By Thomas Heath
Washington Post Staff Writer
Monday, January 17, 2011; 16
Ted Leonsis assumed ownership of one of the NBA's most woeful franchises when he bought the Washington Wizards last June from the estate of the late sports entrepreneur Abe Pollin.
Six months later, Leonsis, who served loyally as Pollin's minority partner for more than a decade, is integrating Pollin's assets into Monumental Sports & Entertainment -- and building what he says is an enterprise nearing $1 billion in value, one he hopes one day will rival New York's Madison Square Garden and Los Angeles' Staples Center as a dominant regional sports enterprise.
The former AOL mogul already has made hundreds of decisions designed to change the Wizards from a money loser ($12 million in fiscal 2009) into one of the NBA's high-performing and most profitable franchises, boosting the value of the Verizon Center in the process.
There are obvious changes, such as installing cupholders in the bathroom and sending concession vendors into the stands. Then there are not-so-obvious changes, such as reorganizing the ticket and sponsorship sales staffs, hiring a new head of security and remodeling an owners' club for high-rollers.
"We've had a major cultural shift from being an insulated executive team to being an executive team that really, really feels it's in service to customers, who give us their time and a lot of money," said Leonsis, who has instituted a concierge service for his top-paying customers. "It's the way we are treating our very best customers, the amount of communications, services we offer, access they have to me. We wine them and dine them every day."
In addition to smart marketing and more handholding for customers, Monumental believes a disciplined businesslike approach will do for the Wizards -- who have not won a division title in 32 years -- what Leonsis & Co. did for the Capitals, transformed from an also-ran into the hottest ticket in Washington.
But Leonsis has yet to win a championship, which Pollin did with the then-Bullets in 1978.
"Ted and [Wizards General Manager] Ernie Grunfeld's greatest challenge is going to be earning back the trust of the fans," said Joe Schreiber, who has followed the basketball team for years as a fan and as a former producer for the George Michael Sports Machine. "I was stunned to see how dead the building was for some of the recent weekend games. They must purge the team of any knuckleheads to get the fans to stop saying, 'They're the same old Wizards.' "
Leonsis and his investors began dismantling the Wizards almost as they negotiated to purchase the team following Pollin's death more than a year ago, trading expensive stars such as Antawn Jamison, Caron Butler and Brendan Haywood. Last month the team unloaded Gilbert Arenas, the highly paid guard who was suspended by the NBA last season after bringing handguns to the team locker room.
"The Wizards waited too long to realize that it didn't have what it takes to win a championship," said Leonsis, who has publicly said the Capitals will make the playoffs the rest of this decade and eventually win a Stanley Cup. "It's hard to say, 'Let's blow this up and start all over.' My reaction is: What are we fearful of? We have to take that risk. The Wizards with Gilbert Arenas and Antawn Jamison were pretty good but this year's rebuilding team is probably going to win as many games as the last two years' teams won."Integrated business model
While he recrafts his team and builds the game experience, Leonsis has also recruited new investors into Monumental, boosting the number of partners to 17. The entire enterprise, with more than $100 million in cash on hand, expects to break even this year.
Dick Patrick, Monumental's vice chairman and chief operating officer, said Monumental is changing the Verizon Center and the Wizards physically, organizationally and culturally.
The physical changes include simple additions, such as painting the arena stairs, and more high-tech ones, like installing fancy lighting to enhance the game experience. Leonsis has insisted on a maniacal pursuit of cleanliness, which is apparent to longtime fans.
Patrick is in charge of all day-to-day business operations, from ticket sales to corporate sponsorships, to create an integrated business model that can match the practices of any teams in the NHL, NBA or WNBA. Leonsis has elevated some Capitals administrators, gone outside for new help to manage security, elevated others to run the building and brought in business associates to help manage the company day to day.
Leonsis in the past was frustrated with the revenue limitations the Capitals suffered under as a renter in the Pollin-owned Verizon Center. Under that system, Leonsis's sales team sold corporate sponsorships for the Capitals, Mystics and the Kettler Capitals Iceplex in Arlington, where the Capitals practice. Another, Pollin sales team sold corporate sponsorships for the Wizards and Verizon Center.
"Now it's one organization and they sell across one platform," said Patrick. "We can present a united front to potential customers and present an entire menu of options. It was costing more and pitting the Capitals against the Wizards. There are savings, and in some areas it takes fewer people."No more freebies
In addition to creating a cleaner environment, physical changes have helped Leonsis squeeze more revenue from the building. Monumental installed pricey Acela Club ledge seating at a prime location in one end of the arena where less-lucrative restaurant seating once stood. Leonsis also moved radio announcers up into the stands to help make room for 16 courtside "dream seats," which sell for $64,000 per seat, per season.
Monumental is working with AT&T to expand its cell phone capacity within the arena and to get WiFi in the building.
Leonsis also has his eye on making money outside the building, such as the restaurants, museums and entertainment attractions nearby, which benefit from the 2.5 million drawn to Verizon Center events each year.
"We generate a lot of revenues for a lot of businesses which have nothing to do with my teams," Leonsis said. "We would like to do business with some of these businesses. Advertise with us. Buy some tickets."
Leonsis still walks the halls of the Verizon Center, listening to requests, sampling food, eyeballing the service and cleanliness. One recent trip took him to the upper deck, where he bought a bowl of nachos to examine firsthand whether a new cardboard, eco-friendly bowl was less efficient than the plastic ones that preceded it. Result: Plastic is probably returning.
"We look at everything from a fan-centric point of view," said Randall Boe, one of Leonsis's colleagues at AOL who was brought in as Monumental's executive vice president, overseeing day-to-day operations. "We spent time over the summer trying to make sure that things in the Verizon Center were improved. We focused on things like making sure hot dog buns are fresh. Making sure pizza is hot. That we had enough variety of beers. We even synchronized the lights on Constitution Avenue so people can get out of Caps games faster."
Leonsis and Boe have instituted monthly "touchpoints" to stay in contact, hear complaints and help smooth their game experience for season ticketholders, who are the economic and emotional core of any franchise customer base. The fans are allowed to participate in conference calls with coaches, managers and players.
Leonsis has doubled the number of season ticket-holders, to nearly 7,500. And as he did with the Capitals, he has put an end to the previous regime's practice of giving away hundreds -- even thousands -- of tickets for games. Believing free tickets devalue the product and are unfair to those who pay full price, Wizards tickets are not the freebie they once were, which makes for some empty houses.
"I don't 'dress up' the arena," said Leonsis. "I don't believe in that. We don't do it with the Capitals. So some nights it looks like our attendance is down, yet our revenues are way up because you are not giving away free tickets. We will make the Wizards a hot ticket because Washington is a fantastic market. If we can build the team around the right players who can play the right way and get results, we will sell it out. And I think we can do it in the same time frame" as the Capitals.