”All of the agencies and a lot of the world are in a really tough situation,“ one agency insider says
With major film and TV productions shut down, music concert tours grounded and the industry all but dark, Hollywood talent agencies have been stuck between a pandemic and a hard place. With their biggest and most bankable clients unable to work, complete projects and get paid, agencies have not seen the steady flow of commissions that typically run 10%.
“All of the agencies and a lot of the world are in a really tough situation,”an individual at one of Hollywood’s major agencies told TheWrap.
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Several insiders at some of Hollywood’s biggest talent agencies told TheWrap that they’ve lost their most significant sources of revenue in live events and representing movie stars and other talent who produce film and TV. The individuals wouldn’t estimate the percentage of business that has been lost — if it’s even possible to get a grasp on such a breakdown — but a second individual said it’s the biggest hit any agency could take.
Despite the shutdown, agencies still have seen revenue from residuals and old deals and packages — as well as the upfront fees from newly signed deals. “It’s not like it was pre-pandemic, but there’s still money coming in. I think agencies are in a relatively good spot right now,” an individual at a third major agency said.
Endeavor’s WME, one of Hollywood’s largest agencies, reported in its short-lived IPO filing with the Securities and Exchange Commission last September that representation accounted for just over one third of the $3.6 billion in revenue it earned in 2018 (the rest came from Endeavor’s IMG marketing division and live sports like the Ultimate Fighting Championship).
Even films that may have been released a year ago, the first agency insider said, could still be hitting deal milestones and bringing in new revenue. In addition, when films like Universal’s “Trolls World Tour” and Disney’s “Artemis Fowl” jump from theatrical releases to streaming premiere, companies often have to buy out any long-term milestone payments for actors and producers and other talent who can no longer expect back-end bumps.
While much of new production has shut down, there are some who have managed to keep working and collecting paychecks — including late-night and daytime talk show hosts, as well as news broadcasters. Voice actors also have still been able to work as animation continues despite the broader production shutdown.
Some agencies have also found a buoy in their push to diversify their businesses beyond talent representation — though WME parent Endeavor’s diversification has led to roughly $5 billion in debt and repayment strained further by the pandemic. “You’re just in a better position the more revenue streams you have coming in, in case one is underperforming,” the first individual said. “That diversification has always been a part of our growth… Some agencies are in different businesses, so they’re not all counting on the same revenue.”
While business segments, such as live events and sports have all but dried up in terms of revenue, WME has seen a bump from its book publishing business. The agency reps Mary Trump, whose tell-all “Too Much and Never Enough: How My Family Created the World’s Most Dangerous Man” sold a record 950,000 copies the first day the book went on sale. The sales were so good that publisher Simon & Schuster ordered a 14th printing.
Details of that deal’s structure aren’t public, but a typical book deal includes an upfront payment when the client signs on and then additional payments when a project — a book in this case — is complete and even more when certain sales performance milestones are hit. And every time a client gets paid, the agent collects that 10% commission.
Still, the continued flow of income doesn’t make up for all the new business that agencies have lost. Anticipating that the faucet was turning off, many agencies cut costs early in the pandemic — slashing salaries, freezing expense reimbursements and in many cases furloughing or laying off employees, especially support staff who could no longer come into physical offices. Employees at CAA had their pay cut by up to 50% companywide, while CAA chiefs Richard Lovett, Bryan Lourd and Kevin Huvane forewent their salaries completely for the rest of the year in hopes of avoiding employee layoffs.
Staff at UTA, Paradigm, ICM Partners, APA and WME were furloughed. “You have to try to bring costs down more in line with revenues,” the first agency insider explained. “All the agencies had to make that tough call based on recurring revenues and what you had coming in… And you always have to keep those options on the table the longer the pandemic drags on. It’s hard to find new money to make up for that loss.”
While WME has been hit hard because of Endeavor’s investments in sports and live events, Paradigm has been virtually crippled since two-thirds of its $150 million in annual revenue comes from music tours that disappeared and are unlikely to resume anytime soon. Co-owner and investor Tom Gores assumed functional oversight of the agency from his older brother, company founder and CEO Sam Gores, TheWrap reported last month. And sports and media mogul Casey Wasserman has been in talks to buy Paradigm’s music assets.
That said, agency insiders report that new deals are being signed — which means new money is still dribbling in, though at a slower-than-usual pace. So far, the shutdown has impacted the film business more drastically than TV, individuals at the major agencies said. And networks and studios are still paying writers so they will have a reserve of scripts ready to shoot … whenever that’s safe to do.
That’s a problem for the top three agencies, which saw their writer clients drop them last year as part of a dispute with the Writers Guild of America over packaging fees and agency ownership of production companies that writers saw as a conflict of interest. Last week, UTA became the biggest agency to agree to a deal with the WGA to again represent writers, and agencies such as Paradigm, APA, Gersh, and Verve have settled with the guild as well.
There’s also been slew of recent overall deals in TV, from “The Batman” director Matt Reeves signing a deal with Warner Bros. Television Group and “Hamilton” director Thomas Kail signing with 20th Century Fox Television, to ABC Studios signing producer and “grown-ish” star Yara Shahidi as well as LeBron James and his SpringHill Entertainment production company.
When deals like this are closed, creators are paid an upfront fee. But the bulk of the payment comes when those star producers or directors or showrunners actually deliver the projects — which for the most part isn’t happening during the pandemic. So while deals are still being signed, and agencies have some revenue coming in, the real income has to wait until production kicks in again.
The first agency insider remains optimistic that the situation will improve for talent reps. “If I were a betting person, though, as the world gets better — because it has to eventually — I would bet on agencies in the long term,” the individual said.