Billions of dollars in investment capital have flowed from the sports agency business. In recent weeks, EQT Private Equity has agreed to become a strategic investor and largest outside shareholder in United Talent Agency (UTA), and Creative Artists Agency (CAA) closed on its $750 million purchase of ICM Partners. Excel Sports Management and Wasserman Media Group have also received strategic investments in the past 20 months from Shamrock Capital and Redbird Capital, respectively.
The smart money is to see the trend continue to increasingly look to player representation businesses “as an index to broader sports value sentiment, exclusive media rights,” said Alex Michael (co-head, LionTree Growth). The thinking is that as long as the price of premium live rights continues to rise, league revenue, player salaries and agency commissions will all increase, a relatively safe bet in uncertain economic times.
Take JWS’: Investment opportunities exist within the agency business as all firms seek strategic capital to fuel their growth. Since Excel took over Shamrock’s capital, it has expanded from three offices to seven, closed on three new acquisitions, started three new divisions and begun expanding globally.
The desire to grow is being driven by increasing competition. “If you count all the available roster spots, 60-70% of the Big Four athletes are represented by six agencies,” said Jason Belzer (founder, GAME, Inc.), and each is doing their best to keep it “less and less.” is doing market share in the space.” That includes gobbling up smaller competitors. The six agencies Belzer mentioned are CAA, Excel, Wasserman, Boras Corporation, Athletes First and Octagon.
“They’re not just buying agents, they’re buying marketing agencies and agencies of record,” Belzer said. Large firms leverage strong service capabilities as a recruiting tool and a means to expand their clients’ revenue.
CAA is the largest sports agency under management by a large margin based on contract value and total potential commissions. “They now have over $10 billion in player contracts under management, which puts them close to $500 million in commissions over the life of those contracts,” Belzer said.
Investors see the agency business as a way to grow the future of sports without buying into individual teams or leagues. Buying into an individual team or league carries additional risks, such as the possibility of poor leadership.
Media rights growth, which has been driving the sport’s growth for the past three decades, has trickled down to player contracts. But it’s also “linked to the enterprise values of sponsorships and franchises,” said Emilio Collins (Partner and Chief Business Officer, Excel Sports Management). “And all of that creates opportunities for agency representation in different forms.”
The growing number of revenue generating opportunities in the sports landscape has also caught the attention of investors. NIL, sports betting, crypto, CBD and Web3 are new categories that have emerged in recent years. “That diversification really gives investors stability as well as great upside,” Collins said.
As growth achieved by larger agencies. “These agencies are large assets with strong cash flow characteristics, which are [as a result] Attracted various types of capital from private equity to sovereign wealth and institutional. It has increased the price and [furthered] interest in these agencies,” said Michael.
The predictable nature of guaranteed contracts seen in sports also appeals to risk-averse investors. Belzer, who represents several Division I college coaches, said he has clients with “seven-, eight-year contracts,” with commissions that are “like an annuity. Unless the client gets arrested and goes to jail, that money will come in over many years. That makes him accordingly.” Enables planning and budgeting.It also ensures that revenues do not drop dramatically during recessions.
As player contracts grow, so do off-field earning opportunities. But Belzer is quick to point out that overall, non-salaried agency revenue pales in comparison to commissions earned on player contracts and that there are “literally thousands” of marketing agents competing for that business. He estimated that the agency’s marketing and record commissions on all sports are “probably a $600 million/year business.”
Although the total market is $1 billion, this represents a fraction of the amount accumulated on the contract side. Belzer said that in 2020, the top 40 agencies worldwide represented more than $55 billion in contracts under management, earning nearly $3 billion in commissions in the process. A large part of it went to top agencies. Belzer would know; He spent seven years Forbes‘ The most valuable agency and agent ranking.
The agent recalled that generational players like LeBron James and Tigers Woods who made fortunes outside of the game are extremely rare exceptions. “The average athlete makes a maximum of 2-3% of their career income in marketing,” he said. Player contracts have become the bread and butter of the sports agency business.
With pure technology growth assets out of favor, it may seem that investor demand for growing agency businesses will only increase. But with the pay-TV universe shrinking, and media rights the primary catalyst for sports growth, investors entering the space today could buy at the peak, especially as there remains a major reset in sector valuations. “You’re still talking about low- to mid-double-digit EBITDA multiples for good assets,” Michael said. Belzer doesn’t believe that’s the case. “We are still far from the top,” he said. “We still haven’t potentially seen what the media industry will look like in 10 or 20 years, whenever. [these rights are] over the air,” and all major tech companies are vying for sports properties for their streaming services.