LITERALLY FREE AGENCY

Is an opportunity looming for CAA, ICM and/or UTA to step into the breach and snatch business and agents away from the troubled talent agencies Paradigm and WME?

WME, weighted down by debt, and Sam Gores’ Paradigm, which laid off a quarter of its staff when the live business collapsed due to the Coronavirus pandemic, are looking at potential coup d'etats from agents displeased with the manner recent financial struggles have been dealt with.

UTA, which has instituted pay cuts, and CAA are said to be in talk with agents from both Paradigm and WME, but the looming issues are NDAs and non-compete clauses. Are they enforceable? If any agent is technically “employed,” but not getting paid, do they have a legal right to jump ship?

Could ICM decide to go big in the music biz and make a significant play for a group of Paradigm agents? It’s likely ICM could offer better deals than Paradigm, but what happens to the ones left out? Will the world of music agents suddenly look like the free-agent marketplace in the NFL and MLB as top agents field offers from multiple agencies?

CAA, whose music department dwarfs those of UTA and ICM, is in the strongest financial position, with little to no debt and no assets that are a drain on the core business.

It wasn’t supposed to play out this way. After a failed IPO, WME’s approximately 150 partners had 4/5 circled on their calendars; this was the day they were allowed to cash out 20% of their equity, based on a $3.6 billion valuation of the company. Not only is that payout being moved down the road, but pay cuts have been suggested that WME agents are saying no to.

A good number of WME agents have worked for lower salaries for several years as equity payout promised a better shot at becoming wealthy. Now, WME, which laid off 250 employees in late March and started to study how to implement salary reductions, has to wonder: How many agents will walk?

Parent company Endeavor Holdings, which bailed on an IPO at the last minute in late September, is struggling from a heavy debt load and further debilitated by the company’s reliance on live events such as UFC fights, Professional Bull Riders events, fashion shows and sporting events. Endeavor purchased—and, many say, overpaid for—the sports and fashion agency IMG Worldwide in 2014 for $2.4 billion and Ultimate Fighting Championship in 2016 for $4 billion; its workforce, pre-layoffs, was 7,500 strong. Are Endeavor’s backers, the private equity firm Silver Lake Partners, losing patience with the situation, wondering how they’ll see a return on their $4.6 billion investment?

Three weeks ago, Silver Lake added $1 billion to Twitter’s coffers and landed co-CEO/Managing Partner Egon Durban on the social-media company’s board. Might the move into the virtual world push Endeavor to dump properties at a loss to keep WME afloat?

Gores’ issues at Paradigm have played out in a more public fashion as he instituted 50% pay cuts and laid off 250 of the agency’s 750 workers on 3/21. Sources said in late March that Gores neglected to talk to his 20 or so top people before issuing the salary-reduction edict. In June, Gores had been portrayed as a hero within the company for rejecting UTA’s $250 million+ offer to acquire the agency.

Paradigm’s leaders in the music space all ran their own companies before moving under Gores’ umbrella. Are Marty Diamond, Tom Windish, AM Only’s Paul Morris, Coda’s Alex Hardee and Steve Strange and his partners at X-ray all on the same page about how to proceed? Do they need to be?

Now, with questions arising about Gores’ ethics, agents may be looking to distance themselves from his empire. It’s possible that if the force majeure clause was invoked to justify the lay-offs and salary cuts, come late June, there will be an army of agents free to sign elsewhere? Time will tell.