Agency megadeal: WME

Is the new entity more than the some of its parts?

The merger of William Morris Agency and Endeavor was the kind of once-in-a-generation earthquake that shifted the showbiz dealmaking landscape.

The pact itself was a jaw-dropper: Scrappy 14-year-old upstart takes over 111-year-old industry stalwart more than twice its size. With no money changing hands, Ari Emanuel and the management team that built Endeavor into a major player suddenly controlled a larger and more diversified business with a greatly enhanced cash-flow base.

Emanuel and cohorts now have a much larger footprint in areas that formerly hindered Endeavor’s growth: Suddenly they control powerhouse departments in reality TV, music touring and publishing — important hedges against future labor strikes and contracting first-dollar gross and TV packaging businesses.

In the bigger picture, the union of WMA-Endeavor in May has turned the Hollywood talent agency landscape into a two-superpower town. The dawn of WME Entertainment gave CAA its first true rival since Michael Ovitz led that agency to dominance in the ’80s.

The tremors are still rattling the industry. Other agencies, from UTA to ICM, Paradigm to Gersh, are under pressure to shore up their core strengths and figure out how to position themselves as alternatives to the behemoths. The weaker agencies face even greater challenges as they seek to prevent clients from being poached and to compete effectively in a down market.

That contracting marketplace is what fueled Endeavor’s urge to merge with WMA in the first place, after a previous flirtation with UTA fizzled. Size brings leverage in brokering deals at studios and networks, and it also creates a strong base from which to expand into new frontiers that tenpercenters see as key to their future — areas like financing, sports, corporate consulting and marketing.

WMA was seen in the industry as adrift, but its strong roster of actors, directors and writers combine with Endeavor’s clients to create a talent stockpile only CAA can rival. It gives WME a greater ability to construct packages than either possessed alone. That’s evidenced by “Battleship,” the screen version of the game from WMA-repped Hasbro, which suddenly had one of Endeavor’s top directors, Pete Berg, and a July 4, 2011, weekend slot from Universal. Endeavor client Adam Sandler and his Happy Madison banner used its “put” at Sony to push forward a long-gestating Richard Pryor biopic written and to be directed by Bill Condon and to star Marlon Wayans — both WMA clients. Material auctioned to studios routinely comes packaged with agency-repped stars and directors.

The client cross-pollination has been a boon, say WME agents, and Endeavor has brought efficient management practices to the film and TV departments.

On the downside, the birth of WME came with a level of ruthlessness shocking even for the agency world.

The bloodletting went all the way to the top with the ouster of WMA chief executive Jim Wiatt, who might have expected to step aside for Emanuel and new leadership at some point but certainly didn’t anticipate an ouster before the ink on the deal was dry.

Wiatt was voted out as chairman of the merged entity by the nine-member board that he helped assemble — a move that had all the drama and betrayals of Julius Caesar on the Roman Senate floor.

More than 100 WMA staffers, many of them agency vets with time on their contracts, were shown the door as part of the consolidation.

Star dealmakers like Steve Rabineau and David Lonner — who, when they were Endeavor partners, clashed with Emanuel and exited to join WMA — were told there was no place for them in the new company (Rabineau quickly became a UTA partner, Lonner a manager, in a compromise that kept beachhead client J.J. Abrams with the agency and longtime dealmaker Lonner).

When a number of those WMA agents landed at other agencies for discounted salaries, WME initially refused to pay the difference as stipulated by the WMA contracts.

WME backed off before having to address the issue at an arbitration hearing, where those agents were prepared to argue they had little choice but to take the first jobs available.

After all, incoming management encouraged the agents to tell clients the merger was great news and make introductions to new department heads.

When the agents were summarily dismissed after that process, they needed to land immediately or risk losing their clients.

WME’s rough internal transition process is nearly over, but survivors from both sides say they are better off than when WMA and Endeavor were staring up at CAA.

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