Can Talent Agencies Adapt in the Wake of the Coronavirus Pandemic?

Matt Donnelly, Joe Otterson and Justin Kroll

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Two words have been bouncing around the email inboxes and Slack channels that now comprise the virtual workplaces of Hollywood’s talent agencies, and they aren’t “social” and “distancing.”

The buzz terms that have sprung from more than a dozen conversations Variety has held with top dealmakers and the companies they work with are “fragmentation” and “simplification” — the measures that Hollywood’s biggest reps must take in the coming months to survive, insiders say.

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The storied institutions have seen revenue paralyzed and office cultures dismantled in less than two weeks, and have been rocked as the coronavirus has touched every facet of life and the due course of business. Cost-cutting measures have come down, such as significant layoffs in the case of Paradigm and salary reductions at companies including UTA, ICM and WME parent company Endeavor. Many industry players are looking ahead at what the virus has exposed about the business models of these companies, and how the disruption will transform them moving forward.

“As the agencies have grown expansively in recent years, they’ve been relying less and less on the client business as a percentage of overall revenues,” says one well-placed industry player, speaking on condition of anonymity. “This virus has been so evil, and has already metastasized in the business. It’s not just that the agencies are hit until film and TV production come back full steam; they’re selling to radically transformed buyers. They’re going to have to be smart about the business — and the future of the business — in a way they’ve never had to be.”

There’s no question that the live-events category is the hardest hit as global shelter-in-place measures remain in effect. Lucrative agency divisions like comedy and music touring are at a standstill. That trickles down to production, where movie stars such as Tom Cruise and Dwayne Johnson cannot film daring stunts on crowded sets around the world, which means commission checks aren’t coming through mailrooms.

These restrictions have left Endeavor the most vulnerable, strapped with $4.6 billion in debt and unable to generate cash from holdings like IMG, which produces global fashion week presentations, and UFC, which stages mixed martial arts events. Add to that financial tornado the withdrawal of the company’s planned public offering last fall, when many senior agents were expecting a stock windfall after delaying compensation for the health of the company. The mounting disasters have sparked rumors that top reps will defect for rivals, in the wake of too many broken promises from Endeavor heads Ari Emanuel and Patrick Whitesell.

“There is no animal out there right now like Endeavor, and they’re in trouble,” says an executive at a rival agency, who begrudgingly admits, “but their failure isn’t good for any of us.”

When normal public life resumes, some agents are skeptical about how quickly consumers will return to old habits.

“After spending three months or whatever, worrying about going outside and if it will kill me or my parents, I’m not going straight to the f—ing Hollywood Bowl,” says one exasperated rep.

Endeavor’s biggest competitor in size is CAA, which as of press time had not enacted any layoffs or cost-cutting measures, though numerous insiders say that leadership is looking across the board at ways to trim fat. UTA, known for sticking to its knitting in the core creative business, has begun exploiting growth sectors like its strong podcast division after cutting salaries agency-wide, sources say.

Studios, networks and streamers are still hungry for development deals, say nearly a dozen agents who have spoken to Variety — a sign that content makers will be ready to spring into action when production resumes and the workforce comes back online. The problem for the agencies in that scenario, many note, is their ongoing stalemate with the Writers Guild of America over fees for packaging television shows with their clients, as well as their own interests in production companies that make film and TV.

None of the major agencies except Paradigm has agreed to sign the WGA’s revised Code of Conduct. Literary departments are essentially the only ones that can generate revenue in the present moment — through script deals and staffing clients in writers’ rooms — but writers continue to make deals without the assistance of agents.

According to sources, agents at companies that have not signed the code are increasingly reaching out to literary management companies in an effort to continue making deals in the interim. Another roadblock, says a TV agent, is that packaged shows pay off only in production, which has no clear starting timeline.

One development executive at a major TV studio says their workload has increased substantially in the past several weeks, while nearly all of their colleagues are in limbo. Agents are concerned this flurry of activity is a stopgap measure.

The sentiment is that the studios will try to insulate themselves with this round of new development projects before shutting off the money spigot entirely to cut costs. This could especially impact nascent streamers like NBCUniversal’s Peacock and WarnerMedia’s HBO Max, as they are ramping up to launch this spring and are in need of original content beyond their libraries. A drought of enticing programming could be fatal for fledgling streamers looking for customers, particularly as the country faces a recession, insiders note.

In terms of payouts, only Netflix has come to the table to pay clients on shut-down productions, in a force majeure motion that will see creatives owe them unfinished work when production can resume. For other companies, notably Disney, plans have yet to materialize.

Looming in the background of the cash crisis and lost jobs is a fear for the very fabric of the agency world — one built on handshakes and double kisses, on packed designer conference rooms and massive celebrations around awards shows and film festivals.

“So much of the agency business is personal face time with clients, and let’s not forget that this town is about presentation,” says another industry source. “Agents get on planes to woo clients on set. They cater a movie star’s favorite food and pop Champagne in conference rooms to win business. A lot of that love is hard to show on Zoom.”

In his 2016 book “Powerhouse,” about the untold history of CAA, author James Andrew Miller quotes the company’s managing partner Kevin Huvane about his overnight transition from premier dealmaker to corporate CEO.

“We were really good agents, and now we had to learn how to be really good businessmen,” Huvane said of the early aughts, when the agency exploded into a diversified client services engine outside the norm of film and TV. “I had never looked at a spreadsheet before, and I remember thinking, ‘Oh my God, we spend that much on fruit?!’”

These days, organic produce is the least of their worries.

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