SBJ/Aug. 5-11, 2013/Opinion

How Omnicom, Publicis union will affect sports

Don’t expect last week’s surprising merger between Omnicom Group and Publicis Groupe to have any immediate impact on the sports agency landscape, but keep an eye on it over the long term. Omnicom clearly has the more advanced sports marketing/media expertise with The Marketing Arm, GMR, Davie Brown Entertainment and Steiner Sports Marketing, among others, in the fold. Publicis, which had Relay Worldwide in its network before 2009, made the decision to invest in the digital space with acquisitions of Digitas and RazorFish, but little in terms of sports.

After the deal closes, expect changes to back-of-the-house functions — finance, HR, accounting, IT — as the newly merged company will look to generate efficiencies across nonrevenue lines of business. That’s the easy thing to do. The hard part is creating revenue growth. Expect leadership to dig into the books of each individual unit and examine margins, people and their overall business. “I’d be sure that my books are in order and that I can answer what my three-year strategic growth plan is,” said Chip Ganassi Racing Team President Steve Lauletta, who is former president of Radiate Sports, an Omnicom group of agencies.

With Omnicom’s sports network more developed, there could be business development opportunities for them within Publicis’ agencies and clients. “There is no real competition at this time in the Publicis network in the sports area, so it’s a white space to develop relationships and grow their business globally,” according to W Partners’ Wally Hayward, who founded Relay Worldwide and was part of Publicis for six years.

Theory has it that after a merger of this size, there is the potential for major collaboration and sharing of ideas and resources to grow business and help clients. And there probably is some of that, but not nearly as much as is suggested. Agencies will tell you that, more often than not, they stay in their own lanes.
 
“I’m looking at two areas,” Hayward said. “How are they going to integrate these agencies and incentivize them to collaborate and work together? They have to take away 100 percent of the focus from being on the individual business P&Ls and offer incentives for cross-pollination within agencies, so no agency feels penalized because they might have lost revenue by sharing a client. The second area I’m watching is that there is a real opportunity for scale and global growth.”
 
Much was made last week about post-merger client conflict, but everyone I spoke with dismissed this as being a major issue. “As long as you are comfortable there is separation with your support staff at the agency, you should be able to benefit from the added discipline and expertise within the holding company,” Lauletta told me. Hayward concurred, “The key is building good firewalls. Clients understand that. There are so few ‘one client with one agency’ relationships today.” A CEO of a major global agency said that he was closely watching the deal and that his strategy would be to play offense in trying to land potential new business due to any conflicts, while playing defense to protect the business he had from being poached by the newly merged mega-group.

> BITS AND PIECES: Thanks for the feedback on a recent column that listed my top 10 sports business stories so far of 2013. A few of you questioned the absence of the Boston Marathon bombing, and you were right, it should have been listed for its impact on preparations, logistics, spending and security around major sports events going forward. Thanks for your input. … Finally, tip of the cap to SI for listening to readers and adding a print function to Peter King’s theMMQB.com!

Abraham D. Madkour can be reached at amadkour@sportsbusinessjournal.com.



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