Monthly Archives: September 2010

Setting the Record Straight on Some Things

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I am not a co-founder of AOL. I am unsure of how this descriptor has crept into mainstream media. I was founder of Redgate Communications which was AOL’s first acquisition. I am proud of my early work with AOL. When AOL acquired Redgate we (combined) had less than 400 employees. I am proud that there is now a building with my name on campus at AOL but I am not a co-founder of the company. I worked at the company for almost 13 years. I retired at the end of 2006.

Steve Case, Jim Kimsey and Mark Seriff are the co-founders of what we call AOL today. There were many early AOLers who did fantastic work too that don’t get enough credit and recognition by media - Jean Case; Jan Brandt; Jack Davies; Audrey Weil; Kathy Ryan; Mike Connors; Barry Appelman; Matt Korn - the list goes on and on.

There was a predecessor company called Quantum Computer. You can read all about the roots of the company and its originator in Kara Swisher’s book about AOL. I talk a bit about AOL too in my book, The Business of Happiness. I do not want to offend my friends who were the real founders of the AOL and am hopeful that media will be more accurate in the use of the term ”co-founder of AOL.” Thank you.

I am not a billionaire. This one is funny. When I bought the teams 12years ago, a writer at the Washington Post tried to figure out my net worth and he counted up my shares and options and wrote that my net worth “hovered near a billion dollars.” I asked the writer what hovered meant and what “hovered as a unit” was defined by in terms of dollars. We both laughed. I also asked him if he knew what my other assets were worth outside of my AOL holdings and of course he said no.

The very next day, another article in the Washington Post – by a different writer - called me a billionaire. And it stuck. It stuck even though the stock price of AOL went up; then down; and further down. We have had two economic downturns, etc. etc.

I am not a billionaire. I wish media would be more judicious in their use of this term. Is that pre-tax - after tax? How do you value what? Just don’t use it in any articles anymore. It isn’t true for me and for most other people that you use it as a short hand descriptor for these days. You don’t have to be a billionaire to feel blessed and happy and wealthy, you know? :-)  Read my book. Thank you.

I own as much of the Washington Mystics as I do of the Washington Capitals and Washington Wizards and Verizon Center and the local Ticketmaster franchise. All of these enterprises are under the umbrella of Monumental Sports and Entertainment. I am pleased to say that Sheila Johnson is also an owner of all of the assets listed above. She is also one of two vice chairmen of the over all company and she is President and managing partner of the Mystics, too.

There - three setting the records straight with mainstream media instances this month. Thank you - and thank you for being more diligent in your reporting in the future.

Two Books Worth Reading

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Michael Lewis wrote a great book published by W.W.Norton and Company called The Big Short. He is a great writer. He wrote Money Ball as you know. The book really does a great job in trying to explain what happened to our economy over the last three years; what the heck a derivative really is; and why “quants” rule the world. It is a great read. I recommend it highly.

Then go read The House Advantage, a fantastic book by Jeffrey Ma, the young man from MIT who was a card-counting black jack winning card player profiled in the film “21.” My friend Jimmy Lynn gave me a copy to read this long weekend and I loved it.

The book is about analytics; sports; life and how math majors rule; and how if you can’t measure it you can’t manage it. It is a great book for all you stat geeks. I am enjoying reading all of the books published about analytics; stats; how numbers can be so enlightening; how counterintuitive some initial gut reactions are; and how most people make decisions based on emotions not on real analysis.

What kind of critic/decision maker are you - emotional or rational? Analytic or gut-based? It says a lot about you and how well you will succeed in your chosen field.

Unemotional Response

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The Washington Capitals are now one of the fastest growing revenue teams in the NHL. We are driving a lot of revenue growth to the league and the NHL Players’ Association. The players receive a disproportionate piece of any and all revenues as per the CBA. Any revenue growth we generate for the league is good news for the players. And the league. Simple equation: We generate more revenues; the salary cap increases; the players get more dollars.

Our hyper growth can be directly attributed to our team success and our drafting and developing and retaining in a long term deal – Alex Ovechkin. In fact, you can trace our real success to literally the day we announced that Alex Ovechkin had signed his 13 year deal. Do some research and trace the success of the team. See what I mean? Since that signing, Alex has gone on to win the League MVP twice and then Player of Year trophy three times as selected by his peers. He has led the league in scoring and in goals twice. We have one of the best records in the NHL over the last three years as well. All since we announced his new contract. We sell out every game. We have a waiting list for season tickets. We have one of the largest full season ticket holder bases in the entire NHL. The long term deal was a great hockey decision and a great business decision.

More importantly, as we own the NBA team too and have seen what happened this off season with star players leaving their franchises in their prime, signing Alex to a long term deal was of great comfort and benefit to the most important constituency we have – our fans.

And we play in a building that we own now. No tax payer dollars went into constructing our building. We generate revenues for our community. We pay taxes. The revitalization of downtown DC can be attributed to the Verizon Center and Mr. Pollin’s courageous decision. There is a reason why the Capitals were named DC Chamber of Commerce’s “Company of the Year.” Everyone is benefitting from our revenue growth. We have a long term mortgage on our building. Other than player payroll our mortgage is our biggest line item expense. It is important for us to do as much as possible to “securitize” our future success. Hence long term deals to Alex Ovechkin and to Backstrom too.

The 13 year deal signed by Alex Ovechkin was a simple deal. His salary is straight-lined across the life of his contract. There was never an issue with the structure of the contract with the NHL. It was all done in the light of day – honest and transparent. By the rules. The writer of this article knows that. He is just mad because he didn’t have access to Alex Ovechkin when he wrote his book. We don’t agree with his point of view in his book and we won’t have anything to do with him and his book now. He is on his own.

Alex’s contract was NOT a long term front-loaded contract structured to achieve artificial low contract value for the purpose of achieving certain advantages under the salary cap. Nor was Backstrom’s deal. That is why they were approved and why we played by the rules. Alex will still be young enough when his deal ends to sign another contract too! As will Backstrom. The writer knows that. Why he lumps the deal in with these other deals is just mean-spirited and inspired by other factors known only to him.

The writer can say anything he wants about me. He doesn’t scare me. :-) He just can’t distort facts. We won’t let him and he is being called out on this one right here and now.