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As the novel coronavirus pandemic keeps upending the entertainment industry, with cost-cutting measures enacted and business models retooled, WME said Thursday it will lay off or furlough 20 percent of its workforce.
“WME is reducing its workforce by approximately 20% as a result of COVID-19’s impact on our business. We appreciate the contributions of our former colleagues, and out of respect for their privacy, we will not be commenting on the status of specific employees,” an agency spokesperson said. “While we are making these difficult decisions now to safeguard our business, we believe in the resilience of our team and our industry.”
Endeavor executive chairman Patrick Whitesell is said to be now taking on a more hands-on role in overseeing WME, sources say. Whitesell, an affable counterpoint to high-voltage CEO Ari Emanuel, is tasked with calming waters roiled by the agency’s failed IPO last fall, followed by the unforeseeable crisis of the pandemic.
Partners who had long been hoping to land a rich payday with the IPO, or at least a consolation prize after it was pulled, are now seeing that dream die as Endeavor grapples with heavy debt and a diversified business reliant in large measure on live events that are indefinitely postponed or canceled.
On April 27 — days after Endeavor announced that one-third of the company’s 7,500 staffers across holdings would be affected by the cost-cutting measures — Moody’s Investors Service downgraded Endeavor, changing its outlook from “stable” to “negative.” Moody’s said the company has enough liquidity short-term but its position “is projected to deteriorate until the impact of the coronavirus subsides.” Previously, S&P Global had downgraded the firm to junk-bond status with analysts Jing Li and Emile J. Courtney saying that “the significant drop in revenue in 2020 could potentially result in unsustainable capital structure.”
Observers believe majority owner Silver Lake Partners has no choice but to help Endeavor weather the storm, cutting staff and possibly shedding assets. Last April, Endeavor closed the acquisition of NeuLion Inc. in a deal valued at about $250 million, and folded it into Endeavor Streaming. But even before the pandemic shut down much of Endeavor’s business, the company was exploring a sale of all or part of that asset.
In 2012, with a major investment from private equity firm Silver Lake Partners, Emanuel and Whitesell set out to build an entertainment powerhouse. They acquired IMG for a rich $2.3 billion, as well as Professional Bull Riders, Miss Universe and a stake in Ultimate Fighting Championship. Rebranding as Endeavor in 2017, Emanuel was named CEO with Whitesell taking on the role of executive chairman.
In the past year, Endeavor has faced a bitter battle with the Writers Guild of America, as well as the postponed IPO in September, which shone a spotlight on the company’s $4.6 billion in debt and revealed that Emanuel and Whitesell had each sold equity positions worth $165 million in 2017. The hope had been that the public offering would raise as much as $600 million that would be used, in part, to pay down debt.
While WME is preparing for particularly deep cuts, all of the major Hollywood talent agencies have enacted cost-cutting measures as the novel coronavirus pandemic continues to cripple the industry. Earlier this week, UTA began furloughs, which largely affected the agency’s assistants. Paradigm laid off an estimated 200 staffers in late March and reduced the payroll due to the pandemic, while ICM has let go of support staff and CAA has implemented temporary pay reductions.
In early March, Endeavor laid off 250 staffers in non-essential areas, while Emanuel and Whitesell gave up their annual salaries.
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