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William Morris and Endeavor talks hinge on top billing

The heads of the Hollywood talent agencies see benefits to combining forces but would need to overcome objections from their respective partners and agents.

March 27, 2009|Dawn Chmielewski and Scott Collins

Issues of control are bogging down a possible merger between two major Hollywood talent agencies.

William Morris Agency and Endeavor have been in merger discussions for weeks, setting the stage for a new Hollywood powerhouse that would wield considerable clout in film, television, music and publishing. Buffeted by waning consumer demand for DVDs and undercut by the Internet, the entertainment industry is facing economic upheaval that is recasting the role agencies play behind the scenes for actors, writers and directors.

Now, in the most visible sign yet of the changing Hollywood economy, William Morris and Endeavor are looking for a way to combine their roster of clients and staffs into a behemoth better able to weather the downturn in revenue and profit affecting every corner of entertainment from TV advertising to star salaries.

Pushing hard for the merger are Jim Wiatt, the mercurial and politically savvy head of William Morris, and Ari Emanuel, the Endeavor partner who inspired the frenetic Ari Gold character in the HBO series "Entourage." They each believe a combined agency could challenge Hollywood's dominant talent broker, Creative Artists Agency.

For The Record
Los Angeles Times Wednesday, April 08, 2009 Home Edition Main News Part A Page 4 National Desk 1 inches; 41 words Type of Material: Correction
William Morris Agency: An article in the March 27 Business section about a possible merger between the William Morris and Endeavor talent agencies said that Jeffrey Katzenberg trained in the mailroom at William Morris. Katzenberg never worked in that agency's mailroom.

Wiatt and Emanuel, however, would need to overcome objections from their respective partners and agents, many of whom would lose their jobs as a result of the merger. Although each agency has strengths where the other has weaknesses, ego-sensitive agents are wary of having their turf invaded by rivals accustomed to handling clients their own way.

It's The Ivy meets Osteria Mozza. William Morris, whose roots date to vaudeville, has a blue-chip roster of music artists including Kanye West, Alicia Keyes and Taylor Swift, "American Idol" host Ryan Seacrest and cooking show stars Emeril Lagasse and Rachael Ray.

Upstart Endeavor, founded 14 years ago when a posse of hotshot agents defected from International Creative Management, is behind hit shows "24," "Gossip Girl" and "30 Rock" and boasts young actor clients including Shia LaBeouf, Keira Knightley and Christian Bale.

Regardless of whether the deal is struck, widespread speculation about the merger has been distracting for both agencies. In a business renowned for its predatory habits, rival agencies are already making overtures to agents and high-profile clients at both William Morris and Endeavor as they seek to exploit an uncertain situation.

Despite relentless chatter in the talent community, it's unclear whether the merger will occur and how the combined company would be structured. Principals within each agency are divided on the idea, according to people familiar with the situation. William Morris has 20 directors; Endeavor has 26 partners. Although William Morris and Endeavor have discussed merging before, it may be more felicitous now given the recession that has battered the Hollywood economy. Combining the two agencies would yield savings in overhead, which could boost profitability.

Endeavor has made it clear in negotiations that it would consider a merger only if the firm's four managing partners -- Emanuel, Patrick Whitesell, Rick Rosen and Adam Venit -- remain in control of the combined entity. William Morris' Wiatt is expected to take on a chairman-like role.

However, that structure is exactly what could prevent a deal. Senior William Morris agents, some of whom are also board members, chafe at losing control, and a vote in favor of merging would be equivalent to voting themselves out of jobs, said people close to the matter.

Moreover, William Morris' coveted music group, which in recent years has accounted for a larger portion of the agency's business, does not want to cede control to Endeavor, which is not a force in the music business. Also pushing back are William Morris' screenwriter agents, who do not want to be taken over by their counterparts at Endeavor.

But, like much else in Hollywood, television may carry the day. Endeavor is adept at putting together packages of creators and talent for some of the most popular prime-time TV series, while William Morris has lost valuable ground. The fees earned from packaging hit TV shows are the most reliable revenue for agencies because they provide income over a long period, as opposed to the one-time commissions for actors in movies.

These revenue sources are threatened by not only the recession but also technological change. As jobs for actors, writers and directors dry up and client fees drop, 10% commission rates yield less income. At the same time, television studios are looking to reduce or eliminate series packages, which can produce tens of millions of dollars for the agency when hit shows such as "Friends" or "Sex and the City" are sold in reruns. Compounding the problem is the shrinking market for scripted TV shows. NBC's recent decision to move Jay Leno to 10 p.m. means there are five fewer hours per week for drama series.

The surest way to adjust to the retrenchment is to lasso a larger client base and have smaller overhead.

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