K Street Posts a Down Year
The lobbying business is not recession-proof.
Tough economic times combined with a presidential election made for a dismal year on K Street, with more than half of the top 25 lobbying shops posting losses in 2008.
The results a 4.2 percent year-on-year decline reflect a sea change for most K Street titans, who have continually posted double-digit revenue spikes over the years.
While lobbyists improved their take by 2.8 percent during the first half of 2008, according to Senate lobbying reports, they were unable to shake off the limited Congressional schedule and the downturn in the economy for the rest of the year.
Additionally, long-standing financial services clients such as Fannie Mae, American International Group, Lehman Brothers, Bear Stearns and others, which cut back on lobbying spending or went out of business entirely, also contributed to the drop.
Overall revenue among the top 25 lobby shops declined, with total gross revenue at $417.1 million, down from $437.5 million in 2007.
Meanwhile, 16 out of the top 25 firms saw losses on their balance sheet and seven of those faced double-digit percentage drops.
Among the top firms, there was little change in rankings, with Patton Boggs remaining atop the heap with $39.2 million in lobbying revenue.
Despite securing the No. 1 position, the firms lobbying profits were down 7.5 percent from 2007, when the firm reported $42.4 million in revenue.
The last two quarters of the year were the ones that showed the declines, said James Christian, a partner at Patton Boggs.
Still, not every firm saw a falloff in profits, including the Podesta Group, whose revenues soared by about 40 percent.
Akin Gump Strauss Hauer & Feld held steady in the No. 2 spot and continued to grow, bringing in $34.4 million for the year, up from $32.1 million in 2007, an increase of 7.2 percent.
While Van Scoyoc Associates Inc. maintained its grip on the third spot, the firms revenue dropped 10.4 percent, sliding from $28.8 million to $25.8 million. The revenue loss came after the firm recorded its best first half ever, according to firm founder H. Stewart Van Scoyoc.
Cassidy & Associates saw a drop-off of 4.5 percent from 2007. The firm maintained its No. 4 spot, bringing in $23.6 million in 2008 compared to $24.7 million in 2007.
The economy certainly showed itself on K Street, said Gregg Hartley, vice chairman and chief operating officer of Cassidy & Associates, echoing the views of several managing partners.
A lot of clients have hesitated re-signing, given the environment, or are not re-signing at quite the same levels, Hartley added.
There was change in the No. 5 and 6 spots as Ogilvy Government Relations edged up one spot to No. 5 and Dutko Worldwide climbed from No. 7 to No. 6.
Ogilvys rise came despite a 6.7 percent drop in revenue from $22.3 million in 2007 to $20.8 million in 2008.
Dutko also posted a revenue drop, falling to $20.3 million from $22.3 million the year before.
Meanwhile Hogan & Hartson held steady at the No. 8 spot, despite seeing its revenues slump 5.2 percent. The firm reported $18.2 million in revenue compared with $19.2 million in 2007.
Williams & Jensen and Quinn Gillespie & Associates rounded out the top 10. Williams & Jensen jumped two spots to No. 9 with a 1.2 percent increase in revenue, inching up to $16.7 million from $16.5 million in 2007.
Quinn Gillespie dropped one spot to No. 10 with a 9.4 percent decrease in lobbying revenue. The firm reported $16.3 million in 2008 lobbying revenue compared with $18 million in 2007.
The drop wasnt surprising given the presidential election and in a year when most American companies suffered enormous financial hardships, said firm co-founder Jack Quinn.
By far, Covington & Burling and the formerly all-Republican firm BGR Group posted some of the most dramatic slumps.
Covington & Burling slid to No. 23 from No. 18 in 2007 as its Congressional lobbying revenues slid from $12.9 million in 2007 to $10 million in 2008.
BGR wasnt far behind. The firm slid two spots to No. 7, dropping 18.9 percent to $18.4 million, down from $22.7 million in 2007.
Like most firms, we felt the head winds of a tough economy and a presidential year in a divided government where legislation typically gridlocks, Loren Monroe of BGR said. A lot of clients are savvy enough to realize not a lot is going to get done.
The Podesta Group saw the most dramatic jump in revenue, growing 40.3 percent in 2008.
The firm reported bringing in $16.0 million in 2008 compared with $11.4 million in 2007.
The Podesta firms growth was fueled by defense, health care, and university clients, according to firm founder Tony Podesta, brother of Barack Obama transition co-chairman John Podesta.
It just sort of happened continuously throughout the whole year, Tony Podesta said. Virtually all of them will continue into next year.
Blank Rome Government Relations also saw a big jump in revenue, growing 17.3 percent in 2008. The firm saw its revenue grow from $8.1 million to $9.5 million.
The revenue increase beat the practice groups internal goal of 15 percent, according to Peter Peyser, a principal with the firm.
So far, lobbyists are hesitant to say what the prospects are for rebounding in 2009.
We anticipate being very busy, but were not blind to the realities of the economy and neither are companies, said Steve Ross of Akin Gump.
More and more clients and potential clients are understanding how critical Washington and the Congress is to what they do, Ross said.