It’s rightly known as the company that invented the sports marketing industry. It has transformed its chairman Mark McCormack from a Cleveland lawyer to one of the most important figures in world sport. The company employs roughly 2,000 people, across 61 offices, in 25 countries, with annual revenues of 750m. Its nearest rivals are less than half its size.
But there is one question that dominates the talk of the International Management Group’s (IMG) offices. When will the 66-year-old chairman give up his empire? And the talk is getting louder. Not because McCormack has given any fresh indication of a retirement date, but because of a changing market.
Richard Dean, managing director of consultancy Sponsorship Science, who spent ten years at IMG says: “That has always been the million dollar question around the office. People always talk about it.”
Another former IMG executive adds: “That’s a question that occupies the minds of a lot of guys there. A lot of people are planning their careers around what happens once Mark retires. The company is staffed almost entirely by sales people and they are all very ambitious.”
It is also a topic that occupies others in the sponsorship world. Matthew Patten, chief executive officer at M&C Saatchi Sponsorship, says: “Certainly there is the question of succession. The company has a lot of very bright, very ambitious people working for it, and they want to know who will lead the company and what that will mean for them.”
Another question well worth asking is: what will IMG look like after McCormack eventually quits?
According to ex-IMG sources, the company experienced average yearly growth rates of 20 per cent in the Eighties and early Nineties, but is coming under increasing pressure from rivals and competition from the likes of Nike. “This growth rate is beginning to slow as the market becomes increasingly crowded,” says the source.
With Nike developing sports management units and the acquisition of both the Advantage International and a majority stake in Alan Pascoe International by advertising’s Interpublic Group, there is more real competition for IMG to confront in the sports market.
The company has developed a formidable breadth since it began in 1960, when McCormack convinced golfer Arnold Palmer to let him represent his interests. Formula One driver David Coulthard may have gone through an acrimonious split with the agency (MW September 11), but it still has a massive array of talent from the sports and arts world on its books.
Michael Schumacher, Andre Agassi, Michael Johnson, Kiri Te Kanawa, Jackie Stewart, violinist Itzhak Perlman, Pete Sampras and Nick Faldo, are just some of the names which let IMG run their business affairs.
But there has been a shift in the emphasis of its business, with event management and TV rights becoming more significant revenue sources than straightforward representation.
The company, through its event management arm and its TV division Trans World International, owns the rights to a range of sports including Wimbledon TV coverage outside the UK, the US Open, the British Open, the US PGA golf tournament, Le Mans 24-hour race, the Rugby World Cup, the International Skiing Federation, men’s (ATP) and women’s (WTA) tennis associations and next year’s Nagano Winter Olympics.
There are really only five or six serious contenders to replace McCormack. And what McCormack, who owns over 90 per cent of the shares of the privately-owned company and who will be taking the decision, has to decide is whether the top job should stay in the family or go to one of his three trusted lieutenants.
The first of the contenders is Robert Kain, the company’s director of operations for North and South America. Former colleagues say the American, who joined the company in 1976, is adept at client handling and has done much to develop tennis projects, which along with golf, has been one of the cornerstones of the company’s success.
Alastair Johnston, director of operations for Asia, Australia and the Pacific Rim, is another contender. His strength lies in managing new business ventures. He, for instance, worked closely with Arnold Palmer to develop his network of business interests, which range from building golf courses to running car dealerships. He has been with IMG since 1972.
The third member of this group is Ian Todd, director of operations in Europe, Africa, and the Middle East, who joined the company in 1971. Over the years the Englishman has built strong relationships with the world’s most powerful governing bodies like the foot ball authorities FIFA and UEFA, and the International Olympic Committee. These links led him to be appointed as marketing director to the organising committee of the 1992 Albertville Winter Olympic Games.
The three men work auto-nomously within their regions, report directly to McCormack, and are fiercely competitive. Patten comments: “Mark is the glue that holds the company together. When he goes, people will want to see how it holds together.”
Three further contenders for McCormack’s throne are his children: Breck, Todd and daughter Lesley, who all work for the family firm. It mirrors the situation at News Corporation, where Rupert Murdoch has been tussling with the problem of succession, and where the promotion of his children has caused internal friction.
Breck, a trained lawyer, has worked in London and Hong Kong, and is experienced in contract negotiation and administration. Todd, based in the US, concentrates on the sales side of the business. Lesley focuses on event management.
The betting is that of the three lieutenants Johnston and Kain are better placed to succeed McCormack. Both are based in the States and, if nothing else, are able to get more access to the chairman. It is perhaps with this in mind that sportswear company Nike has been secretly wooing Ian Todd.
In the past year, Nike has started sports entertainment and sports agency divisions, and the theory is that Todd has been approached to expand them. Nike, like IMG, is an aggressive company, and its yearly revenues, at 4.1bn, are four times larger. But as one observer puts it: “It would still be a hell of a job to tempt Ian away from IMG.”
Critics agree that if a family member takes over the business, it will be either Breck or Todd.
Observers are split on how McCormack will choose his successor. One former IMG employee simply says: “Blood is thicker than water. Mark has built up an amazing legacy and I think he will want to leave one of his family either at the top or very close to the top, so he or she can move into that position soon afterwards.”
However, Sponsorship Science’s Dean says: “For years Mark purposely left no clue as to who might be his obvious successor. Then about three years ago he put these three men directly under him. Many see this as a indication that one of these men will get the top job when he leaves. But I think he wants to find a balance between bringing his family close to the top of the company and keeping his senior management happy.”
And it seems that McCormack, for all his expertise in problem solving, is having trouble squaring this circle. A long-time friend and chairman of a rival sports company says he spent several hours in a hotel room during last year’s Wimbledon explaining his dilemma.
“He knew that if he put his sons at the top when he retired that would lead to an exodus of his senior staff,” says the source. “He was trying to balance both these things but he hadn’t worked it out yet.” This may be the reason McCormack has never given any indication of when he will retire.
There is another option for the company when McCormack does decide to call it a day – to sell up. Patten says: “This would make a very attractive option for a broadcaster. IMG owns so many rights. And sport, particularly live sport, drives ratings. A broadcaster like (News International-owned) Fox TV in the US is crying out for material, and could be interested in acquiring the company. Fox could then arrange an array of licensing deals to help pay for the acquisition. It would work very much in the way as when Sony bought Columbia studios.”
However, Dean thinks this would only be a last resort. “I would be amazed if Mark had not considered it, but I think he has too much personal equity invested in the company. I think he would only do this if he could not solve the question of succession.”
McCormack is not the sort of person to leave on a Friday and never come back. Even when he gives up the day-to-day running of the business, he will still have a role. It is for whoever replaces him to establish the future strategy and structure of the sports company in a changing world. That will have to include TV rights, event management and less of the sports representation upon which IMG was built.
Dome sponsorship hit by Catch 22
Plans to raise 150m of corporate sponsorship for the Millennium Dome in Greenwich have reached an impasse.
IMG, hired to break this log jam and get companies to sign up as sponsors for the celebration of the new millennium, will now work alongside Kevin Johnson, who joins this week as commercial director of the New Millennium Experience Company (NMEC).
IMG won the task of raising the sponsorship for the Millennium Dome in a pitch against rivals API and SRI, a subsidiary of ISL. In true Millennium fashion, the rivals were given just four days to prepare their presentations. This echoes complaints made by advertising agencies: that they were given too little time to submit information after the advertising tender was posted in the European Journal.
It seemed IMG was better prepared than its rivals. It had links to the design company Imagination, which developed all the original ideas for the Millennium exhibition. The two worked on the scheme through a consortium that originally bid to run the exhibition.
Mark McCormack saw the potential for lucrative sponsorship management work for the Millennium exhibition long before his rivals. The agency is understood to have only three full-timers working on the account to develop sponsorship packages. It stands to make a maximum 9m from the contract – the fee has been negotiated down from 15m – if it secures the total 150m required.
For a company with a revenue of 750m it is a relatively small amount of money, but this is a prestige contract. The price of failure to IMG may be 9m in lost revenue, but it would cost the National Lottery some 150m in contingency payments to cover such a shortfall.
Central to the problem of selling sponsorship is the fact that the commercial benefit of sponsoring the event has yet to be proved to many companies. Yes, there may be as many as 12 million visitors to the exhibition, and there is the possibility of selling broadcast rights, but companies remain unconvinced.
It is a classic Catch 22. Companies are reluctant to sign up as sponsors until they know the nature of what they are sponsoring – how the inside of the dome will be designed and where their sponsorship opportunities lie. But NMEC design director Stephen Bayley can’t give a clear idea of what the inside of the dome will look like until he knows the make-up of the sponsors and the details of the deals struck by IMG.
This issue has already forced the NMEC into a damaging split with Imagination, which developed all the original design ideas for the exhibition.
But it pulled out of the project in March because it was concerned about how much influence sponsors would have in determining the contents of the dome, and there was uncertainty about the type of sponsorship being offered. An Imagination spokeswoman says: “There is only so far you can go before you need to pin down the elements of the exhibition. You can only complete the work when the goalposts stop moving. It is not practical for our designers to do more work.”
As a result, the NMEC has invited 22 design agencies to come up with ideas. But until the agencies have been appointed, and a clearer idea materialises of what the exhibition stands for, it will be a tough job to persuade companies to commit funds.
The appointment of M&C Saatchi as advertising agency for the NMEC should help. It is understood that the advertising campaign will have two aims – to attract visitors to the exhibition and persuade corporate sponsors to make a commitment.
A number of top UK companies are already committed sponsors. But British Airways has halved its original commitment of 12m to the project, and it is still not known how much British Aerospace, BT, the Corporation of the City of London and Swatch will put in. Sainsbury’s, which was originally reported to have committed 12m to the project, admits that it is in talks with NMEC but says no decision has yet been taken.
They had better be quick. There are only 835 days to go.