LONDON – The collapse of the world's
biggest sports marketing company ISMM, who were declared
bankrupt Monday, sent shockwaves through the world of sport.
The demise of the Swiss company and its subsidiary ISL
Worldwide could result in one of the most powerful men in sport,
FIFA chief Sepp Blatter, losing his job, some say.
It will certainly lead to a reassessment by major sporting
bodies of how they go about marketing and selling television
rights.
Many of those bodies are likely to take responsibility for
their own marketing, following a trend started by the
International Olympic Committee (IOC) when it cut all ties with
ISL in 1995.
ISMM – International Sports Media and Marketing – was
founded in 1982 by Adidas sportswear tycoon Horst Dassler. It
soon had contracts for the three biggest events in the sporting
calendar – the Olympics, soccer's World Cup and the athletics
world championships.
The loss of the Olympics in 1995 was a blow, but the company
held on to the rights to the World Cup for 2002 and 2006 and
embarked on a rapid expansion intended to attract investors for
a planned flotation.
But to secure the World Cup deal they had to guarantee world
body FIFA $1.56 billion and subsequent deals were also won at an
extremely high cost.
The American motor racing series CART was guaranteed $214
million, while the Masters Series deal was worth $1.2 billion
over 10 years to the Association of Tennis Professionals (ATP).
Other deals included marketing rights for the 2002 Asian
Games, basketball's FIBA superleague and Brazilian soccer clubs
Gremio and Flamengo.
The feeling that the company had outstretched itself was
fuelled when the man responsible for the expansion, chief
executive officer Heinz Schurtenberger, departed abruptly in
November last year.
In January, the ATP tennis tour revealed that ISL were
attempting to renegotiate just two years into their deal. A
month later, ISL canceled their nine-year deal with CART, who
immediately launched a $100-million lawsuit.
At the end of March, the company announced that they were to
undergo major restructuring to avoid bankruptcy and were
courting a 'strong equity partner' to help underwrite it.
Despite the uncertainty, FIFA adopted what they described as
a 'positive stance' towards their problems.
Just two weeks later ISMM were ordered by a Swiss court to
start bankruptcy proceedings, a ruling later delayed for a month
on appeal to allow a possible takeover.
At that stage FIFA called a rare meeting of its emergency
committee to draw up contingency plans, while Blatter made a
trip to Japan to reassure the organizers of the 2002 finals that
FIFA would make up any shortfall in funding.
European soccer's governing body UEFA also revealed that ISL
owed them nearly $12 million over their deal to market Euro
2000.
The end for ISMM came last week when French media giants
Vivendi balked at the company's huge debts and pulled out of
talks on a takeover. FIFA immediately canceled its marketing
deal with them.
The ramifications of the end of ISMM will be most acutely
felt by FIFA and Blatter.
Left with no sponsors for the World Club Championship, which
was due to take place in Spain this summer, they were forced to
postpone the event until 2003.
A FIFA source, who asked not to be identified, told Reuters
last weekend that this decision could ultimately cost Blatter
his job.
"The competition stood as one of the pillars of Mr. Blatter's
presidency," he said.
Blatter has already said he will seek a second term as
president next year.
German media company Kirch, who held the European and U.S.
television rights to the World Cup finals, have now been offered
the rights for the rest of the world, which had been ISL's
responsibility.
Kirch are already at loggerheads with the British government
over their plan to sell the rights to the highest bidder
regardless of whether they offer coverage free to air, as it has
always been, or to a pay-per-view channel.
FIFA have set up an in-house company called FIFA Marketing
to take over responsibility for finding sponsors for the 2002
World Cup finals. But starting from scratch at such a late date
with inexperienced staff may cause a shortfall in funding for
soccer's showpiece event.
In taking their marketing operation back in-house FIFA are
following a trend set by the IOC, whose marketing supremo
Michael Payne – himself a former ISL employee – described
ISL's collapse as "like an earthquake."
Payne said the IOC, whose sponsorship scheme is the envy of
the sporting world, would be prepared to advise other sporting
bodies who wanted to go it alone.
The International Amateur Athletic Federation (IAAF), who
had a deal with ISL over this year's athletics world
championships in Edmonton, may be first in the queue for help.
"We could find some other marketing company. Another option
is to reorganize our marketing department and sell directly,"
said IAAF spokesman Giorgio Reineri last week.
But he added that because they had not sold the television
rights to the world championships through ISL, they would be
only marginally affected by its collapse.
The ATP, who were well prepared for the collapse of ISL,
said last week that they had decided to market the Masters
Series in-house and had already had some success in finding new
sponsors.
With the possibility of new revenue streams offered by the
internet, there is no doubt that someone will attempt to fill
the void left by ISL.
Just this week Vivendi and fellow media giants Bertelsmann
announced that they had merged their sports rights interests to
create one giant player worth more than $875 million.
But it may be a while before the sporting bodies burnt by
the ISL collapse sign away their crown jewels again.
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