A Marketing Formula to Match Eight Gold Medals

By Anita Huslin
Washington Post Staff Writer
Monday, August 18, 2008

What a difference a few chunks of metal make.

With each new gold medal that Olympic swimmer Michael Phelps collected last week, his commercial value skyrocketed. Which is great, of course, but at the moment it's making his agent's job exponentially more complicated.

Little more than a week ago, when he arrived in Beijing, Peter Carlisle was still trying to sell companies on Phelps's marketing potential.

"In one day you're meeting resistance, and they're not seeing it the way you're seeing it," said Carlisle, the head of Octagon Worldwide's Olympics division and Phelps's agent since 2002.

Then his client won his first gold medal. Then another. And a third. Suddenly, Carlisle said, "they're seeing it a little more." After Phelps won his fourth gold medal, becoming the most decorated Olympian in history, sponsors were happy to pay five times more for his services than they were a couple of days earlier.

It's a great time to be an Olympic winner. And not just if you're the athlete.

Phelps's success is also a boost for Octagon, whose McLean sports and personalities division claims more Olympians than any other agency. Like other firms whose fortunes rise and fall with the health of the advertising and marketing industries, Octagon has been feeling the pinch of a lousy U.S. economy. In recent conference calls with staff, its president counseled employees to be judicious in their spending and to watch their travel budgets.

So it's an ephemeral moment, to have hundreds of advertisers suddenly lining up at your door. But even if it's just for one client in a small segment of its overall business, Octagon is savoring the victory.

"You spend four years trying to generate the most compelling opportunities and all of a sudden, in one day, you couldn't possibly do them all," Carlisle said. The demand for Phelps, he said, "is exactly the kind of thing we anticipated . . . but I don't think you could imagine it would be happening at this level."

This is probably the loudest Carlisle or anyone at his firm will proclaim success. Octagon is generally considered to be among the top three U.S. sports agencies in terms of size and influence, but in an industry noted for its sex appeal and swagger, Octagon keeps quiet and does much of its business behind the scenes.

"One can go from rooster to feather duster very quickly," Phil de Picciotto, Octagon's sports and personalities division president, likes to say. "We understand how quickly a landscape can change in any industry."

Indeed, Octagon has evolved from a tradition where agents once were as much the celebrities as their athlete-clients.

The firm traces its roots to the sports marketing practice of the now-defunct D.C. law firm Dell, Craighill, Fentress & Benton. Donald Dell was one of the original partners there when a group of attorneys broke away to form a stand-alone sports marketing agency called Advantage. Dell headed up another sports marketing agency called ProServ. Advantage later was snapped up by international ad agency conglomerate InterPublic, which then rebranded the firm as Octagon.

Dell now works for a private-equity firm in Kentucky that acquired pieces of the last agency he ran when it dissolved. These days, he characterizes Octagon as a "major player" with "great relationships" and "great people skills."

But he questions whether the past accounting and financial woes of InterPublic affected Octagon's ability to grow through acquisitions.

"I think they've struggled very hard with their parent company," Dell said. "It would seem they don't have a rich parent bank behind them."

De Picciotto said Octagon intentionally chose to grow organically, and not through acquisitions, which he said has served the firm well to date.

"We had the opportunity to play that acquisition game and we consciously decided not to do that because the economics didn't make any sense," de Picciotto said.

Octagon has built a reputation of being a full-service firm for athletes, from negotiating and writing contracts to managing their personal finances. It also assists companies that want to advertise through sports. The firm has created a niche with its Olympic practice and has steadily been growing it.

In 2002, when the firm hired Carlisle, the division represented 25 Olympic athletes. That rose to 40 in 2004. This year, Octagon's stable includes nearly 50 athletes from 20 countries, among them swimmers Katie Hoff and Ryan Lochte, basketball player Chris Paul and tennis star Jelena Jankovic.

Octagon estimates that its Olympics division accounts for about 10 percent of its overall revenue, and margins tend to be higher than those from contracts with athletes in professional sports leagues, according to the company. League rules can cap agents' take on contracts at 3 to 5 percent. With no leagues to limit Olympians, an agent's cut can be as high as 20 percent.

InterPublic does not break out Octagon financial data, but Octagon's president has said that the athletes and personalities division has contributed double-digit growth numbers since 2001 -- net revenue rose 21 percent last year.

Still, it's a tough time to be selling clients, at least in the United States. Blue-chip firms are slashing budgets for advertising and marketing, and many still question how best to maximize the value of the Internet.

Octagon encourages its athletes to have an active hand in promoting their sports -- and themselves. It's not exactly a booming business, but Octagon is partnering with Phelps and other swimmers it represents in a new social networking site, http://swimroom.com. They sell DVDs, T-shirts, posters and other swimming memorabilia on the side, but its primary value so far is in expanding athletes' profiles beyond the Olympics and building interest in the sport. There's even a site that markets swim clinics with the Olympic stars, http://swimwiththestars.com.

At the Beijing Olympics, Carlisle watches Octagon's swimmers race from a perch in the nosebleed section of the Water Cube natatorium. The company's Olympics division has developed a complicated algorithm for valuing their clients' commercial worth. For most of them, it's all about maximizing sponsorships and appearances for athletes who have a 17-day window of play. For Phelps, Octagon's task has been to figure out how to create a sustainable global brand that will give the swimmer long-term commercial value.

Carlisle has firmed up four contracts so far for the Phelps victory tour, but will wait until the end of the games next week to sit down and present other offers. Phelps is already on board with Kellogg's, Speedo, Visa, Omega, Hilton, AT&T and PowerBar. Next week, Phelps and his team will sift through a growing pile of pitches for such products as Michael Phelps commemorative coins, oil paintings, sculptures and action figures. And they'll figure out what stops he'll make on tour.

It's a process that is not unlike one the company goes through as it assesses where to focus its own resources. With the downturn in the economy, de Picciotto said, the company has gotten queries from agents who are out on their own, but are looking for the security of an established company.

"Like an athlete, once an event has been performed, the focus has to be on the next one," de Picciotto said. "We always have to be replenishing the pipeline to remain current."