Dec. 28--During a decade in the sports business, Ray Clark had negotiated plenty of deals for big-name athletes and major corporate sponsors, but this time around he had to put a price on his own company and its future.
Omnicom Group Inc., a huge New York-based advertising and public-relations company, wanted to buy the Marketing Arm, the Dallas-based sports-services firm Mr. Clark founded six years ago. The decision hinged on money, of course, but also on whether being part of a global enterprise would be the best way to grow his company.
Mr. Clark opted to sell to Omnicom for $12 million in June, figuring the competitive edge in sports marketing lay with large, full-service companies.
'Sports has gone from a fun thing to do to a sophisticated marketing vehicle,' Mr. Clark said. 'Consolidation is running rampant because corporate clients want it. They don't want 15 sports marketing agencies. They want one that can solve all their needs.'
The 1990s brought an explosion of sports marketing, exemplified by Nike Inc.'s ubiquitous 'Just Do It' slogan. Now, as the decade comes to a close, big, diversified public relations, advertising and entertainment companies are gobbling up small, independent agents and sports marketing companies.
Those involved justify the nearly dozen high-profile deals of the last two years -- worth $500 million or more -- with a straightforward rationale: As the business of sports gets bigger and more complex, it requires larger marketing companies with ample capital and a full complement of skills.
'The only way to survive as a niche agency is to be so specialized that the big agencies need to do business with you,' Mr. Clark said.
Not everyone applauds the consolidation. Independent agents and sports marketers acknowledge that corporate ties might provide added resources and contacts, but they won't concede that bigger is always better.
They see their competitors making a Faustian bargain, with meddling bosses, corporate rivalries and conflicts of interest coming along with the fat checks.
'When you're part of a bigger conglomerate, you may get pushed and pulled in different directions,' said John Tatum, a director of Genesco Sports Enterprises, a Dallas sports marketing company. 'You may not be able to determine what kind of work you do and who your clients are.'
Genesco, founded in 1994 by two refugees from a big advertising agency, so far has walked away from chances to sell out to a bigger company. The company prefers to concentrate on sponsorships for a few corporate clients, such as Pepsi-Cola, General Motors and the Dallas Area Rapid Transit system.
'We feel we're going to be able to compete with the conglomerates,' Mr. Tatum said.
Several big names are playing the acquisition game besides Omnicon.
Cleveland-based International Management Group, started by sports marketing legend Mark McCormack, bought Muhleman Marketing Inc., a Charlotte, N.C., company that made its reputation marketing Nascar racing and helping teams with set-licensing arrangements, this month.
'Sponsorship is about contacts and reputation,' said Max Muhleman, the company's founder. 'IMG will at least triple our base of contacts.'
And Assante Corp., a financial-services company in Winnipeg, Manitoba, paid at least $70 million in October for Steinberg, Moorad & Dunn, a Newport Beach, Calif., firm that represents such athletes as Dallas Cowboys quarterback Troy Aikman and Texas Rangers catcher Ivan Rodriguez. This month, Assante bought Indiana-based Maximum Sports Management, which represents the Cowboys' Deion Sanders and Emmitt Smith.
But the most aggressive buyer has been SFX Entertainment Inc., a New York-based company that manages 120 venues and promotes concerts, sports events and touring Broadway shows.
In May 1998, it paid $100 million for the business of David Falk, the agent who turned Michael Jordan into a money machine. A few months later, it paid the same amount to merge with the Marquee Group Inc., also in New York.
Marquee Group is generally credited with kicking off the consolidation boom four years ago. Between 1995 and the time it sold out to SFX, Marquee assembled an array of sports marketing companies -- among them ProServ Inc., an athlete-management company in Washington, and Connecticut-based Sports Marketing and Television International.
Within the last three months, SFX snapped up three more properties: Houston's Hendricks Management Co. and Tellem & Associates, both sports agents, and SME Power Branding, producer of logos for the National Basketball Association, National Football League and dozens of sports properties.
'We've established for marketers an entirely new way of thinking about how to grow their business and brands, all built on the convergence of sports and entertainment,' said Mr. Falk, named chairman this month of SFX's combined sports operations, now called SFX Sports Group.
For the deep-pocketed buyers, the lure of sports is easy to understand. There's a lot of money at stake. The SportsBusiness Journal, an industry weekly, calculates that America spends $213 billion a year on all aspects of sports, including $5.2 billion on athlete paychecks, $5.1 billion on sponsorships, $2.6 billion on agents' fees and marketing services, and $730 million on endorsements.
Not wanting to miss out on that kind of boom, SFX and others are trying to establish themselves as players quickly by tossing money around. In doing so, they're hoping to profit from their version of what business gurus call 'synergy.'
The same company can represent corporate clients who pay for endorsements and the athletes who do them. Events thrive on television and corporate sponsors, which the company can also bring together.
The payoff for athletes would be more lucrative endorsements, plus opportunities to cross over into music, television and film because many of the bigger companies also operate in those fields.
'We've got plans for new television shows, for events, for Internet programming,' said Leigh Steinberg, the California agent who represents Mr. Aikman and 130 other athletes. 'The old concept of athletes simply being available for live games and some national television is a very narrow view.'
SFX showcased its ability to pull all the pieces together with its Toys 'R' Us Victory Tour this year, which featured members of the World Cup champion U.S. women's soccer team playing against foreign all-stars. The company created the 12-city tour, signed the toy retailer as sponsor, produced two national television broadcasts and provided marketing services for Brandi Chastain and other players.
Getting into business with sponsors, athletes and events poses too many potential conflicts of interest for some sports marketers, however. 'You can't truly evaluate the sponsorships and be unbiased if you sell sponsorships and you represent athletes,' said Mr. Tatum.
For the small service and marketing firm, selling out to a large company can also answer a chronic problem -- a shortage of money that often stunts growth, said Doug Jarvie, who sold Dallas-based Universal Sports America Inc. to Atlanta's Bull Run Corp. earlier this year.
'Being part of Bull Run gives us access to capital that we haven't had in the past,' said Mr. Jarvie, whose company started Hoop-It-Up and other grass-roots marketing events.
But synergy doesn't always come smoothly. Most sports agents and marketers are go-getters used to calling their own shots. After a buyout, there are egos to mesh and rivalries to sort out as former entrepreneurs vie to become what all want to be: the parent company's main sports business executive.
After its buying spree, for example, SFX found itself with two of the top names in the business -- Mr. Falk and Bob Gutkowski, founder of the Marquee Group. Only one could be in charge. Mr. Falk now runs the show. Mr. Gutkowski has left the company.
Even those who stay may choke on the red tape of a big corporation, especially if headquarters fails to follow through on promises for autonomy or expansion funds.
'There are some senior-level people at those companies who are calling us and asking for jobs,' said Merrill Squires, who left the Marketing Arm earlier this year after its sale to Omnicom. He became a director at small, independent-minded Genesco this month.
Some veterans of the business predict the trend of the moment -- mergers and acquisitions -- won't last if it doesn't deliver on its promises.
'Right now, you're seeing a lot of consolidation in the business, but in the next five or 10 years you might see a lot of fragmentation,' said Genesco's Mr. Tatum. 'The entrepreneurs are going to see themselves working for somebody else, and they're going to want to be on their own.'
That's exactly the conclusion reached by Rocky Hambric, former president of Dallas' Cornerstone Sports.
Over 18 years, Mr. Hambric built Cornerstone into one of the top names in the golf business, representing such PGA Tour stars as Phil Mickelson, Corey Pavin and Mark Brooks. In 1998, he sold the business to Gaylord Entertainment Corp., a large Nashville, Tenn.-based media company.
He was swayed not only by cash but also by the tantalizing prospect of spearheading Gaylord's expansion into the sports business.
It didn't work out that way. Mr. Hambric wanted to develop golf outings and promotions for the corporate market, but Gaylord failed to move.
A month ago, Mr. Hambric left Gaylord and the company he founded, taking with him just four of the 30 golfers under contract.
'I just felt like I had to be able to control my own destiny again,' he said.
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(c) 1999, The Dallas Morning News. Distributed by Knight Ridder/Tribune Business News.
