Merger may not have shifted the balance of power for agencies after all

It was about one year ago that Hollywood first learned that the Endeavor talent agency planned to essentially annex the venerable William Morris office, and the town is still struggling to assess the impact of the transaction that followed.

A couple hundred agency jobs have been lost. Scores of clients have been sent scrambling to find new representation. The gossip mills have had a field day disclosing intrigues, real or imagined. One of the industry’s biggest and most respected companies has disappeared into the mist.

But with it all, most observers agree that the formation of WME has not fundamentally altered the basic balance of power in the talent agency business. Nor has it affected another key fact of Hollywood life: The entertainment industry is facing more of a buyer’s market than at any time in several generations.

As one veteran agent puts it, “If Ethel Merman were still around, her lyric would say, ‘There’s no business like no business.'”

To be sure, the disappearance of William Morris as a distinct presence represents a major convulsion for Hollywood, reminding old-timers of the surprise formation of CAA or of MCA’s decision to pull out of talent representation. Arguably, however, those two events had a bigger long-term impact on the basic workings of the industry.

While WME has only been functioning for eight months, it was a year ago that serious rumblings about the deal began to shake the town. Insiders were astonished to learn that the acquisition was essentially being engineered through William Morris’s own resources, not through outside funding. In other words, William Morris was being acquired with its own money.

At the time, say insiders, both Endeavor and William Morris were strong financially but both were troubled by their climbing overhead costs. Jim Wiatt, the chief of William Morris, was said to be looking to put agenting behind him.

The structure of the deal that emerged, plus the instant disappearance of Wiatt surprised Hollywood’s top players. Still, the initial alarm over the fast-moving developments was brought into perspective by the following realizations:

• Contrary to early speculation, the new WME has reconstituted itself with considerable alacrity into a coherent, disciplined structure. Insiders say that the very downturn in the business that spurred the merger has helped pull the new entity together. “We’re all glad we have a job,” says one senior agent.

• The creation of WME has created signing opportunities for its key rival CAA as well as for UTA and ICM. And smaller agencies, too, have picked up agents and clients, including Paradigm and Gersh.

• The networks and studios have been able to leverage agency rivalries as a weapon to help trim talent deals and thus cut costs. Despite the size of the “big two,” the combined agency clout is not what it used to be.

Indeed some of the town’s senior players assert that they regret the disappearance of the elite “boutique agencies” that played an important role in former years — agencies like Chasen Park Citron or Ziegler Ross. “Agencies, like studios, think it’s all about bigness,” says one veteran filmmaker. “There were times when small mattered more than big.”

In acquiring more heft, WME has become an important player in the music business and has substantially expanded its lit and TV presence. “Basically, Endeavor has built a bigger Endeavor,” says the CEO of one major. “But it hasn’t yet made a giant deal or signed a giant star.”

“Ari Emanuel is a brilliant agent and I respect his maverick forcefulness,” says another CEO. “But WME is still a new brand in search of an infrastructure.”

Skeptics point to the striking new building now nearing completion on Beverly Drive in Beverly Hills as a metaphor for WME’s limitations. The building was planned as the new headquarters of William Morris, but now WME may not move into the structure at all, choosing instead to remain at Endeavor’s nearby HQ, which is also a new building but one that cannot hold the combined staff. The “move-in” costs could total $20 million.

Ari Emanuel’s associates, new and old, credit him with serving as a strong unifying force within his agency, preaching to his staff the importance of staying in synch and focusing on getting jobs for clients. “He feels the transition has gone smoother than he expected,” says one associate, “but he’s aware that new ideas and new approaches are needed in this unbelievably tough market.”

While there was early skepticism regarding whether the William Morris and Endeavor employees could mesh, in fact some rival agents report that factionalism within CAA is more readily apparent than at the new Endeavor. To the outside world, of course, the CAA operatives insist they are operating a unified monolith.

WME agents themselves are generally positive about the new entity but complain that they’re working in a more corporate environment, with more meetings and bureaucratic regulations to cope with. “The old Endeavor had a certain swagger,” one agent said. “It was a cool place. Now it’s a corporate place.”

The size issue is being seized upon by key rivals.

Jeremy Zimmer says his agency, UTA, has picked up between 50 and 60 clients as a result of the merger, by arguing that his company “has a focused point of view.” Says Zimmer, “we’re not a big monolith. We are about job creation.”

Assessing agency scorecards is difficult, but UTA has established a significant presence in movies while ICM retains strength in TV and in publishing.

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