SFX, Octagon and IMG, collectively, once dominated the player representation business. Consolidation in the sports agency industry involving these companies, which began in 1995, dramatically changed the sports agent market and transformed the industry from a "mom and pop" environment into the world of big business in which few independent sports agents remain prominent today. [However, one independent agent, Scott Boras, continues to flourish in the baseball industry and is arguably the most dominant agent in any single sport. In 2005, Boras virtually controlled the free-agent market in baseball by signing six premium free agents to more than $400 million worth of deals.]
This year, the agent business was consolidated even further with Creative Artists Agency’s decision to buy and merge the practices of former IMG football agents Tom Condon and Ken Kremer and former SFX football agents Ben Dogra and Jim Steiner. In an instant, the merger created the largest NFL player representation firm in the country, with about 140 players, including stars such as Shaun Alexander, Peyton and Eli Manning, and Carnell “Cadillac” Williams. CAA, a Hollywood talent firm, also purchased IMG's baseball practice lead by Casey Close.
When a company purchases a sports agent business, what is it really buying? The primary assets consist of the player-agent representation agreements. But the players association regulations governing agents in all four sports permit the players to terminate these agreements at will upon just a few days notice. And players frequently switch agents, so there is a risk that some of the agency's clients will not even be the agency's clients at some point or another after the sale. So in essence, the buyer is really just purchasing the future commissions owed by the player to the agents under these agreements. [The regulations only permit commissions to be paid to the agent as and when the player is paid his salary during the term of his player contract.]
The other primary asset purchased consists of the individual agents themselves via an employment agreement with the agent. But here too, it is very common for disputes to arise between individual agents and the agency that employs them, and the agent ends up leaving and takes clients with him resulting in a lawsuit. In the July 31 edition of the Sports Business Journal, Liz Mullen notes that many agents are speculating how long the marriage will last at CAA:
No sooner was the deal announced than other agents started saying it would never work. They reasoned that egos would clash, that players might shy away from being represented by what one agent called “a monstrosity,” and that Condon, long recognized as the most powerful NFL agent, and Dogra, an up-and-comer, would struggle over issues such as who would recruit which players. Arn Tellem, the prominent basketball and baseball agent who was formerly CEO of SFX Sports and is now CEO of athlete management for Wasserman Media Group, said that the most successful agents are extremely competitive and have a hard time working with their former competitors. “It is not in most agents’ nature to make it work,” Tellem said.Another legal issue that arises from consolidation in the industry is the increased potential for conflicts of interest. Such a conflict can arise when an agency represents two or more similarly situated players at the same time who are competing for a finite number of available positions in the league, or, even if not competing for the same position, competing for a pool of available dollars that teams are willing to spend on players at that particular time. Representing over 140 NFL clients means that CAA is representing an average of 5 players per team. At some point, CAA will be negotiating contracts at the same time for multiple free agents competing for a job. An agent owes a fiduciary duty (duty of loyalty) to serve the best interest of each individual client, and it will be difficult for CAA to do so in this scenario. The NFLPA will be closely monitoring this situation.
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