There is a chance, just a chance, that the week ending 1st October 2004 could go down as one of the most significant in the recent history of the business of sport.
It was a week when two of the icons of the industry made news around the world.
First, The (London) Times reported that ESPN, the dominant brand in sports broadcasting in many parts of the world, had plans for a European live sports channel.
Then, only yesterday (Thursday), IMG, the granddaddy of sports marketing, announced that, barring what appear to be formalities, it would be acquired by a New York-based investment company before the end of the year.
Both were announcements that had been anticipated. In the case of IMG the book on will it/won’t it? had been closed some time ago.
But now that that both issues are out in the open it's worth spending some time considering the implications.
In the beginning there was Mark McCormack. He begat IMG. IMG begat …well IMG simply went on begetting. From the new head of marketing at the IOC to the CEO of CSS Stellar and many, many others in between, IMG identified and groomed a raft of sports marketing talent which has gone on to fill senior roles in sports marketing, event management and broadcasting around the world.
It appears to be the very nature of the human condition that originators and innovators will, eventually, fall foul of criticism simply because they were at the forefront in their chosen field.
IMG has, it seems, suffered in this way. In some places they call it Tall Poppy Syndrome, in others a strain of English Disease. But, bearing in mind that absolutely no business ever has been or ever will be perfect, it seems as though IMG has made more than a pretty good fist of things, what with all the begetting and everything.
Its achievements are legion and the rest of sport business probably owes McCormack a greater debt than it realises. Yet IMG is a private company and people were suspicious of it. Talented senior executives left and McCormack’s refusal to part with equity to management was routinely blamed.
But – and this was an important point – it was seldom a criticism levelled by the departees themselves. At least not in public. The respect for McCormack and what he achieved remains undiminished among those who worked with him. They don’t criticise because it would be seen as disloyal and, on the whole, he didn’t employ the sort of people who were going to be disloyal. That was one of the qualities he looked for, a hallmark of the IMG exec.
But now, as predicted, the ownership of IMG is to change. The New York investment firm Forstmann Little has agreed a deal which the Financial Times and other media reported at around $700 million but which no party to the agreement will comment upon.
Perhaps more important than the size of the deal is the stated intentions of the new owners. It may help that the head of the investment firm was a chum of Mark McCormack’s and clearly has an understanding of the culture of the company, and he was quick to make it clear that the acquisition was based on its growth potential as a unit.
This is important because observers have been quick to calculate that the maximum short-term value of IMG would be in the separation of its various divisions – most importantly the TWI television arm – and their disposal as separate units.
In this respect the new owners have played another important card. The press release announcing the acquisition also made it clear that senior members of the management team had been given an equity stake, something which would tie them to the company for the foreseeable future.
This, one must assume, prevents the heads of divisions - or even, we were told, divisions within division, looking for an opportunity to put together MBOs which would split the company.
Forstmann’s statements suggest he is in for the long haul. He’s not just a friend of the McCormack family but a fan of the business and its culture. He’s pledged not just to keep what McCormack nurtured in one piece, but to help it to grow and become more successful.
The difficulties of operating an all-encompassing, multi-disiciplined sports and entertainment marketing business have been well chronicled. Octagon’s travails have focused on the difficulties of achieving what many saw as the dream solution – a major sports marketing player sitting within a massive marketing services group – while CCS Stellar’s recent results also indicate that, while there’s potential, the path to riches is both winding and rocky.
But this week’s announcement should serve to reinvigorate IMG, giving new confidence and the sense of the dawn of a new era. Those running the company now appear to have the opportunity to build the value of their equity by taking the foundations laid by Mark McCormack and building a company which, while remaining true to his ethos and vision, is as successful in the 21st century as it was in the glory days of the last.
This was also the week when Russell Wolfe of ESPN confirmed in an interview with The Times that the broadcaster is looking to launch a live sports channel in Europe.
Although Disney-owned ESPN has been a stakeholder in Eurosport, its ventures in Europe have, to date, been limited to the successful launch of its ESPN Classic channels in France, Italy and, now, Germany.
These specialist offerings, which emulate the original classic channel in the US, are a very specific proposition, developed to meet local interests and tastes, market-by-market.
As we have consistently been told that ESPN believes that delivery of a service which meets local needs is the only way to succeed, it will be interesting to see how plans for a live sport channel develop. The guys at ESPN don’t need to be told that Europe is not a single market for sport but a bunch of markets united by a love of soccer, but with a wider spread of interest in secondary and tertiary sports.
So how do you deliver a local approach?
One option might be to make ESPN a locally delivered international channel built around sports from the US. But other channels have territorial rights to the NFL, NBA and MLB while the North American Sports Network, part owned by Setanta, covers some of the same territory and much else besides.
If an ESPN channel is to work in Europe it will have to have football. And the brand that boasts coverage of all that is best in US sport (it became the first broadcaster to have contracts with all four major leagues) knows it won’t beguile audiences with league action from Belgium, Poland or Belarus.
The conclusion has to be that it will enter the market for significant, major market soccer rights, injecting new competition in to a market which was generally thought to have peaked. That should be good news for those on the receiving end of the money in football and elsewhere.
A significant new sports channel naturally provides new opportunities for other sports and events to make it on air which, even if it doesn’t produce huge rights wealth, at least provides the promise of exposure required to sex-up proposals to sponsors.
