Commentary Ownership

The Cuban Effect: Why Corporate Ownership of Teams is Bad for Fans, Bad for Sports, and Ultimately Bad for Business.


Mark Cuban - Billionaire, Owner - World Champion Dallas Mavericks

With the advent of fall comes one of my favourite times of year – hockey season. Over the past off season, there has been a lot going on in the hockey world, some good, some bad, and some tragic. The summer of 2011 proved to be the most devastating to the hockey world with the number of deaths witnessed in a short number of months. But there were also triumphs: Winnipeg saw its beloved Jets return, and many teams improved their fortunes in the free agent market.

Ultimately, for me though, this offseason has been punctuated by the first stirrings in the media that the Ontario Teacher’s Pension Fund (majority owner of Maple Leaf Sports & Entertainment (MLSE), which in turns own The Toronto Maple Leafs) is starting to make rumblings that it may be ready to sell its 80% stake in this storied franchise. As a fan of The Leafs, this news (and the sale) can’t come soon enough. And here’s why – sports teams owned by corporations are, on the whole, mediocre.

Within the class of “corporately owned teams,” the Maple Leafs happen to be the franchise with which I’m most familiar, but there are several other major sports franchises in North America that are majority owned and operated by “Sports Groups” rather than individuals. The Phoenix Coyotes (NHL), Edmonton Oilers (NHL), Houston Texans (NFL), Miami Dolphins (NFL), and Toronto Blue Jays (MLB) are but a few examples of the mediocrity produced when sports franchises are ruled by committee, rather than with an individual owner. So why is this such a problem? The vast majority of large corporations are operated in such a way – what makes sports franchises so different?

The biggest problem is that too often, there is no “ultimate authority” that must be answered to when things don’t go as planned. “But all these teams have executive boards” you say, “Surely SOMEONE must be in charge?” Well, yes and no. It’s true that every sports team owned by a group of investors has an executive board, and yes, they all have a Chairman. But the problem is that this chairman is in turn answerable to his investors, and in most cases is expected to turn a profit (winning a championship is often a secondary consideration). There is no real personal stake beyond doing his job well and being lauded (and compensated) for it.

Individual majority owners are a different story though. Presumably they have made their money and had their accomplishments lauded already. Where else would they get the money to buy a sports team? Often times, the purchase of a sports franchise transcends the business opportunity it may be. As much as owners may be interested in the bottom line, they are also interested in WINNING. For the most part, the thing that has propelled these people to the positions they are in is a classic Type A, super-competitive personality. Sure they want to make money, but more than that, they want to win because A) it reaffirms their self-image as a person of influence) and B) because the thought of losing is detestable to them on the most basic psychological level.

Among some of the most successful franchises within North American sports, there’s a clear connection between private ownership, and each team’s success. Consider the following list: Larry Kraft (New England Patriots), Dan Rooney (Pittsburgh Steelers), George Steinbrenner (late of the NY Yankees), Jerry Jones (Dallas Cowboys), Jerry Buss (LA Lakers), Mike Ilitch (Detroit Red Wings), Mark Cuban (Dallas Mavericks). Seven owners, numerous championships, and even more championship appearances.

While it’s true that most of the individuals named don’t own 100% of their respective teams, they do own controlling interests, and for all intents and purposes, are the de facto owners. The buck stops with them. And woe to the player, coach, or executive who fails to deliver on the goal of winning. It’s one thing when fans get upset. Athletes, team administrators, and managers must all accept that the ire of fans is a necessary evil. A hazard of the workplace that must be endured, and for the most part, ignored, if they are to do their jobs effectively. However, it’s quite another when an owner gets upset. Fans may pay the bills, but owners write the cheques. For EVERYONE. They have the authority to make hires and fires on a whim, if they so choose. But what if the owner is a nameless, faceless, unemotional entity controlled by committee, reporting to investors? Success is no longer measured in wins and losses – it’s now measured in dollars and cents. And that’s no way to run a championship sports team.

Even worse is the fact that the leadership structure of the organization no longer has an ultimate authority. In the case of corporations, this isn’t such a big deal, as the ultimate goal is to produce a return for investors. Every person must do his/her job, and the machine will keep running, provided the board steers a steady course. But with sports teams, the dynamic is much different. Yes, front office personnel must work diligently. But it is the athletes who bear the majority of the responsibility for whether a franchise is successful or not.

Within the athletic framework, a clear leadership hierarchy is paramount to ensure the group as a whole functions properly and is kept in check if/when things start to go sideways. Athletes answer to coaches. Coaches answer to GMs. GMs answer to Presidents, and Presidents answer to…..a group of people who want to protect an investment? With that kind of structure the emphasis from the top down starts to focus less on winning, and more on the bottom line. Sure, professional athletes and coaches are as competitive and driven to win more than the average Joe, but without a certain level of extrinsic motivation in the form of a supreme authority figure, there is far more potential to get complacent. Not only that, but the drive and ability of the franchise to acquire and retain high quality athletes at any cost starts to diminish in favour of getting the most value for the payroll, even if it means a slightly lower quality roster. GMs do the best they can, but ultimately they are given a budget and must work within those constraints.

In most of the sporting world, this isn’t a problem, since a team’s record and a team’s profits are usually linked to one another. But over the last few years there have been those franchises that have found ways to be profitable despite a losing record.

Now, some of you may be saying  what about BAD owners? Don’t they offset the balance of your argument? While it’s true, a bad owner can do immeasurably harm to a team (Donald Sterling – LA Clipers, Frank McCourt – LA Dodgers, and more locally, Harold Ballard – formerly of the Toronto Maple Leafs in the 1980’s), the potential upside is far greater than what we’re seeing more and more in sports, as corporations seek to cash in on the lucrative business of sports.

And let’s not forget one of the other benefits to having a private owner for a sports teams – often they become entertainment in and of themselves.