Slam Dunk!

Seven days into the new year, Robert L. Johnson is limping to his place at a table before a throng of reporters and photographers. Gingerly, he takes his seat to the clicking sound of dozens of camera shutters. As he positions himself behind a microphone, all eyes are on him and a large green banner that dominates the room. It reads: NBA Charlotte.

“I want to deal with the important issue that’s on everyone’s mind—why I’m limping,” Johnson says to the crowd. “Since I’m in television, I’m going to borrow from David Letterman. There are three reasons why I’m limping: No. 1—Steve Belkin and Larry Bird are sore losers; they caught me in a corner and beat me up. No. 2—The NBA was not satisfied with a minority; they wanted a handicapped minority. And No. 3—I wanted to go one-on-one with one of the [WNBA’s Charlotte] Sting players and tore my ACL.”

Despite the pain from a torn Achilles tendon he suffered during a boating accident in the Caribbean, Johnson can’t hide his joviality. And with good reason. Some three weeks and $300 million before, the founder and CEO of Black Entertainment Television, was awarded the Charlotte NBA expansion franchise, finally realizing his goal of becoming the majority owner of a sports franchise. He is the first African American to do so, despite a player base that’s some 80% black.

The reason for the press conference is to announce the first appointee to the franchise, Ed Tapscott, a former New York Knicks executive, who will serve as executive vice president of the unnamed Charlotte team. The new franchise is scheduled to begin playing at the Charlotte Coliseum in 2004 and to move to its new arena in 2005 when construction is completed.

Since selling Black Entertainment Television (BET) to Viacom in 2000, Johnson has aggressively pursued becoming a majority owner of a sports franchise but could never close a deal. But in the waning months of 2002, Johnson, 56, used his business savvy and political connections—not to mention deep pockets—for a seat at the owners’ table. Johnson closing the deal opens a new chapter in black history as African Americans take the next evolutionary step in their role in professional sports—a step that began with struggling to participate as players, progressing to coaching through joining front office and executive ranks, and finally culminating in team ownership.

But the road to ownership wasn’t an easy journey for Johnson, who attempted to purchase the Charlotte Hornets in 1999 and was rejected by the team’s owner George Shinn. Johnson’s goal of owning a team picked up steam again in spring of 2002 when Shinn, unable to come to terms with the city of Charlotte on the construction of a new stadium, announced a proposal to move the Hornets to New Orleans, former home to the Utah Jazz. Shinn complained that the current Charlotte Coliseum lacked luxury boxes and other amenities used by teams to generate revenue. The bickering between Shinn and city officials, coupled with a Court TV appearance surrounding sexual harassment charges, created a rift with the fans. Attendance, which had been among the league’s highest for years, lagged.

Enter Johnson, who was approached by a few Charlotte-area businessmen about buying the team. “I submitted a letter to buy the team, and [Shinn] turned that offer down,” says Johnson. “I submitted a second letter raising the price, and he turned that down.” The NBA ultimately granted Shinn and co-owner Ray Wooldridge’s wishes, allowing the two men to move the team to a city with a new NBA-ready arena and government subsidies that nearly guarantee profitability.

Johnson was undeterred. The same drive that transformed BET from a fledgling cable operation into the leading African American multimedia entertainment company, piped into some 74 million households, was unwavering. “I called [NBA Commissioner] David Stern and said, ‘David, I’m interested in looking at an NBA team,'” says Johnson. “And he said one of the things they were planning to do is bring a new franchise back to Charlotte, but the [purchase price] is going to have a three in front of it. So I said, ‘OK, if the economics work.'”

As spring gave way to summer, Johnson worked on his game plan for acquiring a franchise. NBA executives met with city officials and Charlotte’s business community to hammer out an agreement to construct a new arena that the league could then use to justify the asking price. “They worked with the city to get the best arena package they could negotiate, with the idea that they would then attract applicants [for the team],” Johnson says.

That process continued through the summer of 2002, and by autumn, Johnson says he was ready to build the infrastructure needed to create a winning, profitable franchise. In October, the number of applicants qualified to purchase the Charlotte franchise was narrowed down to Johnson and a group headed by Boston-area businessman Steve Belkin and former Boston Celtics star and Indiana Pacers coach Larry Bird.

PLAYING WITH A BIG ROLODEX
While the Belkin-Bird group took a grassroots approach to landing a franchise, Johnson opened his Rolodex and went right to the top. “They took the strategy of being aggressively involved in the Charlotte community, making visits down there, talking to the local community, and holding basketball seminars with Larry Bird.” Johnson’s competitors even brought aboard M.L. Carr, a former NBA player and current president of the WNBA’s Charlotte Sting, to reach out to the African American community on their behalf. (Belkin and Bird refused to comment on the selection process.)

But Johnson knew that the NBA brass, not the Charlotte community, would make the final decision on who would land the team. “I had the position that I was going to make my case to the NBA, particularly to the NBA individuals I knew personally,” Johnson says.

He made a whirlwind of phone calls to a list of friends and associates that read like a “who’s who” of professional sports. Among them were Jerry Colangelo, owner of the Phoenix Suns and chair of the selection committee; James Dolan, the head of Cablevision, which owns the New York Knicks; and Larry Tannenbaum, co-owner of the Toronto Raptors. Johnson saw these men as individuals who would be able to vouch for his business acumen to the decision makers.

Far from finished, Johnson then sought out the members of the selection committee. “I found out that Terry McAuliffe, chairman of the Democratic National Committee, knew a guy named Joe Maloof who was the owner of the Sacramento Kings [and a member of] the committee, so I called Terry to reach out to Maloof,” Johnson recalls. To woo Commissioner Stern, Johnson had a slew of business and political all-stars go to bat for him. Among them were AOL Time Warner CEO Dick Parsons; William H. Gray III, president and CEO of the United Negro College Fund; and former President Bill Clinton. “I basically went to these individuals to say ‘Make my case to the NBA,'” Johnson recalls.

Johnson’s case was simple and consisted of three main points:

• He was financially qualified. A billionaire, Johnson has access to capital the league expects from potential team owners.
• He had a suitable demeanor and leadership skills. “I have, throughout my business career, developed some very good relationships with people based on my ability to be a team player in partnerships.”
• He had credibility. “I also had them talk about my credibility, [as far as] creating value and being able to market a brand and attract talented people,” Johnson says.

 

Johnson says he was not surprised when Colangelo and NBA Deputy Commissioner Russ Granik visited his hotel room to break the good news to him. And while Johnson believes it was his business savvy and financial status that won the deal, being African American, he says, was icing on the cake. “The fact that I am African American was a plus, but at the end of the day, if I didn’t have the credibility or experience, there’s no way they would have said, ‘We’ll give it to you just because we want a black guy running an NBA team.'”

HOOP DREAMS
Johnson has always been one to break barriers. In 1980 he launched BET, the first black-owned cable network. He took the company public in 1991, making it the first black-owned company traded on the New York Stock Exchange before making it private again in 1998. In 2000 he sold BET to Viacom for about $3 billion, becoming the media monoliths second largest individual shareholder. And, with an estimated wealth of $1.63 billion, Johnson became the nation’s first black billionaire.

After selling his stake in BET, he began playing in different arenas. In May of 2000, he unsuccessfully tried to launch D.C. Air, which would have been the largest minority airline in the country, until government regulators grounded the venture. And recently he’s been building a hospitality empire through the acquisition of Hilton and Marriott hotel properties.

For years, Johnson has had his sights on sports franchises, and he’s managed to achieve a milestone that’s been a long time coming. Until now, African Americans, like past and present BE 100S CEOs Herman Russell, Comer Cottrell, and Ed Gardner—as well as hoopsters Earvin “Magic” Johnson, Isiah Thomas, and Michael Jordan, have only been able to gain minority stakes in sports franchises.

Harry Edwards, a former sociology professor and consultant for the NFL’s San Francisco 49ers, maintains that Johnson’s inclusion in the ownership ranks marks a refreshing change. “At some point, we had to move beyond black athletes getting involved in ownership and move to just rich black folks getting involved in ownership, just like rich white folks get into ownership,” he says. “Most of the NBA owners couldn’t hit their plates with their forks let alone hitting a 20-foot jumper. But when it came to us [African Americans], we have to have a history of hitting 20-foot jumpers, if not being a Hall of Famer, just to get consideration.”

In fact, a number of African American businesspeople

have been inspired by the news of Johnson’s success. “I was happy for him. It’s like one marathon runner crossing the finish line and then you celebrate for him because if he can do it, so can you,” says Donald V. Watkins, an Alabama businessman looking to acquire a major league baseball team. “I think we’ve changed the mindset. It’s no longer a focus on who will be the manager, who will the players be, it’s which teams these guys are going to own, and that’s healthy for our people.”

Attorney Johnnie Cochran, who’s been at the forefront of a campaign to increase the number of African Americans within the coaching ranks and front offices, says ownership is the next step in the evolution of blacks in sports. “We’ve got a lot of offensive coordinators and defensive coordinators in football and a lot in the pipeline, and we get more and more of them,” he says. “But now we need ownership. That’s the next step.”

Stern says Johnson came out on the winning end of the selection committee’s vote based on the value he brings to the table—business experience and a high net worth—not the color of his skin. “The owners were impressed with his reputation, his experience, his means, and his commitment,” says Stern. “I think there’s an important symbolism to him because he’s the first … but it doesn’t relate to race. In fact, focusing on race in this context sort of misses the point.”

Next up: Johnson’s pursuit of a 51% stake in Major League Baseball’s Montreal Expos. In a deal with an estimated price tag of $400 million to $450 million, his partners, including Washington Redskins owner Daniel Snyder, would purchase the remaining 49% and move the team to Washington, D.C. (See “A New Game for Johnson,” Newspoints, February 2003.)

Johnson explains that he is lured to the sports business for three reasons. He finds the competitiveness attractive and he looks forward to interacting with league owners, some of whom are personal friends. The third reason is, since he is unsure whether he’ll renew his five-year contract with BET, he’ll have another venture to manage. I have another platform to go to that’s fun, exciting, and something I can enjoy with my son, Brett.”

PERFORMANCE COUNTS
Since Johnson sealed the deal, which includes ownership of the WNBA’s Charlotte Sting, the City Council has approved outlines of an agreement with the NBA in which the city would build a $265 million facility that the expansion team would operate. Under the deal, Johnson will sign a 25-year lease, although his team could move out after 20 years if it demonstrates that it’s losing money and not selling enough tickets to survive in the Charlotte market. The Charlotte team will fill its roster through a dispersal draft in which every other NBA team could protect eight players.

At the end of the day, Johnson is a businessman and, despite all the perks that come with being a franchise owner, he wants to cut a profit. “I told the guy that I just announced as head of basketball operations, Eddie Tapscott, that I’m not mad at my money,” he says. “I expect him to put a competitive team on the field and make money.”

The trick for Johnson and company is to build a profitable team from scratch, where revenues (which are primarily derived from TV broadcast rights, advertising sponsorships, and sales from general tickets, luxury suites, and club seating) offset the top expense of any NBA team—player payroll. For the 2002 — 03 season, a team’s player payroll averaged $40.3 million. Despite those high salaries, Johnson expects to have his team running profitably by the end of the first season.

For Johnson, acquiring the NBA franchise and possibly a baseball franchise is just the beginning. He and his staff will work on building a winning franchise and perhaps a new dynasty in the sports arena. This time, he says, he’ll put people in place to ensure his ventures succeed, rather than carry the weight of the enterprise on his own shoulders. “I’m going to set the vision and strategic direction and lay out the culture, but other bright people are going to execute [them]. So it’s not going to be like BET, starting all over again from scratch where I’m doing everything myself.”

As the press conference concludes and all the questions have been answered, Johnson heads back to his waiting car. Torn tendon aside, there’s a spring in his step as he joins the ranks of African American “firsts” in sports. And just like Jackie Robinson, the first African American in a major sports league, or Bill Russell, the first black coach, or Willie Thrower, the first African American to quarterback an NFL team, Johnson knows getting there is just the beginning. It’s also about what you do once you’re in. So, what will Johnson and his organization do now that they’re in? Stay tuned.

Johnson’s Big Deals

• Following the sale of BET, Robert Johnson formed The RLJ Companies. Under RLJ, Johnson owns, in whole or in part, the following:
• The Charlotte, North Carolina, NBA Franchise
• RLJ Development L.L.C.—a real estate investment company that currently owns 11 hotels with an enterprise value of $250 million
• Leeward Islands Lottery Holding Company—an online lottery company operating in six Caribbean countries, including the U.S. Virgin Islands
• Ortanique Restaurants—a restaurant group featuring Caribbean-influenced cuisine with locations in Washington, D.C.; Coral Gables, Florida; and Las Vegas
• Wolverine Pizza—Pizza restaurants operating in Detroit
• BET Soundstage—a nightclub located at Walt Disney World’s Pleasure Island in Orlando, Florida
• Three Keys Music—a Silver Spring, Maryland-based jazz recording company
• Vanguarde Media—a magazine publishing company that publishes three urban-oriented magazines: Honey, a young woman’s magazine; Heart & Soul, a female health and beauty magazine; and Savoy, a general interest feature magazine

 

Failed Deals

• In 2000 — 2001, Johnson pledged some $140 million to purchase certain assets that were to result from the United Airlines/U.S. Airways merger. The airlines hoped the merger would appease antitrust legislators and Johnson was expected to walk away with D.C. Air, a regional airline that was to be operated out of Washington, D.C.’s Reagan National Airport. Johnson’s plans were grounded when the Department of Justice said it would sue to stop the $12.3 billion deal in July 2001 over antitrust concerns.

Deals in the Works

• Johnson is still looking to acquire 51% of Major League Baseball’s Montreal Expos. He has plans to move the team to the Washington, D.C., area. Johnson also mentioned the possibility of forming a regional sports network similar to the New York Yankees’ YES Networks.

MINORITY OWNERS IN THE MINORITY
While acquiring the Charlotte NBA expansion team makes Robert Johnson the first African American majority owner of a major U.S. sports franchise, several others have owned minority stakes. Here’s a list of some of the current and former minority owners and the teams they held interests in:

Name	Occupation	Team
Peter Bynoe	Attorney	Denver Nuggets
Deron Cherry	Former-NFL player, Entrepreneur	Jacksonville Jaguars
Comer Cottrell	Entrepreneur	Texas Rangers
Ed Gardner	Chairman, Soft Sheen Products	Chicago Bulls
Earvin “Magic” Johnson	Former-NBA Star, Entrepreneur	Los Angeles Lakers
Michael Jordan	NBA Star	Washington Wizards
Bertram Lee	Broadcasting executive	Denver Nuggets
Herman J. Russell	CEO, H.J Russell & Co.	Atlanta Hawks
Isiah Thomas	Former-NBA Star, Entrepreneur	Toronto Raptors