This ideal partnership could carve up the industry
It is against this strong industry background that TLA Worldwide has been created to bring together Legacy Sports Group and The Agency Sports Management. The two make an ideal combination. While Legacy represents players in contract negotiations with the clubs, The Agency focusses on exploiting their brand potential. In their own right these two businesses are already highly successful. But, with the chance to cross-sell services, they should become even more so.
With its headquarters in Southern California Legacy Sports Group represents around 100 baseball players, covering both Major League stars and also up-and-coming players in the minor leagues. Its clients include CC Sabathia and Carl Crawford, for whom it negotiated two of the largest deals ever seen in the sport – for the former a $122m five year contract with the New York Yankees, and for the latter a seven-year deal with the Boston Red Sox worth $142m.
In total, Legacy negotiated salary deals worth $321m in the 2010/11 season and has by far the biggest growth rate of any of the bigger agencies.
The Agency Sports Management has its headquarters in New York and has 110 clients not only from the world of baseball but also from golf, American football and that most competitive of sports … cooking (it represents some celebrity chefs). It also has a strong practice providing coaches for college sports, a good opportunity for sports stars once their playing days are over.
The focus of the combined business will be on baseball. Like other major US sports – ice hockey, basketball, American football, golf – it is tightly controlled by its governing body. Despite the fact that, unlike other sports, baseball has no salary cap or fee cap for agents the percentage of revenues that end up in the players’ pockets is just 41%, compared to over 60% in the Premier League. This leaves plenty left over to promote the baseball.
Already the sport has shown steady growth. The past decade has seen the revenues of Major League Baseball grow by 9% per year, despite which the average player’s salary has increased at just 6% per year – the opposite of what one might expect.
The agency market is fragmented. There are about 70 representation groups with none having a market share above 7%. The agents will typically spot a player early in his career, looking to make big money when as a proven star he is able to sign major long-term contracts. The agent’s fee will typically be 4%-5% and given that he will receive this over the life of the player’s contract this gives the agent good visibility of earnings over the medium term.
Once signed, the fees accrue to the agency and not to the agent himself, limiting the threat of the latter departing and taking his clients with him. Any disputes are arbitrated by the Major League Baseball Players Association.
So the business of LS Legacy Sports depends upon its ability to spot talent, its negotiating skills and the growth of players’ salaries. The Agency Sports Management is a little different. On behalf of its clients it will arrange such money-spinners as image rights, endorsements, personal appearances, product licensing and books for which it can earn a fee of up to 20%. It also advises big corporates such as Mastercard on the optimum use of their marketing dollars and derives about 15%-20% of its income from this source.
[document file=”http://tlaworldwide.com/wp-content/uploads/2013/05/RHPS_2012_March.pdf”]Read the full article[/document]