Cat & Mouse With Tom & Jerry
In a rare joint interview, pro sports moguls Tom Hicks and Jerry Jones talk frankly about cash flow, egos, and salaries—their players’ and their own.
Jerry Jones and Tom Hicks are rare birds: professional sports team owners who—at least in Texas—are as famous as their players. The often-grandiose exploits of the 56-year-old Jones, a former Arkansas businessman, have been chronicled by the media ever since his infamous press conference in 1989, when he boldly announced that as the new owner of the Dallas Cowboys he would be in charge of everything from the salaries of his superstars to their “jocks and socks.” The 53-year-old Hicks, the co-founder and CEO of the voracious Dallas-based investment firm Hicks, Muse, Tate, and Furst, tries to keep a lower public profile, but since his purchase of the Texas Rangers in 1995 and the Dallas Stars in 1998, he too has felt the glare of the spotlight.
Both men have proved that they can build winning teams: Jones’s Cowboys have won three Super Bowls, while Hicks’ Stars just won their first Stanley Cup and his Rangers inch ever closer to an American League championship each year. Yet despite their similarities—they’re both extraordinarily competitive, they both own mansions in Dallas within a couple of miles of each other, they both love custom-made cowboy boots—Jones and Hicks don’t know each other very well. “We haven’t had a lot of opportunities to compare notes,” Jones admits.
Until now. In mid-July Texas Monthly Biz got the two men together at Hicks’s office to discuss the business of sports—a business that is often difficult to understand, even if you write the checks.
Texas Monthly Biz: Mr. Jones, when you bought the Cowboys, they were reportedly losing $1 million a year.
Jerry Jones: That’s $1 million a month.
TMB: A month?
JJ: $1 million a month in cash flow. Tom wouldn’t be very proud of me if he reminds himself of what kinds of business decisions I made when I bought the Cowboys. As a matter of fact, Tom, I think you told me one time that you briefly took a look at purchasing the Cowboys before I did, kind of surveyed the land on them, and decided they didn’t look too good.
Tom Hicks (smiling sheepishly): I didn’t know enough about sports then to appreciate their hidden value.
TMB: I have heard rumors, Mr. Jones, that you are now making as much as $20 million a year off the Cowboys in operating profits.
JJ: Let me just say that it’s a real source of pride to be perceived as being financially sound and successful.
TMB: Well, considering in large part the things you’ve done, such as fighting the NFL so that you could make your own deal with Pepsi to advertise at Texas Stadium, isn’t it true that a professional sports team owner can now make money hand over fist?
JJ: No. Don’t confuse cash flow with profits. The money we are making is going where it ought to be going, and that’s back to the players on the field. I’ve spent more on up-front cash bonuses—not salary, but cash bonuses to the players—than it cost me to buy the whole football team, which was about $170 million.
TMB: What about you, Mr. Hicks? Is it true that the Stars and the Rangers, despite their successful seasons, are not making any money?
TH: On an operating basis we’re losing money.
TMB: Even with the Stars winning the Stanley Cup this year, you’re not going to make a profit?
TH: If the Stanley Cup had gone to eleven games, I think we’d have made money. But at least we’re going to lose a lot less than I thought we were going to lose at the beginning of the season.
TMB: So why do you do it? Surely you can find better investment opportunities.
TH: I’m building value over the long term. The Cowboys are the perfect example. When they got started as a franchise, they had very poor attendance in the Cotton Bowl, and it wasn’t clear that they were even going to survive. But over the years they got great players and bonded with the fans, and they created a franchise that today is probably one of the top in football. We’re trying to do that with the two sports I’m involved in.
TMB: But aren’t you also planning to create a unique sports-media empire that could make you a great amount of money?
TH: Yes, we’re starting to integrate the management of the two teams so that many functions can be done by the same person. Then we’ll have all of our teams on the same cable network, and we’ll own the vast majority of the network. So we’ll try to provide a strong sports venue for the people who want to watch sports other than football.
TMB: What aspects of running a sports franchise were you not prepared for?
TH: The first thing was the public notoriety that comes with owning a franchise. There is an invasion of your privacy and an invasion of your family’s privacy, but that’s the pact you make with the fans.
JJ: I was not prepared for the negative criticism. I thought that when somebody came into the community and made a $170 million equity investment in a football team, people would say, “Boy, we’re glad to have you aboard.” I wasn’t prepared to have my butt kicked the way I got it kicked personally at that time. It surprised me. But it was probably the best thing that ever happened. It toughened me up and made me realize that I shouldn’t make any decisions around here based on how they look in the newspaper, because fans and the media are going to kick your fanny anyway. The criticism just made me even more driven to want to show ’em, to try to do better.
TH: I think the other thing I wasn’t prepared for was the rapid escalation of players’ salaries caused by my fellow owners. You’d think they would have more sense than to pay what they do, and of course they probably say the same thing about me. But I think the owners of the two sports I’m involved with have allowed salaries to escalate a lot more than I would have thought.
TMB: You two sound like fans. You’re really shocked about the size of salaries and signing bonuses?
JJ: When I signed Deion Sanders, in 1995, I gave him a check for $13 million. But before I gave him that check, I flew back to the modest area of Arkansas where I grew up, and I walked around the block. I saw the same cracks in the street that I saw when I was eleven years old. I just wanted to get my feet on the ground and reflect back on what $13 million really meant, because the decision was bothering me. Today the numbers are far beyond anything that I could have ever imagined. But I know that if we don’t operate in that territory, we can’t go to the Super Bowl. It’s a little like pulling a ten-pound bass on a two-pound test line. The art is to win the Super Bowl and yet not lose your fanny.
TMB: And you both make all the decisions about who is signed and for how much?
JJ: Traditionally we’ve said that the coach says who plays or that the manager decides who gets to go out there on the field. But that’s not the real world. That’s not how it is. I think what we’re talking about here has evolved, and it has a lot to do with the magnitude of the decisions and the financial well-being of the team. Mistakes in this area [in which a team signs the wrong player for too much money] can tear up a franchise for years to come. Coaches and managers and people like that—the ones who made the decisions—can be a thousand miles away two years from now, and the people who have to live with those decisions are the fans and the owner. So you can’t have that done for you. You’ve got to be there.
TH: I think that’s right. If you sign a long-term contract for pitcher Kevin Brown for $105 million, like the Los Angeles Dodgers did—well, that’s going to have an impact on that franchise for a long time. So I can’t imagine being the owner of that franchise and not getting deeply involved in that kind of decision.
TMB: Mr. Jones said that he absolutely had to have Deion Sanders. Mr. Hicks, are you the type who says the Rangers must have a particular player? Do you put your foot down and say, “Let’s go do anything we have to do to get him”?
TH: No. I said I will make the money available for us to try to get a number-one starter [for the Rangers]. I did push real hard to get Roger Clemens, but the day-to-day discussions were all handled by the team’s general managers.
TMB: Do you two have formulas when you make these big-money hires in the same way you have formulas in your other businesses—the kind that will predict what rate of return you might get on a certain investment? Can you prove to yourself that putting so much money into one player is worth it?
JJ (laughing): You know, I make those decisions instinctively, and then I come back for days and try to justify them using a formula so that I can sleep.
TH: I also do it instinctively, and then I say I’m investing in the future.
TMB: We always hear about the players’ salaries. Are you ready to reveal for the first time what you are paying yourselves for running these teams?
TH: I’m an unpaid owner. I have a day job running what’s now the largest private equity firm in the world.
JJ: I don’t really get a salary that’s meaningful. I’m the lowest-paid member of my management team in my front office. I think it’s fair to say that I’m in the high five figures or low six figures.
TH: So you make less than half as much as a second-string pulling guard, and he’s making more than $400,000 a year.
TMB: What percentage of time, Mr. Jones, do you spend away from football on your oil and real estate businesses?
JJ: I spend probably 15 percent of my time on outside businesses. It might be interesting to note that those businesses have really prospered since I started spending 15 percent of my time on them, as opposed to when I was spending 100 percent of my time on them.
TH: And I spend only about 15 percent of my time on my sports businesses.
TMB: Do you wish that you could spend 85 percent to 90 percent of your time on sports?
TH: No. I think that when you get old, you finally get real comfortable with who you are and who you’re not. I came to learn a long time ago that I like to be involved at an oversight level in a lot of things, rather than being deeply involved in any one thing.
TMB: Be honest. Regardless of the negative attention you receive, don’t you enjoy the ego boost that comes with owning a team?
TH: Well, you have to or you wouldn’t get in this business. I’m a very competitive person, even when I’m playing golf. I can’t help that. It’s just the way I am, and I dare say Jerry is very much the same way. So I like to win at whatever I do, and I usually try to make sure I do. So sports is great, because it gives you instant feedback. Either you win the game or you lose the game.
JJ: Owning a team is not quite the same as owning your own oil and gas business or owning your own house. Maybe it’s because you probably never really expect to get a dividend in terms of dollars and cents. There is a lot in me that never feels like I “own” the Dallas Cowboys. A lot of that feeling has to do with the fact that the Cowboys have been here almost forty years. It’s almost like you can’t own the University of Texas or you can’t own Notre Dame. Sports teams really are a product of the fans, the players, the coaches—that kind of thing. So I just hope that someday people might look back and say, “When Jerry had his turn with that franchise, he used his skills the best he could, and he did a pretty good job.”