After reading and digesting the NBA’s new collective bargaining agreement, Eddie Jones, the Lakers’ all-star guard, called his agent.
And fired him.
Nothing personal. Simply business, the “sensible thing to do,” Jones said later.
The agent business is awash with change, and the NBA’s new labor agreement, sure to be scrutinized by other pro sports, heralds the most revolutionary change of all--that a professional athlete, even a marquee attraction such as Jones, can strike a multimillion-dollar deal without relying on an agent.
The relationship between athlete and agent is undergoing a fundamental reevaluation--driven by a complex web that involves the NBA’s new labor agreement, a challenge from lawyers who don’t charge commissions, the use of sophisticated marketing concepts to position an athlete as a “brand” unto himself (or herself) and, most important, the intertwining of sports and entertainment.
The market is changing so quickly and dramatically that the careers of many, if not most, agents are at risk, said Leigh Steinberg, the Newport Beach agent whose career served as the thinly veiled model for the film “Jerry Maguire.”
It’s a measure of how much change is afoot that “Maguire,” the vehicle that earned Cuba Gooding Jr. an Oscar in 1997--introducing his tag line, “Show me the money!” into popular culture--is already outdated.
One of the movie’s major plot lines centers on the Gooding character’s contract renegotiation. What, no ancillary deals? No record gig? No computer-generated video game?
“Essentially,” Steinberg said, “what has happened is that the sports-representation business started to evolve when we realized that all of the energy and effort going to kill the buffalo on the prairie was yielding only the flank steak of negotiation revenues.
“There are many other uses for athletes.”
For agents too.
“We’ve evolved into the content-provision business, as opposed to simply being negotiators representing a player in contract negotiations with a team,” Steinberg said.
Traditionally, that’s what the job entailed. An agent negotiated an athlete’s playing contract, then skimmed an agreed-upon percentage off the top.
No more. It’s a new deal.
Some agents have been replaced by lawyers, who work for an hourly fee instead of charging a commission, usually 2-5%. For some athletes, the savings amount to millions.
The Detroit Pistons’ Grant Hill, for instance, hired Washington attorney Lon Babby to do his deal. Hill signed an eight-year, $45-million contract in 1994. An agent’s cut of that--4%, under NBA rules-- would be about $1.8 million. Babby billed Hill less than $100,000.
“It’s as if you’re starting a business,” Babby said. “When you’re starting a business, you hire a lawyer. And you hire a financial advisor. No one hires an agent.”
The Milwaukee Bucks’ Ray Allen hired perhaps the most famous lawyer in America, Johnnie Cochran Jr., to read over the $70.9-million contract extension he signed a few weeks ago, paying Cochran $500 an hour instead of a $2.8-million cut. Allen negotiated the contract directly with Buck owner Herb Kohl.
“I don’t need somebody skimming millions off the top,” Allen said.
“This kid was smart,” Cochran said, adding, “He needed legal advice more than somebody to [negotiate] the contract.”
Allen told a Milwaukee reporter: “When we are smart enough to take care of our money, it’s good to do it this way.”
Buck Coach George Karl said: “I just think Ray should be complimented. If he’s not the first, he’s the first I know of who has done this big a deal, pushing aside the pressures of hiring a big-name agent. And I think he’s done it with a lot of class and style. I think he’s shown a lot of people that you may not need agents.”
Allen’s deal is nearly identical to those of the Lakers’ Kobe Bryant, Philadelphia’s Allen Iverson, Vancouver’s Shareef Abdur-Rahim and Boston’s Antoine Walker. The reason: The NBA’s new labor accord sets limits on what players can earn, based on years of service.
Each got the maximum salary the new collective bargaining agreement allows a third-year player--$9 million to start, with annual raises of 12.5%.
After reading the highly structured labor agreement, the Lakers’ Jones--who can, like Bryant, Allen and the others, expect to “max out” on his next deal--fired Sal DiFazio, his longtime agent.
DiFazio understood. “You can’t expect to charge a young man fees for negotiating when negotiations are not necessary,” he said.
The labor agreement arguably makes agents superfluous, not only for stars but for rookies as well. Rookies now work under a salary scale.
Since January, when the labor agreement was reached, 15 agents have been fired, an official at the National Basketball Players Assn. said Tuesday.
Many agents, players and even general managers said, however, that agents may yet play significant roles for the league’s middle class.
But, they added, an agent still negotiating playing contracts must stress that he or she offers management services as well, everything from finding a hotel room for a player’s mom when she flies to town to shopping an athlete when trade time looms. Economists call it “adding value” to the transaction--and agents must do it, or risk being dumped.
One agent said the job has become a 24-hour, seven-day-a-week burden:
“An athlete calls you at 12:30 in the morning and says, ‘I’ve got this girl in my hotel room and now my wife’s here. What do I do?’ Or, ‘I’ve got my shoes in Detroit and I’m in Orlando. What do I do?’
“It’s a full-time service position. Being called an ‘agent’ is misleading. It’s a combination. You’re agent, manager, social worker, family counselor, psychologist. All under one hat.”
Over the last few years, meanwhile, growing numbers of agents have realized that the player contract is secondary. The real action, the chance for an agent to earn double-digit commissions, is in moving an athlete into promotional opportunities elsewhere--sneaker deals, music, movies.
The shift reflects the marriage of sports and entertainment--prompted by a celebrity culture, by the relentless demands of 24-hour cable stations and other technologies for programming and by the arrival of multinational corporations onto the scene.
Marketing experts go so far now as to refer to athletes as “software” and the stages they play on--TV, video games, movies, CDs--as “hardware.”
The possibilities are practically endless. A rich example: Shaquille O’Neal. Movies, rap recordings, commercials for tacos, sodas, shoes--it’s a veritable Shaq-a-thon.
His agent, Leonard Armato, declined to discuss financial specifics. O’Neal is making $120 million to play basketball and that’s only the start of his income stream.
O’Neal simply couldn’t be more delighted.
“You know,” he said after a recent Laker practice, “sports agents got that lingo. The right words, certain words, certain people know how to flip those words easily. Leonard is a great flipper. Leonard is a wordsmith.”
Another case in point, one that at first glance might seem counter-intuitive: Heisman Trophy winner and sure first-round NFL draft pick Ricky Williams announcing a few weeks ago that he was enlisting No Limit Sports, headed by rapper Master P, to represent him.
It’s simply business.
Going with P, as he prefers to be known, eliminates the middleman. P owns the film company. P owns the record label. P owns the clothing label.
And one more thing: “Kids are not going to listen to you unless you are cool, and signing with Master P makes you cool with those kids,” Williams said in signing with the rapper, whose real name is Percy Miller and who, according to Forbes magazine, earned $56 million in 1998, more than Celine Dion, Garth Brooks or the Spice Girls.
“Our success is no fluke,” said No Limit’s business manager, Tevester Scott, adding, “We have the same business knowledge as the old guys, but we relate to the players.”
David Falk, one of the “old guys,” said of P, “I respect what he’s done.”
As well he should, since Falk merged his agency last year with SFX Entertainment Inc., to take advantage of the same sort of seamless marketing and cross-promotion opportunities.
Here’s how the deal came together: SFX had been a leading concert promoter-producer and wanted a broader-based business.
Falk brought his connections to Nike, Warner Brothers and others--among them Michael Jordan, late of the Chicago Bulls, whom Falk has long represented.
Here’s what it gives Falk: access to cash to “build the businesses” of his star basketball players, veterans such as the Knicks’ Patrick Ewing and rising stars such as Iverson and Walker.
For SFX, the idea is that it will all be done under one corporate banner--what business school types call “vertical integration.”
“The millennium is around the corner--it’s a natural time to be focusing on what’s next,” Falk said. “It’s not a question of wielding more power. It’s a question of putting yourself in position to offer clients . . . opportunities in a vertically integrated fashion that can’t be offered under the way sports agencies have been operated for the past 30 years.”
To buy the agency--called Falk Associates Management Enterprises--from Falk and co-founder Curtis Polk, SFX agreed to pay cash and stock currently worth $150 million.
Perhaps nothing underscores just how radical is the evolution in the agent business as that figure: $150 million for an influential agent and his book of business.
“Without getting too literary, it’s Aldous Huxley out there,” Falk said. “It’s a brave new world.”
Registered agents: 288
Cap on agent fee: 4% (4% of $1.1 million average NBA salary is $44,480)
Registered agents: 968
Cap on agent fees: 3% (3% of $912,000 average NFL salary is $27,360)
Registered agents: 319
Cap on agent fees: 5% (5% of $1.4 million average MLB salary is $72,200)
Registered agents: 232
Cap on agent fees: None (Average NHL salary is $862,000)