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Chapter 3 Consolidation An Evolving Industry The last decade and a half or so has been marked by an evolution, influenced significantly by consolidation, of the athlete agent industry. In the 1990s, taking steps to create their own full-service sports agent firms, SFX Sports (SFX), Assante Corporation (Assante), and Interpublic Group’s Octagon (Octagon) followed the lead of industry pioneer IMG in planning for the evolution of sports into a component of the larger entertainment industry. Not all of the firms created in this merger era are still with us. Even IMG, the longtime stalwart, is revising its business model, to some degree due to the death of its founder, Mark McCormack, and the subsequent acquisition of the firm by Ted Forstmann. A new round of consolidations led by relative newcomers to the sports agent industry , such as the Wasserman Media Group (WMG) and Creative Artists Agency (CAA), is premised on the belief that size creates competitive advantage and enhances the quality and range of services firms can provide to their athlete clients. The new wave of consolidations as exemplified by the emergence of CAA, a Hollywood talent agency, also continues to be influenced by the belief that sports is a component of the larger entertainment industry. As was mentioned in the last chapter, some smaller athlete representation firms believe that consolidation is necessary for them to be able to compete successfully in this changing marketplace. As we witness the second wave of consolidation, however, there is evidence of how fragile some of these merger relationships can be, as lawsuits and departures are not an uncommon event. As previously noted, an agent’s main source of revenue was once derived from the fees his or her clients paid for contract negotiation services . During the period when Bob Woolf entered the industry, the most lucrative contracts that athletes signed were with the teams for which they played. While the number of agents increased dramatically in the 1970s, so did players’ salaries, the number of players desiring representation , and the number of athletes engaged in professional sports. The increase in the total amount of revenues available to sports agents led to increased prosperity for those already in the industry and increased appeal for those desiring to join it. With the standardization of agent fees by player unions and the imposition of salary caps by professional leagues, revenues available to sports agents from contract negotiation have flattened. The NFL has capped the agent’s cut at 3 percent of a player’s salary, a salary that is usually not even guaranteed.1 Moreover, competition among agents can push that 3 percent number downward. Player salary caps instituted by the NBA, NFL, and National Hockey League (NHL), with degrees of variation, have capped the total amount available for players’ salaries in each league. Another factor that has contributed to a flattening of potential revenues for agents is the modest increase in the pool of athletes. During the 1990s, the number of athletes on teams in the NBA, NFL, NHL, and MLB increased by only 16.7 percent, or 1.6 percent annually.2 Unless true globalization occurs, with new franchises in cities outside of the United States and Canada, the total numbers of players and potential athlete clients are unlikely to increase appreciably. Although the overall number of individuals who consider themselves agents has actually decreased over the past ten years, competition remains fierce. Woolf estimated in 1989 that 11,000 agents worked in the United States, far more than the number of professional athletes.3 Today, the field has narrowed considerably. As the table in Chapter 1 reveals , in 2006 there were 1,900 players in the NFL and less than 1,000 certified agents. In Major League Baseball there were 1,200 players on the 40-man roster, 750 on the 25-man roster, and only 300 certified agents. In the NHL, there were 700 active players and 150 certified agents, and the NBA had roughly one agent for each of its 350 players.4 These numbers are only slightly different from those reported even five years ago, so there does appear to be a general plateauing. It is an industry in which just as many agents probably enter the business as exit each year, most leaving for lack of financial success. Increased competition in this market has forced agents to find ways in addition to salary contract negotiation to increase their revenues. Agents desiring to grow their practices have done...

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