COVER STORY: How Endeavor’s IPO became a focus of the bitter WGA-Agencies war
Once the talent agency embarked on a multibillion-dollar acquisitions binge, making splashy deals for sports agency IMG and mixed martial arts company UFC , an initial public offering became inevitable. As the company piled on debt and took in new investors during the past seven years to fuel its growth strategy, it was clear to observers that the pressure to deliver returns would lead it to the markets.
Endeavor can’t afford to emerge bloodied from a high-stakes fight with the WGA that threatens a crucial WME client base and source of profits. And it promises to rack up legal bills at least in the short term. Packaging-fee income is estimated to be worth tens of millions of dollars a year to WME, according to industry sources. That’s a small portion of the $1.
With a public offering looming on the horizon, Endeavor has the most to lose in the short term. Endeavor declined to comment on this story, citing the mandatory quiet period before its IPO. Moreover, the WGA’s campaign has highlighted the industry’s focus on the role of private equity investment in talent agencies. Guild leaders argue that this has pushed agency leaders to prioritize predictable profit streams from packaging deals rather than fight for higher individual writer salaries. WME and Endeavor already checked all of the WGA’s boxes as attack targets as the guild went on the offensive against agencies.
Lisbeth Barron, a veteran banker who is chairman-CEO of Barron International Group, predicts there will be demand among certain investors for Endeavor shares. The WGA has already moved to highlight the impact of its campaign in a letter sent June 24 to the Securities and Exchange Commission questioning the accuracy of Endeavor’s statement in the prospectus that it has “more than 6,000” clients in its representation unit, which encompasses WME and IMG among other units. The WGA said it has handled termination letters from at least 1,400 WME clients since April 13, when the mandate to fire agents came down.
“Ari is pissed,” says a source close to Endeavor’s CEO, who described the atmosphere at WME as “tense” in recent weeks given the collision of the WGA’s agency campaign and Endeavor’s IPO. “None of it is going as planned.” “Agents want to make as much money as they can,” says Christine M. Torres, a writer whose credits include “Law & Order: SVU.” “That’s not unheard of. That’s a basic tenet of capitalism, but they’re doing it on the backs of their clients.”
“If the agents could present another basis for negotiation around the idea of packaging fees that address our conflict concerns, we’d absolutely be happy to talk about it,” says Goodman. “The agencies are taking the tack of trying to hold on to the status quo. They don’t want anything to change.” The WGA’s aggressive stance with agencies over packaging and affiliated production has spooked others in the creative community. Talent managers worry that the guild will next take aim at the producing fees that numerous top managers command as part of deals involving their clients. Lawyers have been caught in the middle with increased demands for dealmaking and client services now that agents are sidelined.
The fund surpassed its $25,000 goal in a matter of days and as of July 8 had topped $44,600. Bill Prady, co-creator and exec producer of “The Big Bang Theory,” donated $10,000. The DGA and SAG-AFTRA have stayed quiet in what is a tricky situation for both unions. Both have many members who have benefited from packaging over the years by saving 10% of their income when working on packaged shows. The major studios have also kept their heads down during the fray, as they have no incentive to hand a win to either the WGA or the talent agencies.
“If my agent has been trying very hard to increase my salary on my behalf, I certainly haven’t seen it,” Meighan says. “I really respect the leaders on the negotiating committee and on the board for being willing to take on a very lonely fight against incredibly powerful and entrenched interests.”
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