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| WME Co-CEO's, Ari Emanuel (Left) and Patrick Whitesell (Right) |
You all may have heard the storylines by now: ‘the balance of power in Hollywood
shifts as the William Morris Endeavor acquires IMG Worldwide for nearly $2.4
billion.’ Recent Hollywood economics have pushed for talent agencies to
seek-out new revenue sources, as few stars command the paycheck they once did, while
the number of motion-pictures produced by studios has also dwindled. Hence,
here comes the accordion, because at the end of the day, this all affects
agency compensation, as they have traditionally been paid a percentage of their
clients’ pay.
Therefore
the key players involved with the slowing entertainment industry, have turned
to the rapidly growing business of sports, giving reason to why WME opened
their checkbooks for the acquisition. For quite some time, the William Morris
Endeavor has been chasing the likes of the Creative Artists Agency in this line
of business; CAA has built a sizeable “CAA Sports” division by pursuing former
IMG talent, and developing a client-base of 800 coaches and athletes. However,
now WME leapfrogs CAA in terms of size and scope; now Peyton Manning (IMG)
joins Oprah Winfrey (WME); Novak Djokovic (IMG) with Denzel Washington (WME);
and Kate Upton (IMG) and Alicia Keys (WME) are now playing for the same team.
But
the question has arisen quite often: did WME pay just a tad too much to acquire
IMG? Some insiders believe so, as WME’s top-dogs, Ari Emanuel (yes, the real
life “Ari Gold”) and Patrick Whitesell, aren’t quite adept when it comes to the
areas of business that made IMG money. And will they correctly manage all that
comes with acquiring such a large entity like IMG, who own and operate a dozen
or so businesses in 30-plus countries? Currently, IMG is the world’s largest independent
producer and distributor of sports programming, delivering more than 20,000
hours of content annually. IMG also serves as a top-ranked sports licensing
agency and represents TV rights for nearly 100-plus colleges and collegiate
conferences. With all of that, on top of IMG’s talent management business,
which reaches the entertainment, fashion and sports industries, need I say
more? This is quite the demand for WME while managing the current, daily
demands of folks such as Charlize Theron or Matt Damon.
To
add more to content behind the transaction, rumors have it that the acquisition
comes with a hefty amount of debt; in the neighborhood of $750 million of debt,
that is. And finally, it is predicted that WME’s private equity firm, Silver
Lake, will pressure Emanuel and Whitesell to aggressively ready the business for
its IPO during the next few years- a daunting task given the timeline, while
integrating the two mega-entities.
Finally,
the question begs: with this move, what is the end game for the William Morris
Endeavor? I mean, they now own Hollywood and a large chunk of the sporting
landscape. However, while operating at such a large capacity, one can only
guess that WME could struggle in such a consumer-driven mode of business, in the
years down the road. As consumer spending habits change with the direction of
the wind, and once again, in ten-plus years down the road upon the completion
of the merger, the door could slowly open for up-and-coming Hollywood figures
and celebrity athletes to partner with, say a rejuvenated Creative Artists
Agency, or one of many “new kid on the block” agencies. Only time will tell…
