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Endeavor Forges New Blueprint for Biz With Diversification Push

Ari Emanuel has a knack for pouncing right before an opportunity is ripe.

The CEO of Endeavor saw an opening in the industry in 1995 when he and three others bolted from ICM to launch a talent agency rooted in television writers. He spied a big win in 2009 when 15-year-old Endeavor took over its 111-year-old rival, William Morris Agency, creating the powerhouse William Morris Endeavor (WME).

From there, Emanuel and his core team set their sights on bigger and bolder bets that have taken Endeavor well beyond its tenpercentery roots. With investments in film and TV content, marketing, advertising, sports, fashion, live events, international sales and distribution, Endeavor has rapidly diversified during the past decade.

For leading the company from a handful of employees housed above a restaurant in Beverly Hills to a global player with nearly 7,000 employees and a valuation of $6.3 billion, Emanuel and Endeavor are the recipients of the third annual Variety Vanguard Award. The kudo will be presented to Emanuel on Oct. 15 as part of the annual Mipcom content market in Cannes.

“If you look at three things — money, marketing and distribution — the pillars of what made Hollywood [studios powerful] have disappeared,” Emanuel says. “That has created huge disruption in the business. We have stepped into the void. We have created a company that is all for clients, whether the client be Wimbledon, or [Italian soccer league] Serie A, or [Spain’s] La Liga or Dwayne Johnson or Charlize Theron or Matt Damon. We saw the disruption happening and we’ve built our company as a platform to enable clients to take advantage of all aspects of the new level of content that is coming.”

David Geffen, the DreamWorks co-founder and former talent manager, is among those who are impressed by what Endeavor has achieved to date with assistance on the capital front from its private equity partner Silver Lake. Geffen has been a mentor to Emanuel since the latter’s days as an agent-trainee at CAA in the 1980s.

“He’s always had big dreams and a big vision,” Geffen says. “I can’t honestly say I always thought he was realistic, but Endeavor and WME have surpassed anything he ever talked to me about building. His success is much bigger than his dreams.”

Endeavor has emerged as the largest and most diversified holding company with a talent agency at its core since the the heyday of Lew Wasserman’s MCA in the 1950s. And like MCA, which found itself on the losing end of an antitrust battle with the Justice Department, Endeavor is facing pressure from outside entities sounding the alarm about conflict-of-interest concerns as Endeavor moves forcefully into new businesses.

Before Endeavor acquired IMG in 2014, 80% of the company’s portfolio was based in the representation business. Today the company’s portfolio is about 50-50 representation and owned properties.

The company is now home to everything from MMA giant UFC to advertising agency Droga5 to an international film and TV sales operation built out through its $2.4 billion acquisition of the sports- and fashion-focused IMG agency. Endeavor Content, launched in 2017, is active in packaging, developing, financing and selling TV shows and movies, although its level of involvement and direct investment varies from project to project.

Ronald Perelman, veteran investor and chairman and CEO of McAndrews & Forbes, has been an advisor and friend to Emanuel for a decade. He credits Emanuel with having a clear game plan behind Endeavor’s acquisition spree.

“When he did the IMG deal everybody thought he had overpaid,” says Perelman. “But he really had a vision for the connection between his representation business and the value he could add to IMG. He just has a real understanding of the [media] business and what the consumer wants.”

In Emanuel’s view, the industry has grown and changed so dramatically that his clients — whether they be sports leagues, showrunners, or movie superstars — need more than just a good agent to find them work. Endeavor’s growing collection of disparate assets is designed to give clients options to pursue entrepreneurial ventures. This is becoming increasingly attractive to brand-name clients as digital streaming has leveled the distribution playing field and consolidation has left the entertainment industry with fewer than a dozen major employers.

“My nervousness is that there are becoming fewer and fewer options for my clients,” Emanuel says.

Despite the expansion in the number of outlets, behind the scenes the market is dominated by global giants such as Disney, Comcast, AT&T and Netflix. Endeavor recently bought the business-to-business streaming media provider NeuLion to ensure that the company has the infrastructure to help clients take advantage of what could be the next media gold rush of direct-to-consumer content offerings.

WME/IMG acquired MMA giant UFC in 2016 for a record $4 billion.
Chris Carlson/AP/REX/Shutterstoc

“There’s a lot of the same out there. There’s seven or eight companies and they’re all [becoming] walled gardens that are only supplying content to themselves. Our job is to create different models for the client and the client gets to decide,” Emanuel says. “My job is to make sure that my clients have the optionality that they need. That’s why I’m ramping it up. … Netflix, Amazon, Disney, Comcast — they all they think they’re competing with themselves. But you know who they’re also competing with? Dwayne Johnson and Charlize Theron and Ferrari and La Liga.”

The green fields that Endeavor seeks to plow in the near future include a concerted effort to turn podcasting into a profitable business with the launch of Endeavor Audio division. Endeavor is also circling a big partnership in the education arena for a venture that would bring big names to deliver high-end seminars and other content developed specifically for the education marketplace.

Marketing, sponsorship sales and creative advertising is also a major focus for Endeavor. In June the company made headlines by recruiting one of the nation’s most prominent marketing mavens, Apple and Uber alum Bozoma Saint John, to serve as Endeavor’s first chief marketing officer.

Endeavor’s expansion has been orchestrated with an eye toward offering a range of “touch points” for advertisers. Through IMG the company produces some 800 to 900 events a year around the world — sports tournaments, fashion shows, food festivals and the like. Having events at that volume and the ability to couple sponsorship deals with content in other media is an offering that few other companies can make to Madison Avenue.

“We use the network effect to increase the value,” Emanuel says. “We have [marketing] clients who want us to help them create content, and we have those who want to go directly to those 5,000 people who want to go to a beer festival in Brooklyn.”

Emanuel is well-known throughout the industry for his drive and enthusiasm (for a narrative interpretation, see “Entourage’s” Ari Gold). He sees himself as the captain of a “trading desk” that works across the media landscape. The key to making it work is having a strong team of executives around him, starting with Endeavor chairman Patrick Whitesell.

My nervousness is that there are becoming fewer and fewer options for my clients
Ari Emanuel

“I have people who will call my bulls—, and that’s probably the most important thing,” Emanuel says. “I don’t care how smart you are, none of these [CEOs] sit on a pedestal by themselves. I might have the biggest seat in terms of public image, but there’s a lot of people on that seat with me.”

Whitesell emphasizes the importance of Endeavor’s tight-knit leadership team and the focus on communication about market opportunities big and small across the company.

“Every one of these companies we’ve acquired is going to be one-thousand percent better by being in our network,” Whitesell says. “Everything is integrated with the mindset of working to give people greater control, great economic freedom and more choices.”

There’s been speculation in the industry that Endeavor would eventually look to spinoff WME to its senior leadership as the company expands with mega deals such as the 2016 acquisition of MMA giant UFC for $4 billion. But Emanuel is unequivocal. The pipeline to talent is too central to the company’s vision. “Never,” he says about a WME divestiture. “Never.”

The other big question surrounding Endeavor is whether — some believe it’s only a matter of when — the company will go public. Endeavor has been through multiple rounds of investment from Silver Lake since 2012, plus it has received additional investments from such major players as SoftBank, Fidelity Investments and Singapore’s GIC sovereign wealth fund.

An IPO or a sale of the company would be the logical path for those investors to see a return on those investments. For now, Emanuel says he’s under no pressure because the company is performing well. Silver Lake is the largest shareholder in Endeavor, and they are the only investors “with a seat at the table” in the big-picture management of the company, he says.

“It’s the easiest relationship we have,” says Emanuel of Silver Lake. “It’s easy because we’ve hit our numbers. I don’t know what it would be like if we didn’t hit our numbers.”

Of the IPO chatter, Emanuel says it remains a possibility on the horizon, but for now the focus is on growth. Endeavor is still in the hunt for acquisitions.

“It hasn’t been hard raising money,” he says. “There’s really smart investors who are looking at our numbers and saying, ‘We want in.’ Our biggest investor has said ‘We want in’ three times.”

There’s no doubt that Endeavor has distanced itself from its talent agency rivals in size and scope. It’s a high-wire act for Emanuel and his core team, given the enormity of competition in the media world and the expectations of his investors. But if anybody can pull off such a profound business transformation, it’s Emanuel in Geffen’s view.

“I think he’d rather die than fail,” Geffen says. “He has huge ambitions. He is getting tremendous satisfaction out of reaching further than his biggest dreams. And he wants more.”

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