The Business of Sports by Mark Conrad

Author:Mark Conrad
Language: eng
Format: epub
Publisher: Routledge

Mega-agencies

Although many agents either work alone or as part of a small group, consolidation or merger with entertainment agencies has occurred over the last decade. If an agency has a strong stable of clients, the talent can be marketed into other areas of the sports business, such as event production and marketing and licensing the intellectual property of their clients. However, as we will see later, the personal aspect of the agency services can create succession problems if the founder or leader dies or leaves the agency.

The first and most venerable mega-agency is IMG. Founded by the late Mark McCormack in the early 1960s, the firm grew from a small operation representing the interests of a few individual golfers to a behemoth, representing some of the top tennis and golf stars (IMGWorld.com, 2010). Just as important, IMG owns and operates professional tennis tournaments showcasing its talent pool. By owning these tournaments, IMG earns more money than just commissions from its athletes; it keeps the revenues from the tournament itself. More controversially, IMG operates “training academies” for young athletes. In 1987, it bought the Nick Bollettieri Tennis Academy (considered one of the premier training centers for talented professionals-to-be) and expanded it to include more sports and locations. However, a succession crisis occurred when Mark McCormack died of cardiac arrest in 2003. Upon his death, McCormack’s controlling interest in IMG was transferred to his widow, Betsy Nagelson. In addition to estate tax liabilities, Nagelson had to deal with the IMG’s significant debt because several months before McCormack’s death IMG had financed an enormous expansion with loans from twelve different banks amounting to a reported $200 million. With no management experience, Nagelson had only one real option—to sell the company.

When the company finally went up for sale, Forstmann Little & Co. had the highest bid. As a leveraged buyout firm, Forstmann’s major focus was on profits, not on building relationships (CMG, 2014). As such, Forstmann dismantled the personal service culture of IMG, and instead turned IMG into an international production-and-packaging powerhouse. However, upon Forstmann’s death in 2011, Ari Emmanuel was able to acquire IMG in a merger in mid-2014. Yet again, this merger introduced a slew of new risks resulting from leveraging the company’s assets (Cohan, 2015). In the long run, Mr. Emmanuel hopes to bring the company public, but only time will tell whether the new mega-agency can meet expectations and remain viable.

IMG is not the only mega-agency firm. Octagon also provides more services than contract negotiation, including marketing and endorsements, team relations, public relations and financial planning services. Its website includes event management, TV rights sales and new media planning (http://www.Octagon.com).

More recently, Creative Artists Agency (CAA) started a sports division in 2004, which has become the dominant sports agency in the United States for representing athletes in the four major team sports with total contract commissions at close to $206 million in 2014. In 2015, CAA represented elite NFL quarterbacks like Tony Romo, Drew Brees, Matt Ryan and Phillip Rivers, as well as Eli and Peyton Manning.

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