When Agents Buy the Clients: WME, UFC and the New Hollywood Hierarchy
Picking off clients quickly is becoming a major facet of the WME-IMG growth strategy as Ari Emanuel looks to his own call sheet for potential assets.
In the final episode of HBO's Entourage, the fictional Ari Gold left the talent agency rat race to run a studio that looked a lot like Warner Bros. If that show were being made today, Ari and his agency cohorts probably would have instead tried to buy Warner Bros.
That's how much the tides have turned in the Hollywood ecosystem in only the past few years. A key takeaway from this week's WME-IMG-led deal to acquire the Ultimate Fighting Championship mixed martial arts league for the eye-popping (or eye-gouging, as the case may be) price of about $4 billion is that WME is buying its own longtime client. For years, the real Ari Emanuel negotiated TV deals and helped build UFC from a fringe cage-fighting league that was banned in several states (Sen. John McCain once called it "human cockfighting") to a global power with millions of loyal fans, a massive pay-per-view business, a popular reality show, a digital streaming outlet and more. Emanuel knew the company so well — and presumably recognized its big growth potential — that he and co-CEO Patrick Whitesell simply went and raised money from Silver Lake, KKR and Michael Dell's investment firm to buy it for themselves. WME-IMG will be the operating owner of the Nevada-based company and president Dana White will stay on to run it.
Picking off clients quickly is becoming a major facet of the WME-IMG growth strategy. In the past year, the Beverly Hills-based sports and entertainment powerhouse, flush with cash from majority owner Silver Lake and investors including Softbank and Sequoia, has been on a buying spree that has included at least two other WME clients: Professional Bull Riding, another second-tier sports league that, like UFC, has been represented by WME for TV deals, and the Miss Universe Organization, which WME bought from Emanuel's former client Donald Trump after he decided to run for president and insult an entire universe of non-white people.
Why is this happening now? Since the early 1960s, when superagent Lew Wasserman's MCA was forced by antitrust laws to divest itself of its agency business when it bought Universal Studios, talent agencies legally were prohibited in California from owning the production companies (including studios) they routinely negotiated against. But with WME's $2.4 billion takeover in 2014 of IMG, home to a college licensing business, events management, fashion models and sports stars, the combined company became something far different than a traditional Hollywood agency. Armed with private equity backing and the seemingly limitless ambition of its founders, WME (and, to a lesser extent, longtime rival CAA) has raced to acquire scale and a diversity of revenue streams. In the process, Emanuel and Whitesell have gone looking for companies to buy, often finding them on their own call sheets.
This is a major reversal from the career paths most talent reps have taken over the years. Many agents have done their best to build up their clients to the point where they could leave to run that client's business full time (as William Morris' Jack Rapke did with client Robert Zemeckis, ICM's Bob Broder did with Chuck Lorre and WME's Adam Sher did with Ryan Seacrest). Or, more often, agents would pursue the Ari Gold path, leveraging their relationships and expertise to land a top studio or network job. Ron Meyer segued from co-founding CAA to running Universal. Mike Ovitz left CAA for his infamously short-lived stint at Disney. Brad Grey was a top manager and producer before becoming CEO of Paramount.
These days, if Ari Emanuel took a job running Paramount or Warner Bros., it would be considered a major demotion.
Instead, Emanuel is using his relationships and expertise to build up his own company, presumably for an IPO or sale down the line. After all, what's the best way to scout a potential acquisition? Become its agent, know everything there is to know about the company, then pounce. Why settle for a 10 percent commission slice like a sucker when you can grab the client's entire pie?
Not that the clients are complaining, of course. UFC's owners, the Fertitta family, are said to have entertained several suitors before deciding to go with the buyers they knew — and who presumably paid them the best price. In a statement confirming the deal, seller Lorenzo Fertitta said, “We’re confident that the new ownership team of WME-IMG, with whom we’ve built a strong relationship over the last several years, is committed to accelerating UFC’s global growth. Most importantly, our new owners share the same vision and passion for this organization and its athletes.” Similarly, Professional Bull Riding's TV ratings are up since the sale to WME-IMG, and Trump has said nice things about Emanuel's willingness to take Miss Universe off his hands (and score a new Fox deal to broadcast the pageant).
WME's rivals point to the massive debt the company has taken on to fuel this growth, as well as the conflicts the added voices of recent investors could bring to the table. Time will tell if the aggressive growth strategy pays off. But Emanuel and Whitesell like to talk about how the synergies of a talent-oriented company buying content producers can float all boats. When I interviewed the duo in March, they cited the benefits of WME's country music stars performing at IMG's college events and now at Bull Riding. WME-IMG already reps some top UFC stars like Ronda Rousey (the company is saying it won't be involved in talent negotiations to avoid conflicts). And they don't seem to see that much difference between representing a client vigorously and managing that same client as an owner.
"Bull Riding is like a client," Whitesell told me in March. "It's a unique sport. They have a certain connection with their fans, they have a certain area where they want to grow, they have a way in which they want to be portrayed in the world, to make money, but they also have a certain integrity to it and they want fresh ideas. It's no different than working with a director."
Perhaps that's true. For years, talent managers (a separate but similar profession from agents) have gone into business as producers alongside clients. In fact, some of the industry's most prolific management-production companies — Anonymous Content (Spotlight, Mr. Robot), Management 360 (Game of Thrones) and 3 Arts (Silicon Valley) — built their business with exactly that game plan (making them attractive acquisition targets for larger companies). Now with WME-IMG we're seeing that strategy on steroids, applied with much higher stakes. Who's next? WME-IMG's TV clients include Israeli format powerhouse Keshet (Homeland), which might be a good fit. How about Funny Or Die, which has been on the block? Several U.S.-based reality or live event producers might make sense as acquisitions. These are all my ideas, I don't have inside information.
But at this point, as WME-IMG becomes a ravenous buyer, almost any company should consider itself on the table — especially if Ari Emanuel is its agent.