Welcome to Magpie Interviews, a podcast series where we have real conversations with leaders and thinkers at the forefront of business transformation.

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In this first episode, our host, Lauren Strickland, meets Ted Leonsis, the CEO of Monumental Sports and Entertainment. Together they explore how data, esports, gambling and new technologies are shaping the future of sports.

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Podcast Transcript

Lauren Strickland (LS): Welcome to the Magpie podcast. Magpie explores the trends and signals from culture that are impacting businesses and driving change. I'm your host, Lauren Strickland and this episode we're exploring how innovation and technology is changing sports in our time.

To find out more, I'll be talking to the industry's leading innovator, Ted Leonsis, founder and majority owner and CEO of Monumental Sports and Entertainment. Ted has an impressive track record of betting big on emerging technology. At the start of his career, he helped bring the Internet and instant messaging to the masses. He played a major role in the launch and subsequent success of AOL and now, in addition to his philanthropical efforts, he runs America's leading sports and entertainment family, Monumental, which includes household names like the Washington Capitals, the Wizards and the Capital One Arena in DC. Thanks for joining us, Ted. Could you explain a little bit more about your role at Monumental?

Ted Leonsis (TL): Monumental Sports and Entertainment is one of the largest regional sports and entertainment companies in North America. We own seven sports teams, manage our own four major sports venues, own a big piece of a regional sports network, and basically make major investments in technology companies related to sports.

LS: And I've heard you say a few times, you're in the business of happiness. So what does that mean to you and what does that mean to the team?

TL: Well, what we tried to do is create a culture in an environment where our players, our employees, can get to self actualization and they can know how to declare victory. And that if you go to the Library of Congress, couple of streets from here and you look at the founding white paper, the Declaration of Independence written by our forefathers, the only line of text that wasn't edited and you can go see it, digitised, at the Library of Congress was life, liberty and pursuit of happiness. And we've always believed that if you can be happy, then you can be successful. But if you're successful, it doesn't necessarily mean that you'll be happy. And we just want all of our employees, all of our players, to embrace that and understand their higher calling.

LS: You kept saying that this is a sports and entertainment company and I know you got your start at AOL basically when the Internet was in its boom. Do you see a lot of parallels between that and the sports industry now?

TL: Well, it's interesting because the Internet has created really the most valuable industry. It started as an enabling technology and when we were growing AOL, we were the first media internet company to go public. We built a private internet at AOL and we were able to package up and bring people in communities together. And once we were able to let people communicate and build communities, we could create commerce applications, we could deliver content to them. And really the Internet has grown to be a worldwide phenomenon. There's about 5 billion subscriptions around the world on the Internet, and there's only 7 billion people that live on the planet. So it's the most socially adopted phenomenon of our lifetimes. At the same time, I've watched sports teams more from their content to they're really about the real estate, the buildings that you're gonna play in to really being the most important convener.

And all of the media landscape. If you look at the top 100 programmes and the Nielsen Ratings, they think 95 of them are professional sports events and NCA college events. And equally as important, if you look at major metro areas, New York, Los Angeles, Chicago, London, there's very few iconic enterprises that represent with longevity in that community. Universities, here we have Georgetown University and Johns Hopkins University in America and the like, we have eight major institutions here in DC. And then you have sports teams and you think of what's going on in Boston right now where every one of their teams it seems is playing for a championship. In New York, you think of the Yankees, the Rangers; Boston, the Patriots and the Red Sox. No, just on and on. And here in Washington DC, we won the Stanley Cup. And for a generation, we're that defining memory for young people and moms and dads and all of our fans because we won a championship and nothing is more iconic, nothing is more binding in a big major metropolitan community than a winning sports team.

And so as owners of teams, our social responsibility is so much more than the game day presentation, what your tickets are priced at, what the ratings are like on TV. Those are byproducts of creating a community and a product and service that literally everyone can bond around, as a media property, put things in. For instance, DC is the most political town. CNN has become every moment of every night, they are covering politics and screaming at the White House and on an average night they get less than a one rating. Less than 1% of the households are watching CNN and during the Stanley Cup playoffs, the Washington Capitals were getting 12 readings, so we were Fox and CNN and MSNBC and take every one of the cable channels and roll them together and they won't come in close to the attention and the passion and the engagement that we had.

LS: With the engagement of sports and the younger generations, so immersed in the digital and the Internet, on their phones. Things like e-sports are coming to be a trend, which I know you've been investing for a while now. How do you see that changing in the next maybe five years? How do you see that affecting sports?

TL: I'll let you in a little secret. Esports aren't coming. Esports are here and have taken over. I've never seen a phenomenon as misunderstood by parts of the general public in the media as I have on esports, and so esports today, for the most part, you take a game like League of Legends, which is produced by Riot Games, which is owned by Tencent. Tencent is half a trillion dollar Chinese kinda games self-expression company, about 70 million people every month are active users playing in a multi-user setting. League of Legends, Epic Games, which is here in Cary, North Carolina, we're investors in, they make Fortnite. Fortnite, people have even misunderstood. They think it's just a casual game. It'll morph now into a esport, but the platform itself probably will become bigger and more of a connector of young people than Facebook is, because the game of Fortnite is like the perfect game.

You enter a lobby, you join in with a hundred people, you get thrown on an island. You fight til one person emerges, your scores go up. And then when you're going into that lobby, you have friends, you're talking to your friends, those games will start streaming. Twitch, which Amazon now owns has more activity on it than ESPN. More people watch a esports streaming game on Twitch that'll watch perhaps even the NHL Stanley Cup finals on NBC cable last night. And so the phenomenon is worldwide and it's just a matter of time before the big sponsors start coming that their subscription service is, and anyone can do it. Not everyone can go out and play basketball. It's amazing with how old the League is and only 5,000 people can say they've been an NBA player. And you contrast that with esports where literally 70 million people are playing every month and just because of the Internet and bandwidth and China opening up now to games, it's just a matter of time before there'll be a billion people playing esports.

And when that happens you'll say, well it's already twice as big as the game of basketball. And they were saying an inevitability to this based on really the demography. And the availability because these games are free. You can play Fortnite for free. You can't come into an arena and watch a basketball game for free. So I just think it's not a coming trend, I think it's already there before us. It shocks me all the time when it's like, can't you see this? What? What am I missing? And I think for my grandchildren that being the best League of Legends player or the best Fortnite player, MVP of the new Fortnite League or Overwatch League will be just as significant as saying, oh look, there's Lebron James, there's Steph Curry.

LS: Because of the size of the audience and the number of companies involved. You know, they're essentially creating their own little social networks. With esports and even a topic like sports betting, how does all this access to data change the way you think about the consumer experience?

TL: Well first of all talk about your notion on sports gaming and sports betting, and the other day I was asked, don't you have concerns about the integrity of the game and people betting on sports? And it's, excuse me, what do you think is happening today? It's estimated that there's about a hundred billion dollars worth of illegal gambling that goes on around the four major sports leagues and that's from bookies. That's from offshore mobile betting and we wanna bring, the States wanna bring, the Federal Government will eventually wanna bring all of that illegal revenue generation into the light. And nothing bad happens when you take something in the shadows and bring it into the light. The revenues will create jobs, there'll be tax revenues that can be deployed, how the governments think are best. It also will create a fairness on setting the odds. It'll be much more transparent on what is happening, the integrity of the game just because of the way the technology can monitor just the tiniest micro differences in performance and can shine lights on that.

And so I only see good things happening with the ongoing digitization of the sports and the games and that we'll all look at ourselves as being in the data business. It's literally what we are, and the biggest trends right now driving sports are big data and taking the data and the video and streaming it over the top, meaning outside of or around or over the top, the traditional media gatekeepers direct to the consumer and so direct to consumer over the top and then gaming and gambling. Really enhancing the engagement of the video.

If you're watching TV during a commercial, you're flipping the channels. If you're watching the TV and you have a second screen and you're consuming data, if you're gaming and gambling, you're much more prone to be engaged. You're now sharing that information with the people that are in your network, so the stickiness of the content and the viewing goes up and then you move up into esports and esports is the panacea eventually for media companies because when a typical Gamer is watching on the screen and playing a game, he can process on average 50 or 60 data points. You're playing with your mouse, your controller, you're processing things that are happening on the screen.

Professional Gamers who are 18, 19, 20, 21 years old, they're processing 400 different things on the screen. We are re-wiring young people's brains and that subtleness of change in the way we're wired I think is something that's really under-reported. What's happening with esports is that we will see our ability to process information is much, much different. Our ability to concentrate in highly multimedia worlds will change dramatically.

LS: And then to wrap up with my last question, is there anything you've heard of that you've been really excited about maybe that you see as an up and coming trend?

TL: You've always heard people say, let's try to make a better world. Let's try to leave more than we take. Let's try to create a better tomorrow. I mean that's kind of an aspiration that you have growing up that you want to be a part of a solution and not a problem. And then reality and life takes over and it's really, really hard to make a bigger, better world. And now you start to see the work that's being done in augmented reality and how we will be able to create our own world. It used to be, you'd close your eyes and you'd try to envision what something would be. And I'm being very sincere. When we were in the parade celebrating the Stanley Cup going down Constitution Avenue, I had seen that scene and shot in my head. I could picture it. It's one of the things that drove me, but it was in my mind's eye.

I believe in a few years you'll be able to envision that world and start to populate it and you'll start to live in it. Just as we used to watch TV to numb us, TVs used to be turned on eight hours a day. That's unimaginable today, right? That you would have a TV on for eight hours a day, but in an augmented reality world, you can, you can imagine, you can invite people in. You can start to create that world. And if it takes 20 minutes a day, an hour, a day. But I can see now how you can say, well, I can't really change this world enough, but I can make for me, my family, my friends, a world that can be shared. You want diversity, you want no smog, no pollution. You can now experience that. That might be how people take their next vacations, how people recharge.

It might be the greatest communications tool. I just can't imagine how big that industry will become in using augmented reality to create your own worlds. I think recreationally probably be the new drug, right? Instead of let's go get high and see these poor people being so addicted to painkillers and the like, it'll be, I'm just going to go to a happy place or better world and I really think that healthcare will be changed. Insurance industries will be changed and so we're just at the dawn of this new era, but augmented reality would be the next big thing.

LS: Thanks for your time today, Ted. We appreciate it and we're looking forward to experiencing all these new innovations.

TL: Thank you.

LS: Join us next time to explore more trends and signals from culture. And remember, subscribe to our podcast to get all of our latest thinking. The Magpie podcast is brought to you by Brandpie. Brandpie is an ideas business that uses the power of purpose to help clients transform their brands, cultures, strategies and business models. Brandpie creates impact by integrating purpose, brand, advertising and engagement.