Owen Evans travelled to Singapore to ask Seamus O’Brien and Andrew Georgiou, executive chairman and COO, respectively, of Lagardère Sports and Entertainment, about how they hope a corporate facelift will banish an ugly few years for the sports marketing giant.
Four years ago, Arnaud Lagardère pleaded with his shareholders for patience and 12 months to turn his company’s fortunes around.
The alarm bells were ringing in 2011, when the Frenchman, burdened by an expensive, underperforming sports division featuring agencies like IEC in Sports, Sportfive and World Sport Group, attempted to convince his investors that their money was still in good hands despite consecutive profit warnings.
More than a billion Euros had been sunk into an aggressive sporting expansion project that had involved the acquisition of World Sport Group and Sportfive since 2006. Five years later, the project was hindering the parent company’s future, with major sports rights flying out the door to competitors, followed closely behind by a string of Lagardère’s top operational talent.
— Sports Agent Blog (@SportsAgentBlog) September 22, 2015
Arnaud asked for a year from the shareholders, but it was to get worse before it got better. With projected E70m profits becoming multi-million losses in 2013, the costly acquisition strategy was put to bed, and the wheels were put in motion to switch Lagardère’s focus to consolidation.
That is where we pick up the story two years later in 2015, in a 30th floor office in Singapore’s AXA Tower with Seamus O’Brien and Andrew Georgiou, executive chairman and chief operating officer, respectively, of the newly-branded, recently-unified Lagardère Sports and Entertainment division.
Last month’s unification of the agencies into one corporate division has been a long time coming for many within the agency world, with the common reaction not being ‘why?’, but ‘why has it taken so long?’.
“The journey has been almost two years in the making,” said Georgiou. “The change in brand is altering a few letters on a business card, but what we’re actually saying now is that we are changing our entire business. It’s a long time coming but we are now ready.
“This is about the unification of our agencies,” Georgiou added. “In 2006 with the acquisition of Sportfive, Lagardère made a strategic decision to move into sports and entertainment, and in the meantime they’ve bought multiple agencies and effectively let them be run as separate entities, by and large. I think the original strategy was for Lagardère to be the holding company of multiple agencies, similar to the WPP model. That all changed a couple of years ago when it was apparent that there was enough critical mass for Lagardere’s agencies to go into the market as a full service company with integrated agencies.”
O’Brien said that one of main reasons for it taking almost two years to ratify the new direction is that he and Georgiou had to personally visit every agency in the Lagardère sports division to outline the plans for unification.
“Naturally there were people unsure of the change. Was there 100 per cent unanimity? No, but you’re talking about a very small percentage,” said O’Brien.
While O’Brien and Georgiou have been preoccupied with getting their house in order over the past two years, their rivals have been busy making influential friends.
Headline-grabbing takeovers involving Wanda and Infront, IMG and WME, and WPP’s ESP group acquiring Two Circles earlier this year have given the newly-single Lagardère Sports and Entertainment a powerful set of rivals (see pages 35-41).
Not that O’Brien appears bothered by the fresh competition in their key markets.
“I don’t spend any minute in a day worrying about what somebody else is doing,” O’Brien said. “We’ll succeed if we focus on what we’re doing. The moment you start looking at what other businesses are doing, you take your eyes off your own.
“If we had spent months sitting around thinking about what Wanda going to invest in, I can guarantee you the last thing we would have guessed is that they would spend £650m buying Ironman. So it just goes to show it is a complete waste of time worrying about what these newly merged agencies are going to do next.
“Who would have predicted that IMG-WME would spend more than a £100m on the bull riding tour? I could have had any number of whiteboards up in the office and we still never have come up with that one.
— Lagardère (@LagardereSE) September 17, 2015
“We’ve come out of a general economic tightening of the belt and have gone back to make sure our core businesses still work. Now we have got ourselves to what is a reasonably secure economic global position. We have fine-tuned our infrastructure and with the benefits of consolidation, we think we’re into a real growth curve.”
One of the most alarming elements of the ‘difficult period’ that O’Brien refers to was the number of Lagardère staff leaving the company.
Prime among these were Stéphane Schindler and Olivier Guiguet, highly-experienced football media rights executives who left to set up their own agency, CAA11, and outbid their former employer Sportfive for the Uefa European Qualifiers media rights distribution contract. Uefa Euro and Fifa World Cup qualifier rights had been a central plank of Sportfive’s business.
During a twelve month period between 2013 and 2014, a string of other high-profile exits cast doubt over the long-term future of Lagardère’s sports division. These included Shiva Misra, (ex-senior vice president and head of football associations and media sales at Sportfive International), Phil Lines, (Lagardère Unlimited’s head of media activities in Europe and Africa), and Nick Haigh (ex-chairman of the international board at IEC in Sports).
In an attempt to combat staff leaving in the future, O’Brien revealed that they have sought professional help to ensure they are competitive in the salary market.
“As a general comment, I think there have been very few examples of a top senior executive at one of the major agencies moving to a rival,” said O’Brien. “Maybe at a more functional level where you’ll see CFOs and legal counsels go from one to the other, but not frontline senior executives.
“We feel we provide fair and competitive remuneration schemes with incentives attached to them. We believe we are up with market trends and an attractive place for top senior talent. Add to that the fact that we’re very stable. Would we pay silly money to bring someone in like maybe other shareholders have done?
“Would we pay a silly price to bring someone in? Absolutely not. Perhaps other shareholders may do that because they have a slightly shorter term horizon to achieve an objective but that’s not the basis of our shareholder thinking. We take a longer term view.”
O’Brien revealed in the last five years they had commissioned two research projects to ensure they are paying at the right end of the market, while Georgiou also hinted that executives in the new and improved Lagardère Sports and Entertainment will have more influence at a decision-making level.
“It’s only half the question, to be honest, when you are talking about executives at this level,” said Georgiou. “The remuneration is part of it, but they are also wanting to know how involved they will be in the decision making, and the culture of the organisation they will be going into. There’s also a human element to this, in that when a guy stands in front of us and says that he’s worth £100,000 a year, we have to look at him and guess whether he will generate £400,000.”
Divide and Conquer
With an updated recruitment strategy and an ‘all for one, one for all’ approach, Lagardère Sports and Entertainment is now planning for a brighter future.
The fact that Wanda are doing what they are in China is a very positive sign for us
The markets where the company is in a position to make the biggest impact are in Africa and Asia, ever since they lost a big bulk of Sportfive’s European football portfolio through the centralisation of Uefa’s European football rights.
A new partnership with the AFC (Asian Football Confederation) has been sitting on the table ready to be signed for months, but the process has dragged on due to internal electoral processes taking place within the confederation earlier this year. O’Brien confirmed it was agreed and ready to announce shortly. He also claimed he had little fear over Infront, under its new Chinese ownership, encroaching on Lagardère’s Asian business.
“The interesting thing about the Infront move into China is that there has been very little overlap between our businesses. There’s no doubt that they are going to bring a lot of financial strength to the sector, but if you look at the properties that Infront has historically been involved with, as well as the types of investments that Wanda has made in the past, there is very little crossover with what we do.
“If you were to lay it all out on table, our businesses actually fit together very well. China’s obviously a big strength of Infront’s now, and we historically have done very little in China. We’ve run AFC and golf events there, but in terms of domestic leagues and so on, we’ve done very little.
“The fact that Wanda are doing what they are in China is a very positive sign for us. It adds credibility and substance to that market from one of the world’s biggest companies.”
Gambling on Africa
As the AFC deal is all but signed, the other key market for the new and improved Lagardère Sports and Entertainment is Africa.
However, their rivals are well are of that, and in June TV Sports Markets reported that by signing a 12-year, $1bn renewal with the Confederation of African Football (CAF), in the face of strong competition from Infront. This is a 343-per-cent increase on the current deal, worth a minimum of $150m over the eight years from 2009 to 2016. It is Africa’s most expensive media rights deal and covers media and marketing rights to six Africa Cup of Nations (Afcon) tournaments in 2017, 2019, 2021, 2023, 2025 and 2027.
We don’t feel we overpaid to secure the CAF deal
“We’re bullish on Africa,” O’Brien said. “We wouldn’t be the only people to say that. If you spend any amount of time in the United States or Europe at the moment, you will see Africa find its way onto the front pages of the Wall Street Journal and the Financial Times frequently. We’ve made a significant investment into football in Africa, as it is a prime example of the premium content we are looking for.
“We don’t feel we overpaid to secure the CAF deal. There is a slightly different dynamic in that we are publicly-listed company that has a responsibility to spend shareholder’s capital, and we’re comfortable with the price that we paid. We’ve shown in the past that if a particular set of rights gets highly inflated, then we won’t play that game.”
One industry insider told SportBusiness International that despite having the raw wealth to compete with Sportfive, Infront lost out because they did not have the on-the-ground expertise in the continent. Georgiou wants to use this expertise to grow the company.
“Over the period of the contract we feel we’ll get a return on the money we paid,” said Georgiou. “For us, we see Africa being a central part of our future business and we want to build out from that, so we don’t think we overpaid.
“The other part of this is that because of the number of African players in European football, there is a greater deal of empathy from Africa towards European brands. In terms of exposure, we already know that the Cup of African Nations is going to get a lot more coverage in Europe than say the Gold Cup or the Asian Cup.
“So as a brand sponsoring African football, I know I am going to be coming back into Europe through exposure. I couldn’t say the same for Asia. I have to ask myself, am I selling Europe to a brand that is thinking about sponsoring the Asian Cup? The answer is no.”
When Arnaud Lagardère went down the billion eURO buyout plan almost a decade ago, the ultimate aim was to become the number one sports marketing agency in the world. With a new direction and identity does O’Brien believe they can return to the top?
“I think that when we add up all the different parts of the business we are in the top three of the sector worldwide, and as a business that is where we want to be,” O’Brien said. “We’re number one in Asia and we’re number one in Africa, so it depends on your objectives. Are we as big as IMG? No we’re not, but we are in the top three.”