(FORTUNE Magazine) – It's hard to recall the exact moment the epiphany hit me during my recent mind-boggling tour of the Dallas sports-business scene. Was it while dot-com billionaire Mark Cuban was simultaneously leading cheers, signing autographs, and counting the house at his Dallas Mavericks NBA game? Was it when Arkansas wildcatter and Dallas Cowboys owner Jerry Jones was describing his plans for a new, 100,000-seat stadium that would beg comparison to the Colosseum of Rome? Was it when I donned a hardhat to tour the city's new arena, which will turn LBO artist Tom Hicks' Dallas Stars into the NHL's No. 2 revenue team and could turn the adjoining 58 acres he's co-developing into a bonanza? But hit me it did. Hey, I thought, what a great business!

You'd never know it to read the headlines, which forever poise sports at the precipice of ruin. Owners decry high salaries; commissioners wring their hands over the small markets; TV networks report lower ratings; taxpayers deplore arena and stadium subsidies. And yet...Major League Baseball struck a six-year, $2.5 billion deal with Fox last fall, a 40% increase for its national TV package. Some $3.5 billion worth of MLB and NFL stadiums are opening or under construction this year. The price of an NBA doormat franchise like Dallas climbed from $125 million to $280 million just from 1996 to 2000; the price of an NFL expansion franchise multiplied fivefold, to $700 million, between 1993 and 1999. You'd rather be in tech?

The buyers of these teams are Forbes 400 individuals, moreover, not FORTUNE 500 companies. Media and beer companies once seemed destined to take over the sports world, but the bloodless corporation proved no match for the passionate individual in this realm. Run a conventional discounted cash-flow analysis for a sports team and you will run for your life--or your shareholders will run you off. The fact is, it's a crazy business, and you have to be a little crazy to succeed in it. Call it the triumph of the Steinbrenner model.

A gifted shortstop named Alex Rodriguez wears a Texas Rangers uniform today not just because he was offered $252 million but because he clicked with team owner Tom Hicks (who has both the city's NHL and MLB franchises). "With corporate ownerships, you can get lost very easily, not knowing who's who, what's what, who makes decisions," says A-Rod, who never met the Nintendo elders who controlled his previous team, the Seattle Mariners. "But here, I felt you have a direct avenue to the boss."

The boss has to come equipped with attitude to make it in today's sports business, and that makes Dallas a perfect laboratory to study this strange economic game. Messrs. Hicks, Cuban, and Jones operate their teams with the same elan that enabled them to accumulate their core fortunes. Their modus operandi: Innovate and infuriate. The stakes are simply too high to stick to the "sportsman" model of yesteryear. A look at this unholy trio explains why sports ownership evolved as it did in the '90s and portends where it's headed. "All three of these individuals are case studies of why the independent, creative, visionary entrepreneur has the advantage over the cumbersome, huge conglomerate," says Dean Bonham, a Denver-based sports-marketing consultant, who supplied us with the following scouting report.

Jerry Jones: laid down the template for the modern sports owner, though he's also a throwback to the traditional old-style proprietor-owner, as general manager and chief salesman of the Dallas Cowboys. He redefined stadium economics and challenged all the NFL's business assumptions, from corporate sponsorships to TV deals. Comment: "Jerry is a traditional owner, but the most effective owner there's ever been in building and capitalizing on a brand."

Mark Cuban: Tech instincts unlock new sports opportunities. His Broadcast.com developed audio streaming on the Internet; now he's produced the NBA's first international Webcast, with Mavs' play-by-play in English, Spanish, and Mandarin. What kind of a market might China be for Mavs merchandise, with a center like Wang Zhizhi? That's the way Mark Cuban thinks. Comment: "He's not just a visionary; he's a revolutionary."

Tom Hicks: the Dallas owner who runs his teams at the greatest remove, but whose influence may prove the most profound. The leveraged-buyout artist reveals how to artfully leverage sports: parlaying two teams into one big TV deal and turning two sports facilities into related real estate developments. Comment: "Hicks is creating the ownership model for the 21st century: a synergistic conglomerate built from the ground up."

But Messrs. Jones, Cuban, and Hicks don't operate in a vacuum. Their bold actions expose a fundamental contradiction and problem for the business. Leagues comprise interdependent teams, which increasingly are owned by fiercely independent, egocentric individuals. Sports' newer owners have made huge investments, and, in hot pursuit of payback, they make bold moves. But one owner's coup--signing A-Rod for $252 million, say--is another owner's despair. The salary scale for a whole league ratchets up; the financial bar to play this game is raised; and it's every mogul for himself. An owner can sit around whining about it and waiting to cash out. Or he can be like Messrs. Jones, Hicks, and Cuban and work it hard. Their mad forays set off shock waves that slam hard into teams whose cities aren't the size of Dallas or whose owners aren't ranked in the Forbes 400. But until the sports industry is nationalized, that is the way it's going to be: each team dependent on its owner's level of guts, money, and guile.

The Dallas owners enjoy an abundance of all three, of course, and for that reason the city's populace sure enjoys its owners. They are icons here, vastly out of proportion to their teams' business scale. Exxon Mobil is the biggest company headquartered in Dallas, with revenues topping $200 billion. But honestly, who the hell is Lee Raymond? (Answer: the CEO.) The Dallas Cowboys' revenues are less than $200 million, and who is Jerry Jones? Only the man who dominates Dallas' water-cooler talk and airwaves. All three, says sports-talk radio host Randy Galloway, whose callers discuss the owners endlessly, reflect "part of the atmosphere that made Dallas and Fort Worth. You plunge with your money."

Ownership here is such a splendid platform it could even propel one George W. Bush from a minor oilman to the nation's chief executive. As general partner of the Texas Rangers from 1989 to 1994, he so raised his profile and prestige that he was able to run for governor. After reaping a windfall from the club's sale--$15 million, on a $600,000 investment--he could afford to run for President.

It's the public notoriety, the freebase ego tripping, the love of the game, and a host of other motives besides filthy lucre that drive the filthy rich to sports--and that make this a whole different ball game from other enterprises. "There's an emotion, a passion you don't have in normal business associations," says Jerry Jones. "I just don't see cities doing ticker-tape parades for any entities other than war heroes, astronauts, and winning teams."

Jones admits he "danced with the devil" back in the late 1980s, when the Cowboys were for sale and he was an Arkansas oilman. America's Team was 12% owned by America's government, in the form of the FDIC. That reflected owner Bum Bright's banking problems and symbolized the franchise's sad state. It was losing $1 million a month and was projected to lose more: looking five years out, $25 million per annum, according to one consultant, who advised Jones to pass. Instead he plunged, buying the Cowboys and their Texas Stadium lease for $140 million.

He just couldn't help himself, as an old University of Arkansas lineman who loved football, and as a sharp businessman who believed a football team could be made to run like a business. "I felt I could get in and basically use the tradition and brand of the Dallas Cowboys to create value and create revenue," says Jones.

Jones horrified Dallas by firing venerated coach Tom Landry, replacing him with a novice pro coach, Jimmy Johnson, and stumbling to a 1-15 record his first season. But at the same time he was making a "bet-the-company" move that would soon turn around the team's football fortunes: He traded running back Herschel Walker to the Minnesota Vikings for seven draft choices and five players. The Cowboys would soon be restocked with talent and headed for the 1993 Super Bowl.

Jones was even quicker to turn around the Cowboys' business side. Texas Stadium was built with nearly 300 luxury suites, most of them, pre-Jones, unoccupied. He sold $30 million of suite leases in his first year as an owner, not only by building an aggressive sales force but by being salesman No. 1 himself. Jones recalls fondly how he and ol' Jimmy Johnson would "sit out there having a beer in the afternoon, talking with an individual about joining us by being a suite owner." And once the Cowboys were on the upswing, he could command higher prices from plain old tickets. Season ticket holders were required to pay a "seat option" of $1,500 to $15,000 to hang on to premium locations. Then, having filled up the original Texas Stadium suites, Jones added and leased 89 more.

Though an Arkansas interloper, Jones was on to something about Dallas. For the masses, football was a passion and this franchise an obsession. But for the elite, sports was to Dallas what the opera was to Vienna: a prestigious mingling ground. There was a huge profit opportunity in providing and pushing well-appointed suites, where Dallas' corporate elite could meet, root, and deal. "The business of Dallas is business," says Ross Perot Jr., a real estate developer and former majority owner of the Mavericks. "These suites are used for entertaining and for making contacts, and they're a valuable business tool."

Jones utterly changed the sports business in Dallas (which now has about 760 sports suites, more than any other U.S. city) and in the NFL. This had long been the one league that could level the economic playing field, evenly dividing TV money and splitting the gate 60-40. But Jones' surge of suite and other stadium revenue spiraled the Cowboys above the rest of the pack and helped fuel their three championships in the '90s. That set off a frenzy of franchise relocations, as teams like the Los Angeles Rams and Cleveland Browns moved to new cities with new stadiums.

The league's old-guard owners decried Jones as the cad who destabilized NFL-style socialism, but new ones adopted Jones as a role model. "For those of us who have paid full value, you have to work it, you have to look for ways to justify the investment," says Bob Kraft, who bought the New England Patriots for $170 million. "Jerry helped us understand how to do it. I think he knows how to sell the sizzle better than anybody I've ever met."

Jones saw the value embedded in his and other NFL franchises, which went way beyond conventional P&L measure. In the mid-1990s, when the NFL's network TV partners were moaning about losing money and wanting to reduce their rights fees, owners overwhelmingly agreed that their contracts should be redone. Not Jerry Jones. He argued vehemently that their TV rights were worth more. He finally convinced enough peers to prevent rebates. And when the upstart Fox Network suddenly appeared to aggressively bid for NFL rights, the league's TV revenue jumped 20%.

"The networks were basically saying, 'If we pay out 99 cents, we need $1 back in,' " says Jones. "Well, I used to be part owner of an NBC affiliate in Little Rock, and I knew better. A very experienced television guy once told me that it's drunks who make all the money at managing television stations, because they go out and buy programming that doesn't make economic sense. But what it does do is establish their brand, their station, and gets viewers going to that dial."

The same goes, of course, for the crazies who make all the money owning sports teams.

Tom Hicks isn't crazy. He's the straitlaced, straightforward, thoroughly sober-minded chairman of the Hicks Muse Tate & Furst investment firm. Those very qualities had long kept him away from the unruly sports business, even though he was a big sports fan. But Jerry Jones' fine madness helped convince him what a fine industry it could be. "I used to think sports didn't make economic sense," he says. "But seeing what Jerry did opened my eyes to what a well-managed organization could do."

When the Dallas Stars came up for sale in 1995, Hicks was willing to give hockey a whirl. The previous owner, a Canadian real estate developer named Norm Green, couldn't meet the fast-rising salary demands of NHL players and thus had no stars on the Stars. That didn't play well in a Sunbelt city with little indigenous hockey interest, and that meant the team was on thin ice. Green gave up and got $84 million for the team from Hicks, who entered with an exit strategy firmly in mind: Build up the team, build an arena, and cash out in five years.

Hicks was willing to lose $15 million to $20 million in the years before getting the new arena for which both he and the NBA Mavericks clamored. That was serious deficit spending for hockey, but Hicks quickly got the hang of it: Inject some pizzazz, drive the top line, and the profits would come. He bet the business on the likes of goalie Ed Belfour (a three-year, $10 million contract) and Brett Hull (three years, $17 million), and he was rewarded. By the time he was done, the Stars had moved up from the NHL's financial cellar to being the No. 6 team in payroll and the No. 6 team in revenues. Also, ahem, No. 1 on the ice. The Stars won the Stanley Cup in 1999, and Hicks' five-year plan went out the window.

The team not only had gone cash-flow-positive ahead of schedule, but had also provided huge jolts of adrenaline to Hicks. Sure, that breakthrough Dr Pepper LBO had been neat, but Hicks regarded the Stars' 1999 playoff run as the most exciting time of his life. He loved the emotion of the games (he gets to about 25 regular-season ones a year) and talking shop with insiders. "I've never met a more avid sports fan than Tom Hicks," says Steve Summers, a friend. "He can cite you all the statistics. He knows the seating capacity, the revenue, the gross for every team in the league."

There's hardly a discernible line for Hicks between sports and business. He can recite Ed Belfour's goals-against-average and the Stars' Ebida growth rate with equal facility. He uses the sport's glamour and his heightened profile to bag business for Hicks Muse. And he has managed to remember that the LBO firm is his core business. If an owner isn't going to go the full immersion route, a la Jerry Jones, he shouldn't go the meddlesome back-seat-driver route, a la Peter Angelos (the lawyer-cum-owner who's driven the Baltimore Orioles into the ground). For the most part, Hicks sets strategy, allots capital, and steps back to let his managers manage.

But when he sees a big opportunity, the big guy moves on it. In 1997 the Stars, Mavericks, and Texas Rangers were discussing coming together under one holding company. That couldn't be worked out, but it planted a seed under Hicks' Stetson. The Stars and Rangers had only modest broadcast deals individually, each in the bottom third of its league. But package the two together in the nation's No. 7 TV market and...ka-ching! Hicks made George Bush's Rangers group an offer it couldn't refuse: $250 million.

Hicks bought the Rangers in 1998 and assigned his top sports operative, Michael Cramer, to put together a regional network around the sister teams. Fox Sports Net Southwest, already working this territory, was alarmed at the development. It started making big offers for the Stars' and Rangers' rights, to forestall a formidable competitor. "They needed to cross a certain line before we became indifferent [about selling the teams' TV rights vs. starting the network]," says Cramer. That line turned out to be $550 million, the combined sum Fox paid for 15-year rights to the teams' games, both on cable and over the air. The Stars had tripled their TV money, the Rangers doubled theirs. Between the TV deal's yield and the bounty of a new (1995) stadium, the Rangers had vaulted to baseball's No. 7 revenue team.

That doesn't even include the 230 acres of real estate surrounding The Ballpark in the suburb of Arlington, on which Hicks will now develop a mixed-use real estate complex. He'd already learned the joys of sports-related real estate by going in with Mavericks owner Ross Perot Jr. on a similar 70-acre downtown complex, anchored by a new $350 million arena. But there he had a championship hockey team to lend luster to the neighborhood. In Arlington, he had a franchise that wasn't exactly steeped in the baseball tradition of the Yankees or Red Sox. The Rangers were the transplanted Washington Senators, winners of exactly one post-season game since their 1972 arrival.

So Hicks did what any Texan would do who lacked tradition: buy it. Last November he went hard after baseball's "it" free agent of the season, Alex Rodriguez. The shortstop barely deigned to visit the Rangers, who'd finished last in their division in 2000 and didn't fit his required profile of a pennant contender. "But when I met [Hicks], my mood changed drastically," Rodriguez told me. "I saw the passion and drive in his eyes. The common denominator is that we both feel like we're winners."

Hicks stepped out of his usual hands-off mode to drive A-Rod around the city in the owner's Mercedes, make introductions, and get testimonials from Stars and Rangers players, even giving him a PowerPoint presentation on the team's farm system. The 25-year-old Hispanic clad in Armani was thoroughly flattered by the 54-year-old Texan in Rangers-logo cowboy boots. "For a man like him to spend 2 1/2 days with me, drive me around, have dinner with his family--it was crazy," he says.

That's the very word the baseball men used too, when in the midst of their winter meetings in Dallas in early December, Hicks signed Rodriguez to a ten-year, $252 million deal. But even as they excoriated him as a spendthrift, Rangers fans bought 225 season ticket packages in the first three hours after the A-Rod announcement. That was just the beginning. Rangers officials expect a 10% revenue boost from the A-Rod effect this season. They expect an easier sell of The Ballpark's corporate "naming rights," which should fetch $5 million a year. And, of course, they like the chances for A-Rod City: those 230 developable acres.

Now it's Rodriguez's turn to take the heat for his $252 million--from the fans--but at least he has someone with whom to commiserate. "It's one of the best experiences I've had as a player, being able to sit down with the owner and talk baseball," says Rodriguez, though he adds that their conversations aren't confined to that. "I can ask my boss about real estate in Texas, and what better guy to ask than Mr. Hicks?"

We have indeed arrived at the strange day when, perhaps because of a convergence of net worth, owners and players have lots of common interests. Consider the most outrageous of all the Dallas owners, Mark Cuban. He has run on court to take part in a brawl; he has berated referees to the tune of $505,000 in NBA fines. He plays HORSE with his players at practice; he hits the weight room with them afterward.

He's got to be the world's most buff billionaire, I'm thinking as the 42-year-old owner walks into a Dallas TV station on a recent chilly morning, his arms bursting out of a T-shirt inscribed with the letters MFFL (Mavs Fan for Life). Interviewed on the Good Morning Dallas television program, he's quizzed about everything from his take on the stock market ("Unless you know exactly what you're doing, I'd stay away") to the prospects for a comeback by Charles Barkley ("There's always room for a big butt in the low post"). Then to business: good seats still available for tonight's Mavs-Timberwolves game; $5 discounts for students, says Cuban. "And if you come painted up in Mavs colors, we'll let you in free--my treat. Call 214-747-mavs!"

In the late '90s the team was sometimes known as the Mavwrecks. It hadn't been to the playoffs since 1990, and one of the team's few rabid enthusiasts was a hoops-loving dot-com entrepreneur named Mark Cuban. He was at every game, whooping and leaping and making a general spectacle of himself. After he sold his audio-streaming business, Broadcast.com, to Yahoo and cashed out with about $1.9 billion, he settled on the Mavs as his next adventure. "I sat in the stands like every other sports fan has done, saying I could do it better," he wrote me at the beginning of a long exchange of e-mail, Cuban's preferred interview medium. "Well, I decided to put my money where my mouth was and buy the team."

With his glib tongue, courtside antics, and propensity to shower his players with perks like DVD players in their lockers and masseuses on call, Cuban can give the impression that this whole ownership thing is a lark, no matter the $280 million cost (which includes $80 million for his stake in the arena). This infuriates the more sober practitioners in the sports business. "Cuban is a nightmare," says Marc Ganis, a Chicago-based sports-business consultant. "He's a caricature of the rich kid who doesn't care how much he loses, but whose ripple effects hit everyone who does care."

Yet the more I learned about Cuban, the more I saw how he works this as a real business proposition. The first thing he did on becoming owner was to triple the number of ticket salesmen and about double the number of corporate-sponsor salesmen. The second thing he did was vow to fire any of them who mentioned the Mavs' win-loss record. Not because it was an embarrassment, he said, but because they were selling fun. He even called 200 or so former Mavs ticket holders to pitch them to re-enlist, and, he reports, "I managed to convince a few!"

Before the Mavs even took their first shot of the 2000-01 season, season ticket sales were up 70% and corporate sponsorship revenues up 30%. Then, mirabile dictu, it turned out that this was actually a pretty good team. Twenty of their games have sold out, three times the previous season's number, en route to the playoffs.

Cuban does spend a lot of his time on the fun stuff--noodling with his coach and general manager, Don Nelson, about possible player moves, feeling out other teams on trades, and doing general "portfolio management"--figuring out the maturities and financial implications of each player contract. His tech skills have actually upgraded the team's scouting, as he's developed a method to digitize the tapes of opponents' games and convert them to CD-ROMs, which Nelson and his nine (!) assistant coaches can pop into laptops and analyze.

Team President Terdema Ussery is left to handle the business details, but Cuban constantly peppers him with e-mailed questions and comments (even down to explaining $700 expenditures) and conjures up new lines of commerce for the Mavs for everything from clothing lines to DirecTV subscriptions. He's not here to make a small fortune out of his big one, he assures me by e-mail: "The Mavs, like Broadcast.com, will be an ever-evolving selling organization, with the goal of leveraging all of our assets in order to make lots of profits."

What we may have here is the prototypical new-economy owner--watch the burn rate, build the asset, and thumb your nose at the sports lifers who don't get it. "He's crazy like a fox," says Todd Wagner, the co-founder of Broadcast.com. "He's one of the most astute business people you'll ever meet. People tend to look at the sideshow aspects, but there's a method to that madness. He's got a laser-beam focus."

Cuban's day that began with the TV appearance ended with a Mavs thrashing of the Minnesota Timberwolves before a delighted throng. As the team closed in on 100 points, they chanted "Chalupa! Chalupa!" In yet another promotion, Taco Bell has to provide free you-know-whats to every ticket-bearing patron when the Mavericks hit the century mark. They did, and as the victorious team left the court and autograph seekers mobbed Cuban, the ownership life indeed seemed good.

Just one thing, Mark. The people who sing your praises tonight at Reunion Arena will one day denounce you on sports-talk radio. It's a cyclical business, and the fans put an owner on a pedestal in good times and make him the lightning rod in bad. It's also a zero-sum game, where one team's advance is almost surely another's loss. Just look at Jerry Jones. He owned this town when the Cowboys were Super Bowl regulars; now, with the team's having fallen steadily to last year's 5-11 record, he's being disowned. In a Dallas Morning News poll late last season, 62% of fans said Jones wasn't the man to rebuild the Cowboys.

With fan "approval ratings" so low and sports columnists so acid, Jerry Jones could be excused for just cashing out--collecting the cool billion dollars he has made the Cowboys brand worth and moseying off into the sunset. But he isn't walking away, no sir. He's busily sketching out his next grand vision: a 100,000-seat, retractable-domed, air-conditioned football palace that would double as a sort of Cowboys theme park: tours of the stadium, mementos and merchandise, even simulated games! Listen to Jerry Jones sell the sizzle on that one. "You can be here on a Tuesday, walk out and look at the stadium," says Jones, "and then--just like that--the 49ers run on the field and the Cowboys run on the field. They warm up, play 15 minutes, and the Cowboys win, and come off the field. The stadium empties, and you move on."

This all sounds crazy, of course, which is why it will probably happen. The Texas Stadium lease is up in 2008, and Jones wants to either rebuild it or construct a new one elsewhere. In the meantime, he continues to break ground with his Cowboys brand building. A Dallas Cowboys golf course opens in June. He will soon have new merchandising opportunities at his 12 Dallas Cowboys stores, as a result of NFL licensing reforms he forced. The team may be at the low point of the football cycle, but the owner's business zeal remains relentlessly high. Jones is crazy, all right, just like the chalupa-dispensing techie, the $252 million shortstop signer, and the rest of the owners who manage to wring a fortune out of sports. They are all crazy like foxes.

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