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The WME-IMG deal: What the industry is saying
December 18, 2013 04:54 PM
■ “The easy part is getting to an evaluation, an agreement, and getting a deal done. The hard part starts now and integrating these two companies — if that is the plan — is difficult. Culture and business models in sports and entertainment are different. Not necessarily better, but different. …
“You have to protect against the exodus of people, the exodus of clients. The first six months to a year after one of these deals is a very dangerous time. … The departure of key people is a concern and certainly something we’re going to keep an eye on. Whether it is people or clients or business they might decide to shed, we are going to be looking at those as opportunities.”
— Octagon President & CEO Rick Dudley
■ “We have Hollywood agencies in our portfolio (Rogers & Cowan and FRUKT), and it is just different. It is more about who you know and the sizzle. In sports it is more about the steak — you know there’s going to be a season and championship, so you can play. On the entertainment side, you are constantly putting a stake in the ground, taking risk, and you don’t know whether it will succeed or fail and you’ve got to roll with that. That attracts and breeds to very different kinds of people. “
■ “Above everything else, it just made me sad. When I was at IMG, we were building something and that made it one of the few times in my life when my days were more exciting than the nights. Now IMG is just a commodity, to be bought and sold on the open market like any other commodity.”
— Curt Curtis, a licensing and corporate marketing executive at IMG for 16 years in the 1980s and ’90s
■ “Quite honestly, I don’t think William Morris brings anything new to our industry, and it appears they paid a lot for the diversification! In the end, they will have a significant learning curve, particularly in the collegiate business. While IMG has been very successful in the collegiate arena, the guarantees are quite big and mostly dependent on the extraordinary escalation of television rights fees. Any slow down there could create real problems for William Morris.
“I think there is a real possibility that William Morris will get out of the tennis representation business. IMG only has one of the top four players in the world and the competition is heating up — too many agencies chasing too few players. They will continue to handle Wimbledon’s television, however. I also think they will stay in the golf business — IMG has a solid client list and the business is closely intertwined with its television and events business.
“Lastly, if William Morris can find a buyer for the new Rio tennis event, I think there is a good possibility they will get out of Brazil — too many problems and too little revenue/profits.”
— Frank Craighill, a ProServ founder and now chariman and CEO at Altis Marketing
■ “It’s an aggressive price at almost 14X. That’s a big number. … There’s massive cultural differences between the two companies. One of their biggest challenges will be that cultural challenge. The part that is the same is that they (sports and entertainment) are very much transaction-based businesses. The thing that’s interesting is that William Morris had a very specific culture — then Endeavor came on and they are just getting to a common culture. So to add another one in — I’m not saying they can’t do it, (but) it’s going to be a big challenge.
“The sports culture is a little more relationship-based and not quite as cut throat as the Hollywood culture.
“I am thinking there are a few reasons behind this. One is that the Hollywood business is shrinking. The other is that CAA made the move there, and they have more than 1,000 athletes at CAA now. … Sports is still a growth industry, whereas, as you see from every media rights deal, Hollywood is not right now.
“Sports has already been consolidated with public money on the brand side of the business, the media side of the business and the media buying side of the business. Now you see private equity consolidating a huge portion of the content creation and talent side of the business.”
— Chris Weil, chairman and CEO at Momentum
■ “If you can’t build it, buy it. … With a stroke of a pen, WME just became a global sports giant, something that puts them way ahead of CAA in the battle of Hollywood supremacy.
“It will take decades for anyone to catch WME now. … The key to the acquisition will be how all the kids play in the sandbox. The two cultures are so different, it reminds me of the body builder directing traffic in the Geico commercial.”
— Rob Prazmark, a former IMG executive who is now a principal at 21 Marketing
■ “WME was the smartest choice of all the suitors for this merger as it’s a massive Hollywood and entertainment business that was missing the sports portfolio that IMG brings. Also, IMG’s strong fashion and modeling business is another area that has cross-pollination for WME. Seems to have all the pieces of the puzzle to transform the industry. They just have to put the puzzle together the right way or they will lose the value of the deal.”
— Ben Sturner, principal at The Leverage Agency
■ “The massive escalation on content is assured to continue. We see it in media rights deal after deal. Now we are assured IMG will continue to outspend all competitors for property rights acquisition in the college space. The change of ownership at IMG is making Division I athletic directors around the country salivate.
“It will be fun to see the sports and entertainment shootout between IMG and CAA. Both companies will be pitching for bragging rights for athletes, entertainers, properties and rights holders. Let the games begin.
“There will be a change at the top of IMG. New company senior executives will need to carve out their own territory with a new focus and strategy to take the business to higher and more profitable levels.’’
— Randy Bernstein, president, Premier Partnerships
■ “The industry turns the corner on another new chapter of content consolidation and representation. … I am not certain that any one company holds a patent to great ideas and, more importantly, the execution of such, so the real impact is that it will provide even more true opportunity to historically successful executives that can create stakeholder value via their Rolodex ‘deal-making.’”
— Chris Lencheski, president of Comcast-Spectacor’s Front Row Marketing Services, who also ran his own sports agency, Ski & Co., for many years
■ “The transaction vaults WME into the global sports production and management business and it can provide some economy of scale to other WME initiatives. A key will be what Silver Lake proposes to do via its existing equity stake in WME already, is this a true merger of WME and IMG or rather separate structures under one management umbrella? Most interestingly, if Silver Lake can take their tech-heavy investment success and bring that modeling to WME via IMG, then if ‘content is the new oil,’ they may have hit a gusher!”
■ “Keeping every part of IMG may prove simply unnecessary and there may be better parts of their ‘verticals’ to be acquired within other certain business models; about a year from now if the markets are still available, a combined WME /IMG could make a solid IPO offering and perhaps they get ahead of CAA on that issue. … IMG has some great senior executives, so it will be very important to maintain some sense of balance, especially within the world of sports, which tends to be much more insular than other businesses. Mark Shaprio will greatly impact that success, potentially. …
“Now, more than ever, human talent to run these businesses will be in high demand. Money and deal-flow is out there in enormous ways at the moment, but without solid executives with senior P&L experience to run these silos, the new company is just letters on a page.”
■ “There continues to be a market for quality. That market is evolving and broadening. … Way too early to tell (what this means). It all comes down to the ‘fit’ of the cultures and personalities. Synergies that look logical on paper require people with egos to compromise and execute. Remember SFX? …
“I believe there will be some strategic culling of assets, but the bulk will remain intact. … End of one storied icon … beginning of another.”
— Mark Noonan, principal at Focalsport, a Southport, Conn., marketing consultancy
■ “This IMG sale to WME is another definitive sign that content is the all-important asset and the combination of sports and entertainment gives the combined company the power and reach that I’m sure in their opinion positions them to become bigger, more profitable and be in control of talent, events, media, entertainment, college sports, professional sports and everything in between.
“The danger, in my opinion, is how big is too big and will this combination help or ultimately hurt the clients that they will represent? I have always felt that it is difficult to be all things to all clients. When you sell, represent and create, someone in that process will not be better served. … I make no prediction as to how this will work out long term, but I certainly see a bumpy transition in the near term future. I also believe this huge organization will help the smaller and mid-sized agencies that give so much thinking, support and service to their clients and are not saddled with huge debt payments.”
— Larry Rothstein, president and managing partner of Source Communications
■ “As a long-term ProServ person, I think this sale means a little bit extra to me. IMG was such a fierce competitor for so long and I think made everyone in the business better. Overall, I think this will be an interesting complement to the WME group for a number of reasons, but not necessarily only on the sports side. The years of investment IMG has in the international market and power in the far reaches of the world will be the hidden gem here. Adding entertainment to the offerings around the world will be very powerful. IMG was one of, if not the first, sports company to look globally and truly embrace the opportunity. Unlike others who put their toe in the water, IMG went big with enormous presence in London and to places like Hong Kong, Singapore and, most recently, Nigeria. People accept that sports is global today, but it was not the case when they first went overseas in earnest.”
— Steve Horowitz, a partner at Inner Circle Sports
■ “This creates instant credibility in sports for WME and a two-horse race with CAA as the leading entity to harness the power of sports and entertainment for their clients. …
“This consolidates the marketplace where talent and content are concerned and allows WME to monetize sports talent across new entertainment channels.”
— Michael Neuman, managing partner at Scout Sports & Entertainment
■ “With live sports and entertainment programming driving TV ratings as well as social media conversation, WME was/is the perfect suitor. This acquisition leaves no doubt that the era of ‘content in king,’ relative to individual talent and events validates the ability to profit handsomely from the convergence of sports and Hollywood. If the deal closes for what the media is reporting, Forstmann Little turns a three-times profit on their initial IMG investment so give credit to those who carried out Ted’s vision on how he wanted this investment to play out.”
■ “I like the acquisition. It feels like a strategic fit and consistent with the direction of our industry. CAA has done a great job in this space and I anticipate the same from WMG. Obviously, I’m not privy to the integration plan but must assume some assets will be sold; almost has to occur based on the $2.5 billion price tag. It will be interesting to see what assets remain in tact, including people. I think there is immediate impact in the industry and could be great potential for prospective buyers to look at spin off assets that have further industry impact.”
— Merrill Squires, senior vice president, leagues and properties at USA Today Sports Media Group
■ “It’s a very positive development for the industry, as the new owner provides operating synergy with the IMG lines of business, rather than passive, finance-only interest. …
“Tremendous scale to grow. We’ve seen it in media and in advertising — large-scale mergers/acquisitions give the larger entity significantly added leverage and advantage in the marketplace. Such leadership scale is hugely attractive to new prospective talent, clients, events … properties of all types.
“Certainly makes the Endeavor owners new powers in the sports world, and provides expanded opportunities for more entertainment industry cross-oever into sports.”
— Jim Millman, who ran the sports agency Millsport for 20 yeas before selling out to Omnicom
■ “Like mega-mergers we have seen across multiple industries (e.g., airline, banking and telco), mergers are very challenging relative to structure, culture and process. It will be years before the new organization effectively resets. Further, our industry is driven by relationships across all segments. The bigger the entity, the more difficult it is to build and sustain customized, partner-centric relationships. To the extent that employment agreements allow, I think we will see numerous former IMG exec’s launching their own businesses, as well as migrating to smaller shops.”
— Tony Schiller, group executive vice president and partner, Paragon Marketing
■ “This gives WME an immediate position of power in a space that the company and its ubiquitous CEO Ari Emanuel have long sought. Interestingly, the representation piece of IMG — with which WME has the greatest synergy — accounts for a relatively small piece of the company. There’s a fair amount of psychic premium paid for the company, too, as IMG is obviously a trophy asset. The WME/Silver Lake partnership had to balance that ego play with the realities of the (private equity) business.
“The media and college multimedia pieces of IMG generate significantly more revenue than the representation piece, and the company’s role in the global marketplace is potentially quite lucrative. But WME will have to figure out fairly quickly how it will integrate these longer-term plays into a suddenly much larger entity.”
— Scott Rosner, practice associate professor in the Legal Studies and Business Ethics Department at the Wharton Sports Business Initiative of the University of Pennsylvania
■ “Clearly this is a positive development for the industry as it validates the sheer power of sports, entertainment and fashion as a vehicle to reach huge groups of consumers at their passion points. Nothing brings people closer together than sports. As the entertainment world becomes more and more fragmented, sports content becomes more and more valuable as the only real appointment television because it’s the only content that must be consumed in real-time. Sports and entertainment programming creates some of the most powerful digital content in the world and has become a key driver of significant revenue as leagues, teams and sport entities seek out ways to leverage the second- and third-screen experience.
“Sports and entertainment content is extremely valuable in the mobile world, particularly as a vehicle to reach the under-25 audience. Mobile, video and social media are tailor-made for sports and entertainment. The average consumer under the age of 25 looks at his or her phone 400 times a day. If I own content that he or she is interested in — in other words, sports, fashion and entertainment content — I now have assets that every brand in the world targeting the youth segment wants and needs. The power of this combined company is enormous when you think about the sheer size and scope of the content they have to market on mobile devices.
“This partnership brings together two entertainment marketing powerhouses that truly are more valuable combined than operating as single entities. The new company will have an extremely compelling portfolio of properties, people and entertainment assets to take to the marketplace. Any blue-chip brand looking to connect with virtually any segment of the consumer audience will be able to find valuable assets in this sports and entertainment portfolio to leverage across their marketing mix.
“Mark McCormack realized this type of synergy between sports and entertainment very early on as he was building IMG into a global sports and entertainment company. He believed in the power of combining sports, entertainment and fashion properties to create a broad portfolio of assets that allowed IMG to have a meaningful conversation with virtually any blue-chip brand in the world.”
— Gary Jacobus, vice president and head of business development, Aramark Sports & Entertainment, and a former IMG executive