Pact changes landscape for talent dealmaking

Leaders of WMA and Endeavor took a giant leap into showbiz’s future on Monday, approving a merger that promises to change the landscape for the talent representation biz.

The combination of the 111-year-old WMA and 14-year-old Endeavor will create a mega-agency whose assets extend into virtually every aspect of the entertainment and media biz, with annual revenues estimated at $325 million. The tie-up, which is still subject to government approvals, also creates the largest competitor to CAA since that agency solidified its position as Hollywood’s dominant tenpercentery more than two decades ago. (Related article: WMA and Endeavor’s top clients).

Leading WME Entertainment will be WMA chief exec Jim Wiatt as chairman, while Endeavor toppers Ari Emanuel and Patrick Whitesell and WMA prexy Dave Wirtschafter will serve as co-CEOs.

The board of WMA and partners of Endeavor held separate votes on Monday to greenlight the merger. The news was confirmed by WMA and Endeavor in a brief press release. Insiders said the 27 Endeavor partners voted unanimously in favor of the deal. The vote among the 20 WMA board members was said to be 19 to 1.

Deal is expected to close within a few weeks, though it still requires approval from labor officials in California and New York, and it may face an antitrust review by the Justice Dept.

In addition to the challenges that all tenpercenteries are confronting at a time of great change in the entertainment biz, WME’s leaders will undoubtedly face a formidable task in achieving harmony between the wildly different cultures and backgrounds of the two agencies.

WME will be governed by a nine-member board of directors that includes five from the WMA camp (Wiatt, Wirtschafter, publishing head Jennifer Rudolph Walsh, music department chief Peter Grosslight and motion picture department head John Fogelman) and four from Endeavor (Emanuel; Whitesell; Rick Rosen, who will run the combined agency’s TV department; and Adam Venit).

The merger, for which William Morris and Endeavor had been in on-again, off-again talks for nearly a year, was driven by the fact that each agency has assets the other coveted.

WMA has a steady cash flow base primed by its lucrative music and touring department, which by itself generates an estimated $80 million annually; the legacy profits from decades of rich TV packaging fees on shows ranging from “The Andy Griffith Show” and “The Dick Van Dyke Show” to later hits like “The Cosby Show,” “Roseanne” and “Everybody Loves Raymond”; and its strong nonscripted-TV department, which rakes in fees on enduring hits including “Dancing With the Stars,” “The Biggest Loser” and “Live With Regis and Kelly.”

WMA also has the international presence that Endeavor lacks, with operations in London, Nashville, Miami and Shanghai.

Endeavor brings an aggressive team of agents and the stronger client base among film and TV actors, writers, directors and producers. As one WMA vet observed: “William Morris is cash-rich; Endeavor is client-rich. They need each other.”

Endeavor has about 80 agents to more than 300 for WMA. A wave of layoffs on the WMA side is expected as the two companies merge operations over the next few months. By the end of next year, WME is expected to move into a building on Beverly Drive that WMA has been outfitting to its specifications. The new home will come with a heavy pricetag, like CAA’s expansive new home in Century City. William Morris significantly padded its coffers with the sale last fall of its longtime headquarters and another BevHills building it owned, while Endeavor leases its current Wilshire Boulevard digs.

The jolt of the WMA-Endeavor merger is sure to unleash a frenzy of client and agent moving and shaking among the town’s other tenpercenteries. The fallout began Monday ayem even before the votes were confirmed as WMA’s David Lonner, who reps heavyweight multihyphenate J.J. Abrams, confirmed he would not be making the move to the new agency. Endeavor co-founder and partner Tom Strickler also announced his resignation, saying he plans to segue out of the talent rep biz entirely. And WMA’s highly successful nonscripted TV chief, Mark Itkin, is said to be in play and possibly bound for CAA after being left off of the WME board.

The last time Wiatt and Emanuel had a professional working relationship was in 1995, when Wiatt was prexy of ICM and Emanuel bolted in the middle of the night — with client files in tow — with fellow ICMers Strickler, Rosen and David Greenblatt to form Endeavor.

Fourteen years later, nearly to the day (Endeavor was formed in early April 1995), the duo will be brought back under the same roof as the newly minted WME Entertainment.

Day-to-day operations of WME are expected to be overseen largely by Emanuel and Whitesell, as they have for the past few years together at Endeavor. Emanuel brings a reputation for entrepreneurial ingenuity, and the swagger that helped inspire Ari Gold, the alpha-agent played by Jeremy Piven on HBO’s “Entourage,” the inside-showbiz comedy that Emanuel helped put together on behalf of his client Mark Wahlberg.

While the combined agency will have a formidable roster and strong balance sheet, the long-term question is whether the new leaders of WME can make the new agency more than the sum of the parts of WMA and Endeavor.

Spurring the merger has been the increasingly difficult dealmaking environment for talent in Hollywood as studios retrench in the film and TV production that has been the bread and butter of tenpercenteries. The hope is that as a bigger entity, WME will have more clout in dealing with the majors.

Television packaging fees are not nearly as lucrative since networks and studios began their own merger frenzy in the mid-1990s. On the film side, the major studios have made first-dollar gross deals for actors an endangered species. Amid the economic downturn, the studios are hammering established quotes for writers, directors and actors. And just like everyone else in media, Hollywood is trying to figure out how to make money with new media.

All of these forces are pushing agencies to become more innovative and entrepreneurial in developing opportunities for their clients. Nowadays, tenpercenters say, the ideal client is one with the potential to become a brand unto himself, excelling in multiple disciplines.

Endeavor’s growth has come largely from within — and by opportunistically recruiting prominent agents from other shops — during the past decade. But WMA has been down the road of acquisition before.

In 1992, the industry expected big things when WMA paid $25 million to acquire the fast-rising Triad Artists and turned control of the agency over to its head, Arnold Rifkin.

While Rifkin’s tenure started off strong, he was unable to sign big movie clients and was ousted when it was discovered that he was angling for the top film job at Columbia Pictures. The Triad merger was a win for WMA, however: Sources said that the deal paid for itself just from the “Roseanne” package fee that went to Triad, and WMA also brought Triad’s music division, which remains a revenue powerhouse for the agency.

In 1999, Wiatt provided the next spark when he left ICM to become WMA’s prexy and co-CEO. He quickly brought over his longtime lieutenant Wirtschafter and more than 20 other ICM agents including George Freeman, Steve Dontanville and Todd Feldman. Those recruits gave WMA a much-needed infusion of top actor and director clients, but a decade later, few of those agents remain at WMA.

This time around, once the difficult process of melding the two companies’ operations and pinkslipping hundreds of agents, assistants and support staff is over, the combined entity overall will be a leaner operation than WMA and Endeavor were as separate entities, insiders said.

Related article: WMA and Endeavor’s top clients

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