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Dot-com strategy for Caps Add to ...

Ted Leonsis, the Washington Capitals' gregarious owner and dot.com jillionaire, is on the line, nominally to discuss what ails professional sport, an industry he describes as "broken" and in desperate need of repair. Now, however, we're comparing notes on a different shared compulsion -- the constant need to compile lists of all kinds.

Once, in 1983, Leonsis assembled his definitive list of 101 Things To Do before he died, and among them was a desire to own a professional sports team. My own obsession is to develop lists of songs for every occasion and the ever-helpful Leonsis, president of AOL Interactive Properties, immediately draws my attention to a Web site for like-minded individuals called shoutcast.com -- accessible through his America On Line service, of course.

This type of instant problem-solving seems typical of the way Leonsis does business. In an era when more and more of professional sports appears dominated by nameless, faceless corporations, Leonsis represents something of a throwback.

His goal is to turn the Capitals, one of the National Hockey League's least distinguished teams over the past quarter of a century, into a leading-edge, new-economy company by closing the gap with his primary clients, the fans. To that end, Leonsis walks the concourse at the MCI Center nightly so he can listen to both kudos and complaints. By his own estimation, he has replied to 15,000 e-mails since assuming control of the franchise from Abe Pollin 18 months ago.

Philosophically, Leonsis believes in a new-age strategy called "viral marketing," which sounds an awful lot like an updated spin on word-of-mouth advertising.

"The other day," began Leonsis, "somebody sent me an e-mail, complaining about the cotton-candy hawker, who was spending too much time near his row and was blocking his view of the ice. My first reaction was: 'With all the things going on in the world . . .'

"But then I thought: 'This guy has an issue.' So I write him an e-mail back and tell him, 'I will personally call our vending people and ask them not to go in your area any more.' That's what I did. Later, I get an e-mail back from him, which says: 'Thank you very much. I enjoyed the game so much more.' And he copies his message to 11 people. Now, I know those 11 people probably sent this correspondence to another two or three people. So I did one little thing, but I'll bet you 100 people ended up seeing that we really care. That's viral marketing.

"If you do that 15,000 times, which I have, all of a sudden, the Caps are moving up on the sales front. We want every person in the organization thinking the same way -- that we care."

Careful not to cast himself as a messiah, Leonsis's primary objective is to get the Capitals on track, and the evidence suggests that his approach is working.

The season-ticket base has more than tripled, from under 3,000 to 10,700, since July, 1999. Average attendance is up to 14,475 a game from 12,813 a game, an increase of 12.97 per cent over last season. According to Leonsis, the Capitals just passed one Original Six team, the Chicago Blackhawks, in overall attendance, and are closing in on other, the Boston Bruins.

On the downside, the Capitals will lose money again this year -- upward of $10-million (U.S.) -- despite their box-office gains.

Even though dot.coms fold every day, Leonsis believes the fundamentals of his other major industry are sound because consumer use of the Internet grows every day.

Sports, on the other hand, is a "fundamentally broken" industry. "Ratings are down, the love of the product is down, attendance is down, and yet, prices for ads and tickets go up. It is directly anathema to what we live with in the new economy, which is Moore's Law -- that you give more and charge less.

"If you continue down along that road, you'll end up like the British Empire. I used to have a college professor who said, there was no one to blame for the fall of the British Empire. They lost 1-per-cent market share every year for 100 years."

Born on the same day as Elvis (Presley, not Costello), the 43-year-old Leonsis formed a partnership known as Lincoln Holdings, LLC, to purchase 100 per cent of the Capitals from Pollin along with partners Jonathan Ledecky and Dick Patrick. In January of 2000, two new partners were brought aboard, Raul Fernandez, chairman and CEO of Proxicom, an Internet consulting company, and basketball legend Michael Jordan.

Lincoln Holdings controls a 44-per-cent stake in Washington Sports and Entertainment Limited Partnership (WSELP), which owns the MCI Center, the Capitals, the National Basketball Association's Washington Wizards, the Women's National Basketball Association's Washington Mystics as well as the Washington/Baltimore TicketMaster.

Leonsis describes the Capitals not as a hockey team per se, but as a "new media" company. That characterization may appall some Canadians, who believe the NHL should be more about hockey and less about marketing and sales.

Leonsis disputes this notion, however, saying: "You can't have your head in the sand. In most cities, the hard-core hockey aficionados are small. So what was happening here was, we had a loyal group of 10,000 or 15,000 people, who would come to games. In order to cross the chasm and become a popular phenomenon, you had to reach out to the non-hockey aficionados.

"We're lucky in that the hockey audience is the dot.com audience. It's educated. It's Web savvy. It's wealthier than the traditional sports fan. So I've used the Web as a way to reach out to those people and market to those people."

It's working too, according to the Capitals' own figures, which state that, among other developments, almost 60 per cent of their tickets are now sold on line. The Capitals' Web site averages more than one million page views a month and is unquestionably the NHL's best. The site goes beyond the normal bumph to include such features as postgame interviews with coaches and players.

On the ice, the team uses leading-edge technology, such as the XO Sketch, a video-replay device that enables the coaching staff, on the bench, to instantly review a play that occurred seconds before and discuss it with the players.

Nor does Leonsis exempt his players from their role as salespersons.

"I had a player say to me once, 'I'm not going to sign any autographs, they'll end up selling them on eBay.' I said: 'So you mean, out of the 10 autographs you sign, two might end up on eBay?' So you'd rather have two people lose out than eight people be happy, who are fans? That's a lose situation.

"What I've been trying to do is stress [that]at the heart of all of this is the fans. These are not studio games. We aren't playing to a laugh track, especially not in hockey, where the majority of our revenues come from ticketing. So my whole focus is that everyone in the organization become fan-centric -- and at the same time, we'll field a team that's good and competitive and that people can have hope about.

"It's interesting, because when I bought the team, I was told: 'You don't have any stars in Washington.' I said: 'That's not right. We've got the best goalie in the league [Olie Kolzig, the 2000 Vézina Trophy winner] We've got the best scoring defenceman in the league in [Sergei]Gonchar. We have a Hall Of Fame centre in Adam Oates. We have one of the best scorers in the league in Peter Bondra. We have as many stars as anybody. Quit feeling sorry for yourselves.' "

The Capitals, winners of the Southeast Division last season, are doing just that. After a poor start, they're back in first place again. Leonsis will pass on message-board postings to general manager George McPhee, but ultimately, he leaves the day-to-day operations to the hockey department.

Both McPhee and coach Ron Wilson recently received contract extensions because, as Leonsis puts it: "I trust them immensely. I never played professional hockey, so I cannot make any decisions on players. What I can give them is, the budget and the philosophy and then hold them accountable."

If his management group believes the Capitals are close to winning the Stanley Cup next summer, then Leonsis is prepared to listen to arguments for adding an unrestricted free agent or two.

However, he understands that throwing money at a team is not necessarily a tried-and-true solution. For proof, he needs only to examine the folly of fellow dot.com millionaire, Daniel Snyder, who purchased the Washington Redskins for $800-million, bumped the team's payroll to the top of the National Football League's salary scale and then missed the playoffs anyway. The Redskins' pratfall, along with the struggles of the basketball Wizards, have suddenly made the Capitals the darlings of their market.

"I wish you could just write a cheque and win," he said. "If that were the case, then all the richest guys would be winning championships. So what I believe is, the way you break through is, first, you have an oversupply of young talented players, who are pushing themselves onto the team, from fourth line, to third, to second, to becoming stars.

"Secondly, you make trades and hopefully, those trades will play out correctly. We just got a steal of a deal with [Dmitri]Khristich from Toronto. Then, when you think you're there, you can go into the free-agent market to get you home. But chemistry is vitally important. I'm not going out and being stupid. I'm telling George: 'Engineer a team the fans can fall in love with.' But I also don't want it to be overhyped so you can't live up to expectations."

Some of Leonsis's theories may have a larger application around the league, but he says his primary focus is getting the Capitals straightened around first.

"I'm only 18 months into it and I don't think we're anywhere close to being there," he said. "But if I allow myself a minute of reflection, I'd say over the two seasons, we are the fastest-growing team in the NHL. The buzz on us is high. We've made an impact. So far so good, but the goal is a Stanley Cup and then another Stanley Cup and then to be sold out, with very high levels of satisfaction. That's what AOL does and I think I can do the same thing with the Caps." Eric Duhatschek writes analysis and commentary for globeandmail.com; his column appears on the Web site Tuesday through Saturday.

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