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October 27, 2006 > News > Rockets, Astros owners talk business

Rockets, Astros owners talk business

By Lily Chun | Thresher staff

The unique challenges of owning professional sports teams and managing the revenue they generate were two of the topics Houston sports team owners addressed Monday. Leslie Alexander, owner of the Rockets and Comets, and Drayton McLane, the owner of the Astros, answered questions at McNair Hall from an audience of several hundred.

Bob McNair — the owner of the Houston Texans — had also been scheduled to participate, but was unable to attend.

Students asked questions about a variety of topics, including specific athletes, but many of the questions and answers focused on the economics of professional sports team ownership.

Both owners said football is the most lucrative professional sport, which Alexander said is due to the revenue base from the NFL’s nationally televised games. He said basketball and baseball generate most of their revenue locally. Merchandise is only a small part of revenue for professional teams, while ticket sales and luxury suite sales are the leading revenue areas.

“Drayton and I would both like to make $100 million a year,” Alexander said. “Definitely in the past, it was better to be [the owner of a professional] football team, but I think that could change in a couple of years.”

Professional football teams also share more revenue, so large market teams help support small market ones. Baseball only shares about 20 percent of its revenue, McLane said.

Even if given the opportunity to own a team in another professional sport, McLane would still choose to be a baseball team owner, he said. He cited Major League Baseball’s exemption from anti-trust laws as a unique aspect of the business. However, the sport’s lack of a salary cap does lead to an uneven playing field between teams.

“The New York Yankees have a [team] salary of around 200 million,” McLane said. “So you have $30 million teams playing teams with $200 million.”

The Astros team salary last year was $92.5 million.

Sometimes big-ticket players, like the Rockets’ center Yao Ming, do not generate the revenue expected, Alexander said.

“We’re just starting now to finally see revenue from China,” he said. “Ticket sales I thought would accrue because of Yao didn’t appear. Tickets sold out with [Cleveland Cavaliers forward] Lebron James, but not with Yao.”

Despite the differences in baseball payroll, McLane said the sport is working toward parity among teams, in part through its draft and other procedures.

Alexander said a high degree of parity exists in professional basketball because of the NBA’s salary cap.

“San Antonio is a small city, but it has won many championships,” Alexander said. “New York hasn’t won in a while, and [Los Angeles] doesn’t win. We have true parity in our sport.”

Both owners said the Internet has the power to dramatically change their marketing and audience base. Alexander said Internet gaming is a potential opportunity for revenue generation. McLane said advanced software and Internet capabilities have increased access.

“You can be anywhere in the world and watch baseball,” McLane said. “Advanced media can give you every statistic. We’re going to have a totally different audience in 10 years.”

The owners were also asked how they inspire their players to win.

Alexander said he focuses on finding talented coaches and players, but he ultimately leaves inspiration to the coaches. McLane said all the administrative personnel, including scouts, general managers and coaches are important to developing a team committed to winning. Baseball is different from other sports because players must stay motivated many nights in a row, he said.

“In baseball, you can have a marvelous victory at 10:30 p.m., and then you have to do it again the next night,” McLane said. “An owner needs to set a leadership model and give that image to the players.”

McLane said the best part of team ownership is the people with whom he interacts.

“It’s important to win, but equally important are the fans,” he said. “To me, it’s the excitement, thrill and pride of the fans and watching players grow.”

Lovett College senior Ann Frost organized the event for the Sport Management Series, which seeks to demonstrate the integration of sports and business. She said the question-and-answer session went as well as she expected.

“I was pleased with the turnout,” she said. “I was also excited about the quality of the questions — they were right on target.”

McLane said he was also impressed by the session.

“The questions were good,” McLane said. “The students were really prepared and really know what they’re looking for in their careers.”

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