|
Hello, I'm Matt Belloni.
Welcome to a special Wednesday issue of What I’m Hearing… (I’m traveling tomorrow). This email is part of Puck, our new journalist-owned media company focusing on the power centers of Hollywood, Silicon Valley, Washington, and Wall Street.
If this was forwarded to you, sign up for a membership here. (Yes, we have group subscriptions, so your entire company can get my emails for one price, just email fritz@puck.news for details.) Thanks again for your support.
Sponsored by Amazon Prime Video 
The Big 4 agencies are becoming the Big 3! A “landmark” deal! Bryan Lourd’s declaring war on Ari Emanuel! It’s hard to look at the reactions to Monday’s news that Creative Artists Agency is acquiring rival ICM Partners and not feel like everyone in Hollywood has become a bit hyperbolic.
Sure, the former world’s largest talent representation company, which had been stripped of that title by Emanuel’s William Morris Endeavor and its M&A-first strategy, is adding some top agents and star clients, and expanding its presence in the book world and international soccer, thus reclaiming its title as the world’s largest talent representation company. And after years of watching WME pull off the IMG merger, snatch UFC away from other suitors, morph into Endeavor, and take the whole thing public this spring, CAA’s Lourd, Richard Lovett and Kevin Huvane now have something shiny and new to talk about. The rest of Hollywood is consolidating and bulking up in the face of domination by tech companies—and so, they can say, is CAA. Disney’s Bob Chapek won’t return Lourd’s phone calls? Well now, in addition to a lawsuit over Scarlett Johansson’s Black Widow pay, Chapek will have to deal with CAA on Samuel L. Jackson’s next Avengers deal. Michael Ovitz would be proud.
But let’s not pretend the ICM deal is a huge coup. If we’re honest, that “Big 4” designation hasn’t really been accurate for a long time. ICM was a full-service agency, in the sense that a high-earning client like Ellen DeGeneres or Regina King or Chris Rock could expect to benefit from agents across film, TV, books, branding, digital, touring, and even some sports. But despite grouping itself with its much larger rivals and slapping its name on a Century City high-rise (replacing MGM, ironically, another casualty of the Great Consolidation), it’s been awhile since ICM approached the breadth and volume of the deal activity at CAA, WME or UTA.
It has far fewer employees, but you can also tell in how it operates, its media strategy, and the way its people privately disparage the culture and priorities of the Big 3 (if I had a nickel for every time an ICM agent or client explained how they’d never want to be at a place like CAA...). Of course, you also see it in the agents ICM floats despite representing lower-earning clients—agents who, incidentally, will likely be shown the door or encouraged to pursue management by CAA. For good and bad, ICM was a decidedly middle-tier agency. And there’s a real chance that in a few years, middle-tier talent agencies—like the midsized film and television studios—won’t exist anymore.
Still, business for ICM has been good. Chris Silbermann, the TV packaging agent turned C.E.O., wrested the company away from Jeff Berg, kept it together by repositioning it as a “partnership,” and grew its revenue solidly over the past decade, according to sources who have seen its books. ICM sold off a lot of its legacy television packages when it went through financial whitewater under Berg, and Silbermann was never able to make the kind of meaningful agent hires or client poaches that would have vaulted ICM. But he and his TV lit team competed with the Big 3 in handling nine-figure deals for showrunners like Shonda Rhimes, Bill Lawrence and Vince Gilligan, all of whom could have left for a “major” at any time and yet chose to stay.
But while representing TV creators is still an amazing business, the economics are changing, as we all know, thanks to the elimination of backends by the streamers, and the end of packaging fees demanded by the Writers Guild. Silbermann has benefited as much as anyone in Hollywood from packages, and he was likely looking three to five years in the future and seeing his incline treadmill becoming markedly steeper.
Silbermann isn’t even scoring a big upfront payday here. ICM’s investors, like Crestview Partners, are getting paid out, I’m told, but for everyone else it’s an all-equity deal, meaning Silbermann, Ted Chervin and the others joining CAA will receive shares in the company. Those will likely become lucrative, and Silbermann himself will make out great, but this isn’t a quick windfall deal; those guys are incentivized to make this acquisition work.
That will almost certainly mean waving bye-bye to many, if not most, of the ICM agents and employees. Who needs ICM’s motion picture department when CAA’s is the best in town? Despite the “Partners” in the firm’s name, the agents are anything but, and nobody had any say in the decision to sell except its leaders and its board. “Terrified” is how the ICM rank-and-file feel, according to two agents I spoke to this week. It’s sad for them, and many feel like they have no idea what’s going on, but this is the disrupted and scrambling state of Hollywood in 2021. And agencies like APA, Gersh and the rest are already making overtures to the agents likely to be let go.
Because it’s pretty obvious CAA will just take what it thinks it needs and cut the rest. That’s why I found Lourd’s comments during his post-announcement interviews pretty laughable. “There is so much connectivity and respect for each other,” he told me when I asked him on Monday how the companies would be integrated. “There will be a common culture that emerges.” I seriously doubt that. It will be CAA’s culture. Some ICM people in areas that CAA covets will be invited to participate in and benefit from that culture. The rest will be gone. CAA is well-known for the “soft landing,” placing employees it no longer finds useful in jobs—albeit often less lucrative jobs—all over town. That’s probably a best-case scenario for many of the ICM agents.
ADVERTISEMENT
Amazon Studios presents MY NAME IS PAULI MURRAY, A new documentary chronicling both the personal path and tireless advocacy of the social justice warrior who’s work foreshadowed some of the most politically consequential issues of our time. From the directors of RBG, The Hollywood Reporter raves the film is "A must-see doc about a must-know subject." 
MY NAME IS PAULI MURRAY is in theaters now and streaming October 1st on Amazon Prime Video.
But these sticky decisions haven’t been made yet, Lourd told me. And no, he said, Lovett isn’t retiring or leaving the company. “That speculation is all from one source,” Lourd said, referring to Emanuel. Even if it’s not true, the CAA guys are all in their 60s now, with an assertive majority owner in the private equity firm TPG. (Disclosure: TPG is an investor in Puck.) While he and Silbermann have been talking about a potential deal since at least the start of the pandemic, watching what Endeavor has been doing likely lit a fire under CAA to get this done. The negotiation heated up this summer, with Lourd and Silbermann spending time together at the Sun Valley conference in July, trying to figure out how it would work. The appeal of doubling-down on representation at a time when Endeavor appears to prioritize other areas of growth must have been irresistible.
Monday’s announcement came before most agents—and clients—even knew what was being discussed. Of course it leaked right before, and some are angry over how the whole thing has been handled. But I’m pretty amazed the deal was kept secret until right after it was signed. Think back to 2008 and ‘09, how Ari used Nikki Finke to drip tidbits of negotiation news and twist the knife into William Morris before finally emerging as the vanquisher. CAA didn’t do that to ICM. Its bankers at Allen & Co. and its Wachtell lawyers kept quiet, as did ICM’s bank, Lazard, and attorneys at Sheppard Mullin and Davis Polk. These things are just awkward, and it’s probably going to get more awkward as ICM sheds staff and, almost certainly, hundreds of clients. The feeding frenzy has already begun.
This summer, amid the Johansson drama and Lourd’s back-and-forth with Disney, I half-jokingly called Lourd the new Mayor of Hollywood, in part because Emanuel is so focused on businesses beyond entertainment. So I asked Lourd on Monday if it’s even more true now that he absorbed ICM and, on the same day, Endeavor acquired a sports betting company. “Ari is the biggest person in the world,” he deadpanned, and I’ll let you detect his level of sincerity or sarcasm. “The new world that he’s ventured into, I look forward to seeing what he does with it. I’m really happy for him. We’re in the representation business. We believe in artists, we believe in athletes, we believe in getting them paid well. That’s our business. I’m happy to be one of the mayors of that town.”
ADVERTISEMENT 
“This Deal Is About Agendas and Exhaustion”: A Conversation With CAA Expert James Andrew Miller When news of the CAA-ICM deal broke, I knew there was one person I needed to talk to: James Andrew Miller. Jim literally wrote the book on CAA (Powerhouse, in 2016; his new effort is a history of HBO, Tinderbox, which comes out on Nov. 16). He’s got, in my opinion, the best perspective on the agency world and its place in the larger Hollywood landscape. So yesterday and today, he and I went back and forth on what it means when the home of Tom Cruise and Brad Pitt gobbles up the house of Shonda Rhimes and Ellen DeGeneres in an all-equity deal, and what the future holds for CAA and its rivals in a quickly changing talent landscape.
Matt Belloni: You predicted this talent agency consolidation in your book, especially when Ari Emanuel started growing what is now Endeavor into a multi-headed octopus, with an agency (WME) alongside a sports marketing firm (IMG), a combat sport league (UFC), a bull riding association (PBR), and, as of this week, a sports betting platform (OpenBet). Then the Writers Guild revolted against TV packaging, which was the bread-and-butter of ICM; the pandemic hit, squeezing everyone; and Endeavor went public in April, indicating it will use the money to grow larger and larger. So, did ICM need to do this deal? And, perhaps more importantly in this market, did CAA need to do it?
James Andrew Miller: “Need” can be a toxic word in Hollywood. (Monday at lunch, someone mentioned he needed the new Aston Martin SUV). So would it have been possible for both CAA and ICM to have continued as is, without this deal? For CAA, absolutely; for ICM, probably. This deal is more about agendas and exhaustion.
After years watching WME acquire and acquire, CAA prided itself on the fact that it didn’t covet, focusing instead on comparatively minor investments, and declaring it was concentrating on “organic growth.” Now the leadership believes there’s significant value to be realized through this external purchase. So now that they’re in buying mode, it begs the question if there are more acquisitions in CAA’s future, leading to further consolidation in the agency business.
For its part, ICM has weathered major storms over the past couple decades, surviving and even thriving at times, albeit on a smaller scale than in its former incarnation. But ICM isn’t optimally designed for the post-packaging, streaming era. On its own, it would have been climbing Everest on a cold day in shorts. And you can’t blame ICM leadership for wanting to ensure a more secure foundation, while finally seeing what the view is like from the expensive seats.
M.B.: I spoke to Bryan Lourd on Monday, and he kept emphasizing that CAA is a representation company, drawing an explicit contrast with Endeavor. Do you think it’s possible for CAA to just be the world’s biggest talent agency, or must it go vertical, as they say, to thrive?
J.A.M.: This may be the one area where CAA and Endeavor can agree. Only about 30 percent of Endeavor’s revenue comes from its classic representation business. Ari long ago dedicated himself to diversification, and he doesn’t want it to be known as a representation company. Just this week, Endeavor spent over a billion dollars in the sports gambling sector. The timing of that press release on the same day as the CAA-ICM deal may have been a coincidence, but it’s a timely reminder these companies are not always playing the same game.
One can make the case that the representation business is more difficult now than it's ever been—packaging has a bleak future, there is turmoil in the theatrical film business, for example—but the appetite for content is also greater than ever, and there’s plenty of money around to make new, big deals for clients.
M.B.: Ari was asked about the CAA deal yesterday by Kara Swisher, and he said this: “I think what CAA bought was five incredible TV writers. They bought a very good book business, and a very good soccer representation business out of Europe.” Not exactly the coming-together of two storied agencies that Lourd and Silbermann have been touting.
J.A.M.: The ICM books business is the crown jewel of the company, and CAA’s books department has been a much more limited operation. ICM should clearly take the baton when it comes to the future of the new agency’s book biz. It’s worth noting, however, that the ICM book bench, full of all-stars, is also chock full of veterans, and it’s unclear how long they will want to stick around. This element will get tricky: In the short term, CAA gets a books business it never had, but it must worry about keeping those key book clients if they lose their long-time agents. (Disclosure: I used to be represented by ICM for books and am now repped by WME.)
M.B.: Everyone managed to keep this deal quiet until my colleague Dylan Byers broke the news on Twitter on Monday morning, but we both had heard rumors lately about everything from CAA buying ICM to a CAA-UTA deal to Paradigm selling to various rivals (especially after it offloaded its music business to Wasserman). Even a WME spinoff from Endeavor and/or tie-up with UTA seems possible, though Ari said yesterday that he’s not interested in UTA. Does the CAA-ICM deal put every talent agency in play?
J.A.M.: Virtually every agency has had a conversation in recent years about a purchase, sale, or merger, and ICM in particular was often considered in play. What this CAA deal does is place a higher wattage bulb on UTA, which has also been investigating options for its future. UTA has had serious talks with potential outside investors, banks, and competitors about a merger, an acquisition, or even a sale. At one hubristic point, a UTA partner even threw out the possibility of UTA buying CAA, which would have been one helluva financial maneuver.
M.B.: I asked Lourd about that on Monday. He laughed and said, “Oh, please.”
J.A.M.: I’m not surprised that plan didn’t reach him. Regardless, the psychology of the leadership at UTA suggests they will not be satisfied with the present agency hierarchy.
M.B.: So you think WME could be spun off and merged with UTA? Some analysts have suggested that, but Ari seemed pretty adamant yesterday that he “doesn’t need it.”
J.A.M.: He would know best. Overall, the past couple decades have taught us that everything (except Apple) is in play at the right price.
M.B.: I don’t think the CAA-ICM deal will draw much regulatory scrutiny, but another big merger--especially if the Big 3 shrinks to a Big 2—would set off antitrust alarms, in my opinion. And there seems to be a debate around town as to whether this merger helps smaller agencies like Gersh, APA, Paradigm and the rest, or makes it even harder to compete with the majors. I happen to think there’s an opportunity for the smaller shops to pitch themselves as anti-Big 3, and there will certainly be an opportunity to pick up the agents that ICM lays off. As for managers, I think it will also provide the opportunity to deliver the kind of client service to mid-level talent that ICM once prided itself on.
That brings up the culture issue. ICM has always claimed its values were very different from the ruthless, bottom-line oriented CAA (though it’s debatable whether that was ever true). So how will these companies mix? Silbermann also positions himself as a wheeler and dealer at mogul conferences like Sun Valley. Will there be room for that now that he’s just on the “shareholder board” at CAA?
J.A.M.: ICM’s culture shifted considerably over the years, less a denunciation of CAA and more of a reaction to the waning, difficult years of the Jeff Berg era. But you’re right, they do use different operating systems. There are a bunch of agents at ICM who have celebrated that they were part of a kinder, gentler culture at ICM than at CAA (some were formerly part of CAA), and many a CAA agent has dismissed ICM as “soft.” What the new entity needs to do now is present this as a marathon being run together, rather than a series of dashes. The leadership question will take time to sort out. Remember Jim Wiatt joining the WME board after Endeavor took over William Morris?
M.B.: Right. That seems hilarious in retrospect.
J.A.M.: There’s also the sad reality that many people will be laid off, and those departures—who doesn’t make the cut, and how they are exited—will help define the new culture. Silbermann doesn’t need my advice, but it is instructive to look back at everything that has happened since 1995, when Lovett, Lourd, and Huvane took over CAA from Ovitz, Meyer, and Haber. Since then, the head table has had three place settings on it. Three, and only three. (Patrick Whitesell could have been the fourth, but they wouldn’t let him in. It’s wild to think what the alternative history for Endeavor’s film business would have been without him.)
My guess is that the table doesn’t get any bigger—maybe optically, but not in reality. Rumors persist that Lovett may be ready to retire, which CAA denies. But if true, it would create a whole new set of issues. From the start of CAA 2.0, neither Lourd nor Huvane has been interested in officially taking charge of the company; they were beyond content to have Lovett perform those duties. At some point in the coming months, Richard will probably need to clarify his plans.
M.B.: If you’re Ari Emanuel, how do you view this deal? He snarked yesterday that CAA is finally doing what he did back in 2009, when Endeavor swallowed William Morris.
J.A.M.: Yes, his take is, “Welcome to the party; we did this 12 years ago to create scale.” Ari also can point out that WME has already bought numerous agencies—including IMG, for more than $2 billion—so what’s new? What he might have been thinking, but didn’t say out loud, was, “Get ready for a clusterfuck, because these marriages are tough to pull off.” The William Morris Endeavor merger was brutal...for years. On the flip side, there’s also a part of Ari that loves Hollywood history, and if you gave him sodium pentothal, he might say it’s sad to see a venerable agency like ICM being sold off for parts.
M.B.: What about the TPG question? CAA’s owner was rumored to be pushing for it to go public, but now TPG itself is planning to go public.
J.A.M.: TPG is a behemoth—both in terms of financial might and its portfolio of assets. Apart from changing a slide or two for a roadshow presentation, it’s hard to imagine this being regarded as consequential for a TPG I.P.O., including its pricing.
M.B.: If this is indeed a eulogy for ICM, got any final words to say?
J.A.M.: It’s hard not to salute ICM’s survival through the years. Given its challenges internally and externally, it traveled one of the most hazardous paths of any agency. There are a bunch of thoughtful, creative people in that agency, and you can’t help but worry about some of their futures. I wish them all the very best. This is obviously a new era for ICM, and a bunch of it may disappear, but the agency business doesn’t need to be viewed as binary: There can be many definitions of success.
Finally, a correction: Due to a stupid cut-and-paste error in Sunday’s email, I included Chris Aronson’s name with Disney’s Kareem Daniel in the Who Won the Week item about Shang-Chi’s success. Aronson runs domestic distribution at Paramount, not Disney. Apologies to Chris, and thanks to everyone who flagged the misstep.
See you Sunday, Matt
Got a question, comment, complaint, or a crazy ICM agent story? Email me at Matt@puck.news or call/text me at 310-804-3198.
You received this message because you signed up to receive emails from Puck.
Was this email forwarded to you?
Sent to {{customer.email}}
Puck is published by Heat Media LLC.
For support, just reply to this e-mail. For brand partnerships, email ads@puck.news |
SHARE
