Chief Future Officer: Peter Biché, Monumental Sports

Monuments are not built in a day. Ted Leonsis laid the foundation for his sports empire in a different era.

When I first bought the Washington Capitals, no one had computers. It was a facts generated just facts as would be blow it all over the place.

As analog gave way to digital, Monumental Sports and Entertainment took form. In twenty ten, Leonsis bought the Washington Wizards, along with DC's Downtown Sports Arena. Since then, Monumental has added teams, opened more venues, invested in new ventures, and broadened its reach with media networks. Financially, it's a whole new ballgame.

We need very sophisticated financial management to make sure we're getting the right yield, make sure we're not too far over our skis in terms of cash investment. The demands on the CFO have heightened as the stakes have increased, the valuations have increased, the revenues have increased, The demands by the fans have increased.

The executive Lyons's trust to meet these demands is Peter Bische. He's been Monumental CFO from the very beginning. The CFO role is the only one you've had here. You essentially defined created that position.

I suppose some might say it's a dead end job.

I've been CFO forever with absolutely no advancement or a title change.

BChE serves as CFO of the Capitals, the Wizards, and the entire group of teams, facilities, and networks. Monumental owns and operates. He's instrumental to an enterprise currently valued at over four billion dollars.

It's gotten larger, a lot more zeros on the numbers I deal with and have. It may have been the case in the past, and so the pressures financially are different.

Peter's like a partner and not only a thought leader and help him with strategy, but he likes to spend the money like it's his. I'm more, let's scale, let's grow, let's go, go go, and Peter's more well, let's aim and target and think that through and run the numbers before we dive in.

Make no mistake, ted Leonsis has Monumental moving forward.

Ted is very much and has always been in his prior life, and this one sort of growth more.

Let's see around the corners, what's coming. How do we take this business into.

The next century or whatever.

Obviously we need we have our car business, and we need to have games here and all that sort of thing.

But what else can we do? How do we grow the platform?

So you've had to learn to see around corners as well financially, at least.

It's part of what you have to do. It can't be the same old, same old. It can't be the same as yesterday.

And our mission, our goal is to build the world's most valuable regional sports and entertainment company.

We've been growing double digit.

Most sports teams are growing six seven eight percent.

Monumental's two most valuable properties are the NHL's Washington Capitals and the NBA's Washington Wizards. They're also the most expensive to maintain. The biggest budget item player compensation, but at least that number is predictable as each team operates under a salary cap set by the league. Is the fact that you have the salary cap structure and gms deal with a lot of what that ultimate dollar figure should look like for you up to focus on the other areas of the business.

Yeah, you know, tag is lead is this and I'm involved sort of set the big number for them. Spend of the cap, spend more or less whatever than numbers, how it gets spent as.

Really up to that, I don't get a vote.

I don't really think Ted gets a vote on who they draft or trade for.

We leave that to the pros.

Well, you get to sign the checks. What was it like signing a.

Third signs checks anymore? It's all it's all by a wire.

So so that's okay sending a wire. Then thirty four million dollar bonus check to Alex Ovechkin, what does that feel like?

Now?

It makes for interesting cash planning when you have a big number like that, and we have a number of players who get their salaries and very lompy amounts, but it just you plan your cash around it.

Paying out massive bonuses is the cost of competing in pro sports. And when Alex Ovechkin and the Capitals hoisted the Stanley Cup in twenty eighteen, the return on investment was crystal clear. But when the cheering stops, it's back to work. Beyond salaries, Ask CFO, what are your big line items? What are you thinking about on a daily basis?

The other big spends for us where I spend a lot of time thinking is really on some of our capital projects as opposed to what day to day spend on whites or whatever. And then, of course the corollary is, if we're going to spend that money, where do we get it, How do we fund it?

How do we finance it? Is it from operations? Is it from borrowing?

What does our capital stack look like, what is the appropriate amount of leverage?

And those sorts of things.

Monumental has put a lot of resources into its flagship venue, Capital One Arena. In addition to capitals and Wizards home games, it hosts college sports, concerts, and family shows over two hundred and twenty events a year. Monumental fully owns and operates the facility most of the time. That's an advantage.

Basically, during the pandemic art building was shut. That was a very sobering feeling. It wasn't like the bank said, oh, you don't have to pay us the mortgage.

Or pros and cons. It's a bit more expensive to own it because often in more public private partnerships, the public entity has some responsibility for maintaining.

Because we own it, because we control it, a.

Lot more nimble, as much as you could be nimble with a million square foot building, we're much more nimble, owning it and running it ourselves.

We've had our best year ever.

The concert businesses off the chart, the ben businesses off the chart. We hosted a professional boxing match. It was our best gate in our twenty five year history. We put three million people through the building.

The resurgence of live sports and entertainment in the last two years has been accompanied by high infleetion, putting a spotlight on ticket pricing. That's another area that's changed for the CFO, the.

Whole ticket pricing process.

It used to be very yellow sheet of paper, maybe some numbers around. It was not a lot of science behind it. We're now in the world and have been for many years, as most other similar businesses are. The dynamic pricing, so our pricing for a seat may change hourly if we see demand for that. We will price aisle seats different way that lead to price center seats. We will price seats at the end where the hockey team shoots twice differently than at the end where they

Few revenue streams and sports have as much growth potential as media rights. In twenty twenty two, Monumental acquired full equity ownership of NBC Sports Washington. It plans to rebrand the Regional Sports Network and develop it into a versatile platform for distributing games and other media products.

The RSN model, where they get full distribution in a city or a state is.

A broken model.

Most of these local teams want to control their own consumer, build their own consumer, and control that information and the experience.

My background is in digital distribution of content. There's a lot of on trend development happening direct to consumer, and I felt that it was probably a wise thing for us to do to reclaim our rights. We grow our market, we'd have freedom to innovate.

What Ted has done in his Monumental team is created this flywheel where you own the team and you own the marks. You owned the logos, you own the building, you own the the RSN, you own the social sites, you own, you own all the content. And if you do that, there's a tremendous flywheel for brands and sponsors as well as the fan experience.

I think it will give us the opportunity to add categories UH of product. It will offer us ways.

To slice UH the product differently than when we had a single channel and a single way of distributing it.

We think having it in house is critical.

Peter worked with us and our investment bank at Lion Tree. We said, let's finance it. Let's show that the cash flow can pay down the debt.

It dramatically grew our revenues. We were able to do.

An additional equity financing and paid down the debt. And so while it looks like a smart strategic move, it's also turned into a very very good value creator top line, bottom line and for overall valuation.

As an enterprise.

Monumental's valuation could take another leap higher if leonce'spuys the Washington Nationals. The Washington Post reports that he's offered more than two billion dollars for the Major League Baseball team, which is not officially for sale. The purchase of another DC sports franchise would certainly fit the Monumental model.

We are definitely in growth mode.

We view this as a platform onto which we can add different things. So we see things all the time. People show us things all the time. I am heavily involved, particularly because of the strategy issues and funding issues and ROI calculations.

And that sort of thing.

We'll never go into anything that's not pretty closely related or most likely not in our region. I think we're very legionally oriented. There are other sports collectives that have

Have you ever run the numbers on something like that? Though, like a European football soccer team.

We have been shown more teams, more EPL teams than I might have imagined could be for sale, but we just couldn't figure out where we would add value.

Monumental sports and entertainment has become a towering presence in Washington sports, with the Capitals, the Wizards, and the cities Downtown Sports Arena among the holdings. And while CEO ted Leonsis and CFO Peter Bisha both have a long history with DC as they both graduated from Georgetown University. Bishay started his professional career on Wall Street.

Worked for one of the big old houses in New York, the Old Original, not the two thousand and eight bankruptcy Lehman Brothers. Ended up doing a lot of sports related work while I was there, a lot of sports related m and A work buying and selling, advising people on buying and selling sports teams.

Did a lot of work with those same owners.

Developing financing building arenas, and so became an expert in that area.

Bija left finance to work for a Poland's Washington Sports and Entertainment Group in the mid nineteen nineties, joining Monumental at its inception in twenty ten.

I'm a sports fan like many people are.

So to be the CFO for a couple franchises to be built new arena was a tremendous opportunity from psychic income. In addition to come to work in an arena every day.

The arena that Peter Bische comes to work in today has gone through many changes since it's opened in nineteen ninety seven. In the last five years alone, Monumental has invested nearly seventy million dollars in renovations and upgrades.

That had aged z not because the building had gotten old, but because the way people consume sports, the way our fans at ten games, what they expect when they come to events has changed pretty dramatically. It used to be you know, fixed seating, sit in a line, buy a beer. And we have found, particularly with our younger fans, they expect a lot more than that. They want something more experiential, they want something more targeted towards them.

It wasn't about making it shiny and new. It was about utility.

It was about operational and revenue.

Of course, some of the enhancements are shiny and new, like the huge center hung.

Scoreboard sort of has two purposes.

One is information to fans, scores, stats, and that's the middle and video in the upper middle. The other big part of it you can see elsewhere, is advertising sponsorship for us, my sponsors obviously love it.

It's bright, it's high depth.

Now that you have all of this, how much has your revenue per game in terms of advertising gone up because of all of this.

So whenever we do a major spend like this, and this is about ten million dollars for the center hung and all the signage. We of course run an uri, not any typical thing to do, and I think our return on this in terms of incremental dollars, not just existing but incremental.

Was about two years.

So we added about five million dollars of revenue to get a two year payback.

So it's it's a no brainer for us to do.

Investing in the fan experience inside the arena qualifies as a no brainer, but Monumental has made other bets with longer odds.

I just had a firm belief that the sports industry would continue to grow the value of the teams would continue to grow, and we should invest while everyone else was trying to hoard.

We first made an investment in a company called sport Radar back in twenty fifteen, prior to when sports betting was legal in the United States. As we learn more and more about the European markets, how they were regulated, in the success that they've driven, we really became an evangelist in the United States for the legalization of sports betting. Generally, we held hearings on Capitol Hill with sports Radar to advocate for it.

A Supreme Court decision in twenty eighteen struck down the federal ban on sports betting, the District of Columbia made it legal in twenty nineteen, and in twenty twenty, Capital One Arena became the first US sports venue to officially open a sports book.

It's driven by fan engagement.

How do we engage with our fans in ways beyond just sitting at a seat and watching our game.

Since we've opened it, there's been almost three hundred million dollars that's been bet downstairs. And it feels like an Apple Genius bar or something. It's very all Bloomberg. It's got terminals everywhere, it's got TV screens everyek, and so I'm very proud of making those kinds of investments when it seemed very dark and dire, and now it's paying off.

I think sports betting is going to be dominant here in the US because it's fun and so if Ted, which very smartly put a sports book in his arena, that's another way to connect with your consumer.

And I believe that's going to be a very good business to be.

Under NBA and NHL rules, the company can't receive revenue directly from betting that's entirely handled by its partner, Caesar's Monumental's profit comes from food and beverage sales, and the venue brings customers to the facility year round.

You can come here whether we have an event or not, a game or not eat Wager.

In early twenty twenty three, Monumental opened District Eat, a live event theater focused on esports. Is another avenue for fan engagement and another indicator of Monumental's appetite for innovation.

We made an investment in that just because we knew that was the that it was not as big in the US as it has been in Asia, but it was common and in a big way.

People are really starting to understand that gaming as a platform is looking more like traditional sports entertainment postht pandemic.

People want to get back to in person gathering and being more digitally focused, tech savvy, even more aggressive. Doubling down on a lot of our already existing commitments made a lot of sense to us, and I think District fits that mold.

Monumental in particular exceptionally brilliant at ensuring they own kind of the vertical revenue streams that can exist with having both facility those in person events, their teams that can compete in that facility as well as other events and opportunities to monetize not just with their team and their competitions.

You have any sports NBA team and coffee team, they require their own infrastructure and support. I would imagine what are those inflows and outflows like.

So it's not quite on the scale of an NBA team's, at least in this market.

But we have players, We draft players, we trade for players, we signed players, and then there's a whole business process around it as well. You have the team side, but they're sponsorship. You look around, you'll see a lot of the same sponsors that have signage.

In the building.

So it fits in really well with what we're trying to.

Do with a Washington Capital Stanley Cup in twenty eighteen and a Washington Mystics WNBA title in twenty nineteen. The Monumental sports and Entertainment family of teams has delivered great moments on the ice and on the court, and as an investment, it's returned solid value.

I paid eighty five million dollars for the Capitals. You know, maybe it's a billion and a half plus.

I paid three.

Hundred and fifty million, four hundred million for the Wizards. Maybe it's four billion. So now these have become growth stocks, if you will.

With the exception of corporate giants like Madison Square Garden, it's been rare for US sports organizations to go public, but that might be changing. Do you see a future for Monumental as a public company?

Yeah, I think so.

I think what we found is the leagues have opened up to new pools of capital. Over the last year or two, both the NBA and NHL have allowed professional investors to come in, not as individual owners, but as fund So that's a whole new pool of capital it didn't exist before. Sort of shows a whole new asset class opening up for professional sports, not just caves, but professional sports enterprises.

I think the sophisticated analysts will be looking at this industry and as our revenue start to get in the billions of dollars, yeah, I think that you'll see a wave of companies go public, whether we will or not. There's a big responsibility when you're a public company, and I tell people where a public company already. The scrutiny that you're under and running a sports team is I think much higher than a public company. CEO has to live with we'd be prepared to do it.

Just the mark would have to be right.

We'd have to emotionally be ready to do something like that. But I think Monumental will be one of the three four five best in class organizations that if the time was there, sure we could go public.

For now, Monumental is focused on reaching a milestone one billion dollars in annual revenue. The CFO has confidence his team will get there, but he sees work to do beyond the numbers, to.

Do the things that we taught acquisition going public. CANi Lee, we need up our game a little bit. We've we've the business has changed a lot in the last twenty years, but I won't say, at least in my area, we're the most cutting or cutting edge organization from a financial planning and analysis part of it. We need to up our game there. We've uped it in certain areas. I think we can up in my area as well.

So I'll put it on me. I won't point fingers in anyone else.

Peter bishe has his eyes on the big picture, not just charging forward, but seeing around corners. I asked him what that future looks like. What is the opportunity for Monumental in the next five years that most excites.

You an acquisition to be personally CFO of an NBA team, CFO of an nhlteam, CFO of a wnbaight, CFO of another major league team, that would be that would be pretty exciting. So personally, I think also taking advantage of the platform, proving the case that we could plug something in and have it create value beyond just whatever.

We paid for it.

I think that would be exciting as well, sort of proof of concept that the platform has value and can create value.

I think that would be exciting as well.

About what worries you? What are challenges that the organization faces in the next five years that keep you up at night?

I suppose the corollary to what I said earlier was.

What if we're wrong, what if an acquisition is not value creating as we hoped. I don't worry a lot about that because I really do believe and what we're trying to accomplish.

What is the skill set or area of knowledge that you think is going to be most useful in your role as CFO in the next five years.

I think for me it will be understanding our consumer that's changed so dramatically over the last decade, how they consume us, how they want to consume us, how.

We get to them and reach them.

It's the demand on that is much greater than it's ever banned because they have so many other distractions. So even for the CFO, understanding what our consumer wants, what our customer wants, it's changed. How we deliver its changed will change. I think I need to be up to speed on that.

If someone got promoted to CFO today, what would your advice.

Be for them?

I think this is probably typical. Know the whole business.

It's easy that it can be easy to sit in your office, look at your spreadsheets, look at your data, and sort of live in that world.

If you're going to be a good CFO, a.

Good advisor, and the senior team a good advisor to the chairman, you need to know a lot of stuff beyond just the numbers coming out and seeing how things work, seeing how the fans are moving around, seeing how their experience in the building, going into our studios and seeing how that's working going into the district e. I think appreciating that back of house kind of stuff, the real

To have a very broad understanding.

It's not just about debit's and credits and digits and dollar signs.

I'm Keiley Liones. This is Bloomberg sp