The London Hicks-Sick Blues
When Metroplex sports team owner Tom Hicks announced recently that he was buying a $250 million share in the Liverpool soccer club of the prestigious English Premier League, the British press wanted to know one thing: Are you going to spend money on soccer players like you did with Alex Rodriguez?
Local sports fans remember that one. A-Rod got a record deal from Hicks and the Texas Rangers in 2001, $252 million over 10 years. And we remember how it ended: A-Rod got traded to the New York Yankees because Hicks couldn’t afford him anymore.
“We’re not going to put a budget on what we are going to do,” Hicks told the British media.
That’s a nice line to throw out there, Tom, but the soccer-mad Liverpool fans might want to look at some recent history with the Rangers and Dallas Stars to weigh your words in light of your actions.
In some ways, Hicks has been pigeonholed by sports writers as an owner willing to spend big on star players – even though they also buy his line that he wised up, post-A-Rod, and realized that a checkbook is not the only key to winning.
Fact is, it was something more basic than A-Rod angst that led Hicks to cut back his sports-team spending. Tom’s main business – the investment firm Hicks, Muse, Tate & Furst – lost a ton of money in the late 1990s and early 2000s. Some news reports speculated that his departure from the firm in 2004 was a forced out. In any case, the funding source for Hicks’ sports hobby dried up.
The best pro team owners are the ones who treat it as a hobby. That’s what Hicks did in the ’80s and ’90s, when Hicks Muse was making a ton. The company bought Dr. Pepper/7-Up bottling and turned it into a billion-dollar profit. They bought a bunch of radio stations and turned them into Clear Channel Communications. When the Stars came on the market for $85 million in 1995, Hicks bought in. And in 1998, he paid $250 million to buy the Rangers from George W. Bush.
About that time, however, Hicks Muse started losing lots of money. Telecom investments disappeared with the bursting of the internet bubble. Hicks Muse gobbled up a lot of Latin American media companies, only to get blindsided by a huge economic recession down there. The recession stemming from the 9/11 attacks made it even tougher for investment firms to make some money.
As a result, Hicks’ attitude toward his sports teams changed: Making money, not winning, became the object. He has slashed the Rangers’ players’ payroll from more than $100 million to about $65 million in recent years. As for hockey, Hicks was the biggest backer of the 2004-05 lockout, in which NHL owners cancelled a season rather than give up their proposal to cut payrolls via a strict salary cap.
The result, from fans’ point of view, has been disastrous. In the late 1990s, when Hicks was spending, his teams did very well: a 1999 Stanley Cup for the Stars and American League West championships for the Rangers in 1996, 1998, and 1999. Since the spending stopped, pretty much nothing.
Hicks has said publicly that he no longer wants to lose money on his sports businesses annually: “I ain’t going to lose ten million a year and have the team finish in third place.” But that line of spin isn’t based on basic sports economics. Pro sports owners can afford to lose some money every year on their operating budget, because the long-term investment more than makes up for that. Forbes Magazine recently assessed the value of the Stars at $248 million and the Rangers at $353 million. Add up the bottom line, and Hicks has made $266 million since he bought the Stars in franchise appreciation alone. That’s $22 million a year, sports fans.
How Hicks’ mind-set will affect Liverpool soccer will play out in coming years. But it was interesting to hear what Hicks and his co-investor – Montreal Canadians owner George Gillett Jr. – emphasized with the British media last week. Cable revenues for the English Premier League jumped 67 percent last year with a new tv deal. The league and the Liverpool team have rabid fans around the world, and Hicks and Gillett said they wanted to sell more merchandise in Asia and Latin America. More revenues could be had with a new stadium, they said. And the English Premier League might tap into the ready-to-grow North American market.
Liverpool soccer fans might want to look at who Tom Hicks is now and not who he was five years ago – and ask whether they’re going to get what North Texas sports fans have been putting up with. He has learned how to trot out mediocre teams and still make a profit. But pro sports owners who focus on the bottom line usually end up near the bottom of the standings. From what I read, Hicks might want to be very careful in this new venture – Liverpudlians take their team much more seriously than the relatively sedate baseball and hockey fans here.