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CNN Live Saturday

Financial Scandals Affect Sports World

Aired August 03, 2002 - 18:20   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL LIN, CNN ANCHOR: When you sit down to watch sports on TV or go to a game, you might not think recent business and accounting scandals have anything to do with what's happening on the field, but they might.

CNNfn sports business analyst Rick Horrow joins me from West Palm Beach to look at how the scandals affect the world of sports and sports fans.

Hi, Rick, good to see you. Thanks for being here.

RICK HORROW, CNN FINANCIAL NEWS CORRESPONDENT: Good to see you. How are you doing?

LIN: All right, we talked about the Adelphia Regis family, which owns the Buffalo Sabers hockey team, AOL/Time Warner, the parent company of this company, CNN, and the Atlanta Braves. AOL under investigation by the Justice Department. Am I missing out on anybody else? I think the San Diego Padres also theoretically targeted for investigation?

HORROW: Well, John Moore is the owner...

LIN: Yes.

HORROW: ...was subject of a June 13 suit by some of his investors, saying the $611 million stockholder valuation was caused by some accounting issues. So yes, you missed him.

LIN: All right, so, you have a situation here where if the owner's personal wealth is built on a house of cards, that then what does it mean to sports fan and the sports teams?

HORROW: Well, the first thing, as far as corporate spending specifically, you know the NBA, NHL, all those leagues have very specific procedures to try to insulate the individual owners from the operation of the team. When the Regis family was led away in handcuffs in Buffalo by the Justice Department after Adelphia went bankrupt, Gary Bettman, the NHL commissioner went to Buffalo the next week and said we're running the team until a new owner is found. Don't worry about the operations.

Yet there's a psychological impact. It is not inconsistent and it is not coincidence that there have only been 6,000 seats or season tickets sold by the Sabers. And so, that's the lowest amount in a number of years.

So there is a perception as far as ownership is concerned. That is a big issue.

LIN: But you're saying that the team itself is protected. For example, when the owner -- if the owner does emerge from bankruptcy, there is no effect on the team or the fans.

HORROW: Well, the league takes it over. There is a specific bankruptcy procedure. If the Moores issue involves the Padres, then major league baseball has some procedures, where they take the team back, and they can really then sell it, hold it, run it. So usually, the team is protected in the very specific instance.

Now perception, that's another matter.

LIN: When you talk about perception, I mean, one glaring example was when, you know, Enron Stadium, you know, there was the embarrassment to Enron where the city wanted their name removed from the stadium. And Minute Maid finally took over, but that had to be embarrassing. I mean, is there a price to pay when you get in bed with corporate America and you start naming your stadiums and the image of the team is linked with the scandals?

HORROW: Yes, well, the price to pay -- the flip side of that is the revenue that's generated. You know, North American Corporation spent over $9.5 billion last year in events naming stadiums, et cetera. And $4.1 billion over the past decade is from naming facilities. Now those are dollars that taxpayers don't otherwise have to pay. So that's a good thing.

Specifically, Enron spent $100 million that now has to be found by somebody else. It's going to be Minute Maid in Houston. And of course, Adelphia has spent $30 million to name the coliseum in Nashville for the Houston Oilers that then became the Tennessee Titans. And so, they had to find that money somewhere else.

So naming dollars are still coming in. FedEx just spent $90 million for a new arena in Memphis. So it's not the fact that there won't be the naming deals in the future. It's just that there have been 250 stadiums and arenas done and now 50 more in the future. And so, it's harder to find those corporate dollars if many of them are going to be targeted for investigation.

LIN: Mm-hmm. How about the Corporate Responsibility Bill, which just passed and was signed by President Bush? Do you think this is going to have any, you know, play out in the sports world?

HORROW: Well, I think what it does, is it affects options and it affects the future of the market. And I'm not Kreskin, so I'm not going to predict how that plays out, but the bottom line is it'll narrow the pool of owners that are available in the future to be able to buy franchises.

Now Mark Cuban, Broadband, a sports pioneer, Internet pioneer, had $200 million of disposable income available to him to buy the Dallas Mavericks. Those owners may be few and far between in the future.

And for example, a good business investment like the NFL, Arthur Blank, the owner and founder of Home Depot, spent $525 million to buy the Falcons. The problem is, if it's not a good investment, if there's some discretionary income, you may find the pool drying up. There may be less buyers out there than there used to be.

LIN: Mm-hmm. All right, well at least it's good to know that they're going to continue to play ball while this plays out on Wall Street and at the Justice Department. Thank you very much, Rick Horrow, for joining us today.

HORROW: Thank you very much. We'll see how this all plays out in the future.

LIN: We'll keep our fingers crossed.

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