Welcome back to What I’m Hearing...

🚨🚨Before we start, an announcement! After nearly three years of sending you emails on Thursdays and Sundays, I’m switching up the schedule. The Sunday WIH will now come on Mondays. Why? I love publishing on Sundays, helping ease people back into the week and getting a head start on the news. But my kid is getting older, I need to be available for sports and other activities on weekends, and it’s been tougher and tougher for me do all that and keep up the quality that readers deserve. Delivering the best product is the top priority, so Mondays and Thursdays it is.

Thanks for understanding, and on the bright side, I’m sure tons of executives and P.R. people are rejoicing right now. “You just ruined my weekend” is a phrase I hear a lot. Now I can ruin your Mondays.

As always, if you were forwarded this email or are new to the WIH community, click here to become a Puck member.

Let’s begin…

• Skydance/Paramount looks like it’s happening, people: Pretty much every day since I revealed, in December, that David Ellison wanted to buy Paramount, someone asks me if the deal will actually happen. Honestly, I now think it will. Skydance met with its legal team this afternoon to strategize next steps after entering an exclusive 30-day negotiation window with Shari Redstone and National Amusements Inc. They’re working on a framework—both structurally and financially—that they think will make sense for NAI and minimize the threat of lawsuits from Paramount Global shareholders. Lots can still happen to derail this deal, but even Paramount C.E.O. Bob Bakish seems more resigned to it, and the key fact is the ticking clock: Paramount’s cratering TV business is facing upcoming carriage renewals with Charter and others, and those distributors smell blood. One or two bad results there and the Paramount valuation/debt situation could flatline fast. Now’s the time.
• More Skydance/Paramount: Many analysts think Paramount should shut down Paramount+ and simply become a content supplier for other streaming platforms. But surprisingly, I’m told the Ellison pitch to Redstone has been the opposite: He wants to supersize Par+, either through a joint venture, as the Times reported today, or simply by leveraging the tech prowess of Ellison’s father, Larry. Who knows if David is bluffing to make Shari feel more comfortable parting with the company, but Par+ powered by Oracle is an intriguing idea.
• Still more Skydance/Paramount: Why not seriously consider the $26 billion cash offer from Apollo? After all, that money would go directly to Paramount shareholders—very different from the complicated Skydance-NAI scenario. But Apollo previously offered $11 billion for just the studio, which was an opening offer, so let’s say Apollo values it at $12 billion. Add in the $14 billion or so in debt that Paramount carried at the end of 2023, and that’s $26 billion—meaning Apollo appears to value the rest of Paramount at exactly zero dollars. Shari, understandably, thinks there is some value in CBS, Par+, Pluto TV, the stations, etc. Plus, Apollo brings potential issues: Remember, a sale of CBS requires F.C.C. approval to transfer the license. A pure private equity play could raise red flags, especially if the plan is to merge Paramount with Legendary, which is part of the Apollo bid and is co-owned by China’s Wanda. I’ve also heard Apollo may raise money for its bid, and that process could include sovereign wealth funds. A source close to Apollo said that’s not happening, but obviously any Gulf money would complicate the regulatory process further.

• Box office over/under: I’m coming off my biggest miss ever with Godzilla x Kong, but the stakes are way lower this week, with 20th Century’s The First Omen and Universal’s Monkey Man both tracking at about $12 million openings. I’ll take the over on the former (horror!) and the under on the latter (action… with a message?).

Great, good for them, but have you seen these payouts for the leadership? The C-suite stands to make a killing. When private equity firm Silver Lake officially acquires Endeavor early next year at a valuation of $13 billion, or $27.50 per share, casual investors will largely shrug. Endeavor I.P.O.’d in April 2021 at $24 per share, meaning those who bought into the sports and entertainment conglomerate on Day One have endured a profitable yet ultimately disappointing three-year ride.

And yet Emanuel, C.E.O. of the current public and future private Endeavor, will get quarterly royalty payments of 2.5 percent of net cash profits from the WME talent agency, plus potentially tons of new shares in Endeavor. Whitesell, who will stay on the Endeavor board, has the option to become chairman of WME and get that rich 2.5 percent royalty, or do his own thing with a $60 million payday. Shapiro, the Endeavor president, will see his salary more than double, to $7 million a year, with a guaranteed $15 million bonus. Plus he gets another $15 million bonus when the deal closes, and 1 percent of equity in the new entity.

That’s not all. The 8K filing also reveals huge “asset sale bonuses” to be paid when the disparate pieces of Endeavor are inevitably offloaded even more quickly than they were cobbled together. Ari gets a $25 million bonus when assets are sold, plus Shapiro will earn a $20 million bonus if aggregate proceeds of the sales equal $1 billion, $2 billion, and then $3 billion; he gets $100 million total if he purges everything they want purged, after which he’ll get a new deal with a $5 million salary and a $2 million bonus. Plus private jets for Ari and Patrick. (Shapiro has to settle for “reasonable access” to the PJs; I know… thoughts and prayers.) And, after two years, Ari can make Silver Lake buy him out. Patrick can force the buyout after one year. And Patrick gets $250 million of Silver Lake’s money to help him launch the new thing, which could end up being his primary focus, even though he’ll still be on the board and involved in the agency.

So, no, going private is not a bad consolation prize for essentially failing to accomplish the dream that Ari has been pitching his employees for years now: build build build, go public, and everyone gets phenomenally rich. It’s true that all the agents and other Endeavor employees with pre-I.P.O. shares will make a lot more at a $27.50 per-share price, fully vested or double-triggered, than at $17, which was the price when Silver Lake announced its plan last October. And if Endeavor can grow more as a private company than what the public market gave it credit for, that’s a big positive.

Despite three years of Emanuel screaming at investors like they were Ari Gold’s Lloyd, Wall Street never cared for the talent agency or the other businesses that weren’t UFC, and it certainly never understood why the sum of everything from the Miami Open tennis tournament to stylists at the Wall Group to Professional Bull Riders would be greater than its parts. So finally, Ari and Egon Durban, whose Silver Lake has bankrolled his ascent for more than a decade, threw up their hands. In the end, the Endeavor assets, including its 51 percent ownership of TKO, the separate and still-public home of UFC and WWE, will carry an enterprise value of $25 billion, according to Silver Lake.

That’s also not bad. Certainly not what Egon and Ari wanted, of course, but remember, Emanuel and his inner circle still tend to compare themselves to Bryan Lourd and his CAA, which was valued at “just” $7 billion when it sold to François-Henri Pinault last year. (CAA’s leadership reaped enormous sums in that deal while longtime agents and employees were only allowed to cash out a small amount of their equity, with uncertain prospects now that the company is housed in a family office.)

Unlike the CAA guys—or the leaders of UTA, the other major private equity-backed talent company—Ari and Patrick co-founded Endeavor, and its rise from tiny ICM offshoot to a global sports and entertainment conglomerate justifies those outsize payments, at least in their eyes. Plus, once WME and the other representation-oriented businesses are freed from baggage like On Location Experiences and the Frieze Art Fair, perhaps another suitor (like the Pinaults) would come calling, triggering another big equity event. Agents can dream.

Still, this outcome must be a bummer for Egon. The Bay Area tech investor first began pouring money into Endeavor 12 years ago, money that Ari used to go on a 1980s Wheel of Fortune-style shopping spree—except these fabulous prizes were companies that, at best, were tangentially related to the representation business (IMG Worldwide for $2.3 billion; OpenBet for $800 million), and at worst, just seemed like buy-it-because-it’s-available trophy assets (the Madrid Open??) that could be shoehorned into a “narrative” of Endeavor as a “next-generation” sports and entertainment powerhouse, with Ari there to sell the whole thing like it was a Mark Wahlberg movie package.

The vision didn’t pan out, but after whittling down the company, there will still be good assets, not least of which is the 51 percent stake in TKO, which Emanuel will still run as C.E.O. TKO could even be a potential buyer for some of the Endeavor assets, though most are probably too small or off-mission.

Is this new venture an off-ramp? For now, no. I’ve heard the same rumors you have about Ari and Patrick growing further apart in recent years. They always deny any rifts, and with Ari, it’s hard to separate the usual screaming matches from something more problematic. TKO was technically Emanuel’s first venture without Whitesell, and as the empire has grown, what was once The Ari and Patrick Show has often become The Ari Show… With Patrick. Even though Whitesell is recently remarried, I’m guessing he doesn’t love that Ari sometimes hangs out with Jeff Bezos and Lauren Sanchez, Whitesell’s ex-wife. That’d definitely annoy me, at least.

Still, their partnership has made both men extraordinarily rich and powerful. Whitesell will remain one of the largest shareholders in the company. And his new deal gives him options. He can stay heavily involved with Endeavor and collect that hefty royalty on WME profits. Or he can leverage that $250 million from Silver Lake to raise more money and launch something new, and take a $60 million personal check for his troubles. Or he can do a version of both, staying on the Endeavor board, but doing his own thing.

Seems like Whitesell doesn’t know yet what his new venture will be. I’m told he is not interested in launching a management company, despite “management” being listed in the 8K as a possible business. More likely, it will be something at the center of entertainment, sports, and A.I., helping Silver Lake take advantage of the coming disruption. Durban loves Whitesell, hence the blank check, so the goal is to keep him involved in Endeavor. Egon “doesn’t want to face Ari without Patrick in the mix,” one friend of theirs texted.

Importantly, none of this will happen until early next year, when the go-private deal is expected to close. And given the volatilities in Hollywood, in general, and the agency business, in particular, a lot can change between now and then.

Got a question, comment, complaint, or a suggestion what to write in frosting on the congratulatory Mickey cake I’m sending Bob Iger? Email me at Matt@puck.news or call/text me at 310-804-3198.