United Communications Group 33 years ago. Gaithersburg-based UCG, which has offices from Boston to New Jersey to Singapore, is an assembly of highly specialized newletters and information services that serve health-care, energy, mortgage banking, telecommunications, tax and even the funeral and cemetery industries.
You want to know the price of premium gasoline arriving on a tanker in New York Harbor? UCG’s OPIS division has it. The effect of Hurricane Katrina on New Orleans funeral homes? UCG’s American Funeral Director reported it. The latest regulations on Medicare reimbursement are found in DecisionHealth. The tax pros and cons of homeownership is in their mortgage finance division. They also hold industry conferences in these sectors.
This is very lucrative stuff.
UCG wouldn’t discuss revenue or profits, but it makes a lot of money on these subscription businesses. They earn enough to laugh about a $20 million misfire a few years back when they tried to build “the mother of all petroleum exchanges.”
The company now has about 620 employees, down from more than 1,000 a couple of years ago before it sold some businesses. One respected financial information company, Gale, estimated UCG sales at $463 million in 2008.
“We have had a bunch of home runs,” Levenson said. “We never lost money. It has really been profitable.”
One reason is the culture. There are no business cards. No secretaries. Everyone answers their own phone.
Most of the office furniture is used. I didn’t see any glass-enclosed corner offices, founders’ portraits or plush leather chairs at UCG’s corporate headquarters, which is on the first floor of a nameless office tower in Gaithersburg. I did see some toy models of BP, ExxonMobil and other oil industry tanker trucks.
“In the beginning, all we cared about was the content and the marketing,” Levenson said. “The trappings we didn’t care about. We really focused on those two areas, and that has served us well.”
The UCG founders know a good business when they see one. They love the fact that customers would pay their annual subscriptions upfront, creating tax advantages and “a float,” which allows them to invest the money until the expenses roll in.
UCG began in 1977 when, unhappy at the oil industry newsletter where they worked, the pair decided to start a rival publication called Oil Express. Oil Express began above a C Street liquor/convenience store owned by Levenson’s father. They had no money, worked 70 hours a week and lived on half-smokes and ice cream that the store sold them on credit.
Their first big success came fast when Peskowitz, who had deep contacts in the oil industry, got hold of Texaco’s five-year plan. Soon they had 4,000 subscribers paying $49 a year for their weekly newsletter (the price has since grown to $499).
“It was the biggest scoop,” said Peskowitz. Texaco employees were calling them asking for the plan because it reported that the oil giant was going to eliminate 20,000 jobs.
The story gave Oil Express instant credibility. They used that standing to sponsor an oil industry conference at the Hyatt at Embarcadero Center in San Francisco, which has spawned a UCG conference business that is lucrative to this day.
The next moneymaker began on a Friday afternoon in early 1978, when Peskowitz and Levenson came up with the idea for a decal that gas stations could put on pumps. The decal was designed to discourage motorists from using polluting leaded gasoline instead of the newer and more expensive unleaded.
They charged $1 for a decal that cost them less than a nickel. They sold 1 million in a month, ranging from small orders from mom-and-pop service stations to 200,000 for major oil companies.
The windfall gave them enough breathing room to think about their next business move. They acquired two newsletters that covered the postal and financial regulatory sector that were being sold by a Washington-based company called Computer Data Systems.
It was the Oil Express model all over again.
“We understood the [newsletter] business,” Levenson said. “We were identifying opportunities to deliver information in a variety of formats into a segment we had captured through the newsletter. We started going into other industries and replicating the model.”
Several more hits followed.
When one employee said he could help them provide oil prices to their customers through computers that communicated through telephone hookups, they became pioneers in online content. As the oil price data slowly dribbled across the phone lines, UCG raked in the dough: They charged by the minute.
They repeated that online model with Commerce Business Daily, the shopping list that the federal government sends out to get bids on everything from pencils to jet engines. The CBD online business was a cash cow for Levenson-Peskowitz for almost a decade.
As profits rolled in and the staff expanded, UCG moved to Bethesda, then to Rockville and a couple of years ago to an office park in Gaithersburg, where the company headquarters occupies 60,000 square feet.
Levenson and Peskowitz have loosened their hands-on management style just a tad so they can spend time on their Atlanta sports teams. They have owned 40 percent of the teams and arena operating rights since they purchased them in 2004 from Time Warner. (They have been in a nasty court fight with one of their Atlanta sports team partners for several years.)
The company is very closely held. There is no private equity money. There are no outside investors. They have decided against going public.
The founders plan to stay deeply involved in the business, but they have prepared their next generation of owners for decades. Numbers and acquisitions guy Todd Foreman, sales and marketing wiz Nancy Becker and journalist Dan Brown are all part owners who will someday take over.
Foreman said UCG sold a bunch of companies in 2006 because “it was getting to the point . . . where we want to maximize the value of our assets. We sold some businesses, bought some businesses and, in the future, we are going to do both.”
Levenson prides himself on a relaxed, democratic atmosphere. The informal division of labor makes Levenson the strategic thinker and company voice, while the cerebral, soft-spoken Peskowitz tends to the all-important content.
“There is no bigger voice in the [ownership] room than anybody else,” said Levenson, speaking in a conference room between bites on his sandwich. Behind him is a list that represents his company’s values. The list includes “Partnership Agreement as a living document.” “Lunch together.” “Not all lawyers.” “Collaborate.” “Trust.”
As he explains the list, Levenson says, “We don’t have votes. We don’t have a chairman. We disagree, we debate and then we decide. It really does work that way.”
And apparently, it really does work.
Follow me on Twitter at @addedvalueth.