LOS ANGELES (AdAge.com) -- The worst-kept secret in Hollywood is officially out: Talent agencies Endeavor and William Morris Agency formally announced yesterday they'll merge to form William Morris Endeavor Entertainment, an estimated $300 million venture with broad implications for the future of entertainment and marketing.
The combination brings together representatives of movie stars such as Russell Crowe and Matt Damon, as well as a bevy of global brands and corporate clients seeking to leverage their star power. William Morris Consulting, for example, represents consumer brands such as Hasbro, Nokia, General Motors, Starbucks, fashion label Rock & Republic, e-commerce site BlueFly, Swarovski crystal and even Amtrak. Endeavor-affiliated Endeavor Marketing Solutions represents far fewer corporate clients, advising a select list that includes American Express and Revlon.
But to complicate matters, the merged company forces once-fierce rivals with markedly different styles to share power. WME Entertainment will have no fewer than three co-CEOs: Endeavor partners Ariel Emanuel and Patrick Whitesell will share the title with William Morris President Dave Wirtschafter, while William Morris' current CEO, Jim Wiatt, will become chairman.
Each agency's leaders have taken distinctly different approaches when it comes to marketing through Hollywood entertainment. Endeavor, for example, usually sends its corporate advisers to work directly in the offices of their clients for far longer periods of time than William Morris does.
"But the thing that Ari [Emanuel] has done that's been very interesting is that he has pushed for innovation relative to talent and production," said Doug Scott, president of New York-based Ogilvy Entertainment.
Mr. Scott singled out Mr. Emanuel's role in last summer's deal for Seth MacFarlane's "Cavalcade of Cartoon Comedy." Mr. MacFarlane -- creator of the "Family Guy" TV series and an Endeavor client -- agreed to create animated vignettes distributed via Google and sponsored by Burger King, which is not represented by the agency.
Such brand-dependent deals could become more abundant, as the new talent venture represents both media properties and distribution sources. William Morris Consulting represents the NFL, the NHL and MySpace, while Endeavor represents AT&T, which in recent years has invested billions in fiber-optic infrastructure to compete with cable and satellite companies in piping entertainment into homes.
Importance of corporate clients
Mike Medavoy, a former talent agent and studio head turned film producer, said the importance of corporate clients and consumer brands to the financial health of the modern talent agency is becoming ever more crucial as the once uber-lucrative movie business becomes more fiscally challenging.
While the merger consolidates many highly paid "gross participants" -- stars such as Denzel Washington, Mel Gibson, Russell Crowe, Matt Damon, Eddie Murphy and Hugh Jackman who take a cut of a movie's gross -- under one roof, the number of movies that pay vast sums to such stars dwindles every year, Mr. Medavoy said.
"I do think that it's getting harder to say someone is 'movie star,'" he said, adding, "When Miley Cyrus and Beyonce [Knowles] are making movies that work, and studios are not going to have to give up a lot [in star salaries], it sends a message about what talent is really worth."
A quick look at this month's box office supports his point: Ms. Knowles starred in the thriller "Obsessed," which opened this past weekend to the tune of $28.6 million, slightly above expectations. Ms. Cyrus starred in "Hannah Montana: The Movie," which opened April 10 to a robust $32.3 million. Yet despite their No. 1 box-office debuts and global fame as recording artists, neither Ms. Cyrus nor Ms. Knowles is understood to be a gross participant in her films.
By contrast, despite being powered by Messrs. Affleck and Crowe, "State of Play" grossed barely $14 million when it opened on April 17, just a hair above Ms. Cyrus' film -- which was in its second weekend of release.
More involved in brand deals
So with the declining influence of movie stars and plunging ratings in network TV, Ogilvy's Mr. Scott said, "agents from all the [Hollywood talent] agencies are getting more and more involved in the brand deal-making process," entering territory that was once the provenance solely of corporate-advisory agents.
Perhaps highlighting the degree to which all talent agents may soon be asked to serve as ersatz corporate advisers, it's not yet clear who will run corporate advisory at the new WME Entertainment. Paul Bricault heads William Morris Consulting in Beverly Hills, while Endeavor Marketing Solutions' CEO, Mark Dowley, runs his corporate operation out of New York.
Last August, Interpublic Group of Cos., which had held a 40% stake in Endeavor Marketing Solutions since 2005, acquired the remaining 60%, though Mr. Dowley remained its CEO and frequently uses the Endeavor talent agency's film and TV stars in his EMS marketing efforts.
Neither Mr. Bricault nor Mr. Dowley was available for comment, and spokesmen for both agencies declined to say who would lead the corporate-advisory division or how it might be organized, saying those details were "still being worked out."
'You can't have everybody'
"It boils down to: Does [the merger] give us access to more people doing this?" asks Frank Scherma, president of branded content shop Radical Media. "Until the dust settles, that's going to be tough to say, because you can't have everybody."
Indeed, the merger is proving as much: Already, the biggest and most highly prized name in TV, J.J. Abrams, is up for grabs as a result.
Mr. Abrams, the creator of shows such as "Alias," "Lost" and "Fringe" and the producer of motion pictures such as "Cloverfield" and the forthcoming "Star Trek" reboot at Paramount, was represented by William Morris motion-picture literary head David Lonner, who decided not be part of the newly formed company. Mr. Abrams has not indicated whether he'll stay at the merged agency without Mr. Lonner.
Mr. Lonner hasn't decided whether he'll join another agency, which would force Mr. Abrams to choose sides, or become Mr. Abrams' manager, which would allow Mr. Abrams to remain with William Morris even if Mr. Lonner does not.
Ogilvy's Mr. Scott said the merger shows that the agencies' aims in representing creative talent are evolving.
"If you want to read anything into it," he said, "it's this: How do you move yourself out of the constricted agency model [of getting a commission for who you represented] and into the creative packaging model, where you are tapping into the value of what's been created?"