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Talent agencies on mission to diversify

Tenpercenteries broaden into other businesses

For talent agencies, diversification has become a mission.

Agencies saw the benefit of broadening beyond TV and film when a 100-day writers strike and de-facto actors strike dramatically quieted the ringing of the commission cash register.

Strike-resistant businesses such as music, publishing, reality TV, sports and digital are suddenly very important.

“Nobody got laid off or missed a paycheck, and that was because of our music business, Broadway and publishing,” says Paradigm chairman Sam Gores. “People don’t realize that every part of the music industry is a struggle except touring, a business we’ve grown aggressively. Booking tours for Dave Matthews, Aerosmith, Black-Eyed Peas and others helped. Agencies that are trying to protect old business models will find trouble ahead.”

Paradigm has expanded into a finance division and brokered a $400 million film production fund for Singapore-based management-production company RGM, and it is expecting results after hiring global branded entertainment exec Lori Sale from ICM.

None of these areas will supplant the bread-and-butter business of Hollywood agencies, which make more money from healthy film and TV packages than anywhere else. But every agency took a hit from the writers strike, and agents are bracing for paltry bonus checks.

Continued movie and TV contraction, and uncertainty over how content will be distributed in the distant future has agencies trying to cover every angle.

Growth in diversified areas like music, digital, sports, financing and brand-building corporate consulting divisions give value-added service to clients, who can tap into new media and endorsement agreements , plug into sponsorships or secure financing for deals that give unprecedented ownership and upside that studios never grant.

Endeavor-incubated financier/producer Media Rights Capital has become a prolific financier of films that leaves talent in ownership positions, and CAA brokered first-look deals with India-based Reliance with the production companies of Jim Carrey, Brad Pitt, Jay Roach, Chris Columbus, Tom Hanks, George Clooney, Nicolas Cage and Brett Ratner, in which Reliance funds project development and will co-finance the features.

CAA’s entry into sports was expensive, but, in just two years, CAA Sports has become the largest broker of sports contracts with $680 million worth of dealmaking last year. Aside from leading a naming rights deal for the new Yankee Stadium, CAA paired Pequot Capital with clients LeBron James, Derek Jeter and Peyton Manning to spearhead Weplay.com, a social networking youth sports site.

The agency put Jerry Bruckheimer and MTV in a videogame venture, and brokered Will Ferrell’s Funnyordie.com and Tony Hawk’s Shredordie.com sites.

Endeavor’s diversification results include guiding mixed martial arts league Ultimate Fighting Championship into a billion dollar business; and saving the NBC series “Friday Night Lights” by plugging in funding from DirectTV for an exclusive window to air new episodes.

Along with brokering Seth MacFarlane’s $100 million Fox deal, the agency paired the “Family Guy” creator with MRC and Google for a website that leaves MacFarlane owning all his creations. A publishing business started last year has grown to eight agents.

UTA has guided songstress client Gwen Stefani into fashion, where her L.A.M.B. and Harajuku Lovers brands generated more than $150 million in annual sales. It started the dedicated broadband division UTA Online, and incubated 60 Frames, a finance and syndication company for web content.

Gotham-based upstart venture United Entertainment Group is creating branded entertainment around Procter & Gamble brands, and UTA’s music division recently put together Celine Dion’s world tour.

“Looking at the contraction in TV and the current contraction in movies, it’s hard to imagine a great deal of growth in the next few years,” says UTA board member Jeremy Zimmer. “Businesses once viewed as ancillary have become extended core areas, where there is growth. We’re trying to be at the forefront of the distribution and monetization of digital content, whether it’s music, licensing or marketing, and to build businesses that clients can own, and in which we can share in the upside.”

WMA, which has had a strong music touring business since the Triad merger, now books non-musical tours like Walking With Dinosaurs and the MTV videogame tour Game Riot. The agency makes endorsement deals for select athletes like Alex Rodriguez, Kevin Garnett, Serena Williams and Dwayne Wade.

WMA’s corporate consulting biz placed client General Motors into “Transformers” for client Michael Bay, and now reps toymaker Hasbro. WMA’s partnered with venture capital firms Accel Partners and Venrock and AT&T on the Mailroom Fund, which seeds digital media start-ups; and the agency has placed an emphasis on building brands for multi-hyphenates like Tyler Perry, Rachael Ray, Ryan Seacrest and Kanye West.

Boutiques like APA are also trying to be more nimble; APA doubled its staff in areas like reality, branding, endorsements and comedy tours, and its music business is thriving.

ICM president Chris Silbermann says his agency has found growth in music touring (ICM just purchased M.V.O.), packaging reality series like “Dancing With the Stars,” live tours and books branding; placing the New York Times into film deals hatched by the newspaper’s articles.

A growing concentration, he says, is to broaden business globally.

“Chris Rock became one of the first African-American comics to tour internationally, and he broke open markets everywhere from London to South Africa and Australia, where standup comics historically haven’t translated,” Silbermann says. “There is real opportunity for growth in places like the Middle East and Asia.”

Gersh Agency’s David Gersh also cited offshore opportunities as the next growth area for agencies.

“We’re in sports, books, theater, and we’re making a lot more deals with independent financing sources,” says Gersh. “You find some of them are flakes, but you can’t discount them, or the possibilities that exist overseas. I have a big roster of German filmmakers now, when four years ago I didn’t have any.”

Says UTA’s Zimmer: “It’s hard to know exactly where things are going as the world changes, but we’re about to see a massive influx of cash from new regions of the world which haven’t yet participated in the entertainment business. That means an opportunity for agencies and their clients to participate differently than they have in the past.”

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