Leonsis Always Had an Urge to Own a Team
Washington Post Staff Writers
Thursday, May 13, 1999; Page A1
When Ted Leonsis was 25, he had a horrifying airplane flight. The next day, he drew up a list of 101 things to do before he died.
Yesterday, Leonsis, now 42 and the president of the interactive properties group at America Online Inc., checked off one item on his list: buying a sports team.
As a senior executive of AOL, Leonsis has the cash to do it. His purchase symbolizes the shift from Washington's old power structure based in commercial real estate and downtown government connections to the world of cyberspace enterprises beyond the Beltway and soaring stock market windfalls.
When Abe Pollin, 75, brought his professional basketball team to the Washington suburbs from Baltimore in 1973, he became a member of what is now the old guard of Washington area business leaders, politically plugged-in heads of long-standing local franchises in banking, retailing and real estate.
Their places are being taken by suburban entrepreneurs like Leonsis who have emerged in just four or five years riding the unanticipated, explosive growth of the Internet.
Leonsis is but one of several thousand millionaires at AOL, whose stock has soared from $5 a share two years ago to more than $138 currently, after accounting for stock splits. Today, the value of AOL's stock approaches $150 billion. While no other Washington technology company has matched AOL's pace, there are dozens of smaller successful start-ups with their own contingents of newly wealthy owners, executives and employees.
Leonsis will be majority owner of the Washington Capitals hockey team and eventually will take control of Abe Pollin's interests in the Washington Wizards and the MCI Arena.
He will be joined by his friend and now business partner, Jonathan Ledecky, 41, another young Turk of the local business scene who made his money in corporate "roll-ups," buying several small companies in similar businesses and merging them into a larger company. Ledecky will have a 32 percent ownership stake, and Richard Patrick, president of the Capitals, will exchange his current ownership for the remaining 8 percent. At a yet-to-be-determined time, Leonsis and his partners will take full ownership of all the properties, he said.
Leonsis is a colorful, charismatic, loud and extremely competitive man. He makes frequent use of the word "cool" and gushes about "turbocharging" the franchise. He said he's been a huge sports fan all his life and a regular at Capitals' games.
"I was born to do this," he said yesterday.
AOL President Bob Pittman described Leonsis as "the number one showman of the entire Internet industry." He said Leonsis has a great ability to connect to the AOL audience, a skill that will help him understand sports fans.
Leonsis, who has a top role at AOL -- which he said he will keep even after this deal -- has particularly benefited from the company's rising stock price. While his net worth fluctuates with that price, it hovers around $1 billion.
Leonsis joined AOL in 1994 when it bought the company he owned and founded, Redgate Communications Corp. of Vero Beach, Fla., for $45 million. Since then, Leonsis has bounced around the executive suite at AOL, a big man with a strong personality, known for his frequent hugs and enthusiasm for marketing.
He initially became AOL's content king, scouting and reeling in "talent" like the Motley Fool, iVillage and Moms Online, each of which AOL funded and developed. But then AOL's strategy changed from one of building its own content to one of charging others rent to display their work on AOL's popular online service.
One of Leonsis's main duties at AOL is running the ICQ ("I seek you") instant messaging service, which is aimed at a younger, hipper Internet audience than AOL.
Ledecky and Leonsis credit their relationship to Anthony Shriver, who runs the nonprofit Best Buddies International, which helps mentally retarded people. The two businessmen were last year's co-chairs of a Washington Best Buddies charity event.
At that time, Ledecky, who also once made a bid for the Los Angeles Dodgers, was trying to buy the Cincinnati Reds. "We started talking about sports," Ledecky recalled yesterday.
Leonsis said he started to meet with Pollin and his family about four months ago and noted that Pollin did not want a bidding war over his properties. "Mr. Pollin watched how the Redskins sale went, was concerned with the process and wanted a more orderly transition," Leonsis said.
There were other potential buyers, but Leonsis walked away with the team. "Tag, I won," said Leonsis enthusiastically.
"It's exciting for two kids who grew up in Brooklyn," Ledecky said.
"Ted uses a phrase that 'if you play, play to win,' " said Russ Ramsey, president of investment bank Friedman, Billings, Ramsey Group Inc. in Arlington. Sports today is all about marketing, said Ramsey.
It's not clear yet when the buyers would completely take over the properties, but a source close to the deal said it will likely be when Pollin, 75, passes away. Regardless, they will be a new generation of sports owners.
"We are positioned as young people to continue Mr. Pollin's legacy," Ledecky said.
They, and their friends, are also positioned to transform Washington's business, cultural and political establishment. "This shows how Washington is changing. It's the technology titans buying everything from homes to teams," said Raul Fernandez, chief executive of Web site builder Proxicom Inc. of Reston.
"For a long time Washington was controlled by an echelon of people on Capitol Hill, the old business establishment in real estate and banking and the diplomatic corps," said Mark Warner, former U.S. Senate candidate in Virginia and head of an Alexandria investment fund that has pumped millions of dollars into technology start-ups.
The new group of technology executives are influencing a wide range of existing institutions and creating entirely new ones, from charitable and educational foundations to political action committees.
"You're starting to see a maturation of techno-entrepreneurs," Warner said. "They've moved beyond building companies and creating wealth."
"All of this is still embryonic, but it has really started," said Mario Morino, a software industry pioneer in the Washington area whose Herndon-based foundation provides mentoring for young area entrepreneurs and financial backing for educational programs. "We're in the middle of it right now."
The change in ownership in local sports franchises has been the most visible symbol of this new guard. Later this month, National Football League owners are expected to approve the sale of the Washington Redskins to a group headed by Daniel M. Snyder, 34, whose Bethesda marketing and advertising company includes a $40 million-a-year Internet subsidiary. To buy the Redskins, Snyder will tap personal assets that include significant holdings in AOL, friends say.
Several groups of Washington executives are also pursuing a bid for the Montreal Expos baseball franchise, to bring it to the capital area.
Now the question is what else will the techno-entrepreneurs do with their money, said Richard S. Seline, a principal with Collaborative Economics, who is advising Washington area business leaders on how to reinvest their money and influence back into the region.
New "social venture funds" have been formed by techno-entrepreneurs to channel funding and technology into learning centers in disadvantaged neighborhoods in the District and suburbs, says Morino.
Warner and Morino are among a group of several dozen business leaders -- many from technology companies -- who have formed an "angels" investment group to provide capital, advice and contacts to young entrepreneurs.
And the new leadership group has begun to exert a political influence.
In several weeks, CapNet, a new political action fund launched by area business leaders, will disclose its contributors and begin to offer support to federal candidates who back the group's positions on technology, education, health care and Internet issues, said AOL Senior Vice President George Vradenburg, one of the PAC's organizers.
"There will definitely be a political engagement" with Congress and the administration, Morino said.
Leonsis would be comfortable with that. As part of his quirky career path, Leonsis spent five years as mayor of the town of Orchid, Fla.
Morino said he does not to expect Leonsis, who is married and spends family time at his homes in Great Falls and Vero Beach, Fla., to be a new member of the Washington party circuit. "That's not Ted's cup of tea."
But Fernandez said he doesn't expect Leonsis to be a quiet owner. "Ted's going to turn up the passion quotient on everything there," he said.
Leonsis said that, as at AOL, he intends to build consumer awareness and make money. "I think we can turbocharge the team both on the court and financially," he said.
He sees hockey as a business and pastime that needs to be jump-started.
"The hockey team is what I'll focus on first," said Leonsis. "It's the most exciting game, but it's been undermarketed and underappreciated.
"I'll run it and manage it like a fan does," he added. "I hope to be the voice of the fan, like I was the voice of the member at AOL."
© Copyright 1999 The Washington Post Company