Tilting Hollywood’s Balance of Power to Talent Agency Clients
LOS ANGELES, March 18 — Almost six years ago, big thinkers at Hollywood’s Endeavor talent agency, best known as the players behind the industry satire “Entourage” on HBO, drilled into a bothersome question: Why should a star or director work for low pay on a labor of love only to see a film studio or foreign sales company strike it rich if the movie thrives in worldwide theatrical and video markets?
Far better, they reckoned, would be to put those dollars in the pockets of clients and, not incidentally, of the agents who represent them.
By late 2003, a young agent, Mordecai Wiczyk, under the wing of the Endeavor partners Ariel Emanuel and Patrick Whitesell, joined with a Harvard Business School classmate, Asif Satchu, to do just that by creating Media Rights Capital.
It soon built high-profile movies — like Alejandro González Iñárritu’s “Babel” and the comedic actor Sacha Baron Cohen’s planned “Bruno” — around clients of Endeavor, which was quietly given part ownership in return for helping to find film projects and make deals.
AT&T and the advertising conglomerate WPP Group joined Goldman Sachs as investors. This combination, Mr. Wiczyk and Mr. Satchu said, gives Media Rights the ability to invest $400 million a year into movies, television shows and broadband Internet episodes, a considerable amount even at a time when Hollywood is crawling with aspiring financiers.
If they succeed, the pair may help shift the balance of power in Hollywood by increasing opportunity for idiosyncratic movies like the multilingual “Babel,” and by giving filmmakers and stars more earning power and ownership of their projects.
Despite the new money and the seven Oscar nominations for “Babel,” the company has yet to convince a skeptical film business that it is not just a stalking horse for Endeavor and its clients. To expand its reach, Media Rights must overcome a widespread sense that the company is playing loose with restrictions on agencies employing their own clients or that it is somehow beholden to the agency that helped create it. “Everyone who is not in the bus, we’re going to keep stopping by the house and opening the door,” Mr. Wiczyk said in an interview this month at the company’s office in the building that also houses Endeavor.
Mr. Wiczyk, who previously worked at the foreign sales company Summit Entertainment, and Mr. Satchu, who co-founded and later sold the online industrial supply-chain management company SupplierMarket at the height of the dot-com boom, remain more business school than Hollywood in their delivery.
Working the phones from their barebones office on Wilshire Boulevard in Beverly Hills, Mr. Satchu, 35, acknowledged a penchant for making points with scrawls on a whiteboard. Mr. Wiczyk, 34, spoke with considerable passion about their zeal for market information. “We spend all of our time thinking about the data we don’t have and what would we do if we had it,” he said.
The pair described a process in which information shared among partners like WPP and AT&T at the formative stages of a project — like a DVD and Internet program for homemakers, suggested by the actress Raven-Symoné — may increase its marketability later. They said the company worked through likely outcomes from, say, a series of 10 five-minute spots as opposed to 20 of half that length, granting the actress and her collaborators the final call.
Meanwhile, detailed assessments of foreign markets may influence decisions about selling rights to films like “Sleuth,” coming in the fall.
“We get people comfortable; we get people to give us their information,” said Mr. Wiczyk, who described himself as being “evangelical” about using data to help artists seize the value in their own work.
And they dream big. They talk of financing 10 films, five or six television shows, and 20 mobile or broadband shows annually.
A financier’s connection with a talent agency is not a novelty in Hollywood. Stung by the studios’ continuing retreat from star-driven films, talent companies like Creative Artists Agency, the William Morris Agency, International Creative Management and the United Talent Agency have all sought to connect their clients with alternative financing.
Cassian Elwes and his division, William Morris Independent, for instance, have helped Morris clients put together movies (like the planned “Grace Is Gone”) outside the studio system. But representatives of several such companies said last week that they knew of no firm that has pushed its alliance with an agency as far as Media Rights.
Films backed by the financier have included substantial talent from other agencies — Brad Pitt and Cate Blanchett, stars of “Babel,” are represented by Creative Artists.
But virtually all of the company’s projects have been built around an Endeavor-backed participant, like the actor Jude Law in “Sleuth,” or Hugh Jackman, in “The Tourist.”According to Mr. Wiczyk and Mr. Satchu, the agency owns a minority, nonvoting stake in their company, which they declined to specify. They added that no Endeavor agent holds an individual stake or sits on the Media Rights board.
Still, those at other agencies would like to know more. Requesting anonymity because of general industry reluctance to speak publicly about a rival’s business, some agents last week questioned whether Media Rights could be trusted not to put their proprietary information in the service of Endeavor. Others wondered if the Endeavor’s ownership stake ran afoul of regulatory provisions in California law or contracts with guilds.
“For us, financing opportunities are always exciting and interesting,” said Jeremy Zimmer, a partner at United Talent. Mr. Zimmer said that his agency has not done business with Media Rights, but might do so if it was satisfied that the company’s ownership and influences were clear. “What becomes critical is who is the management?” he asked. “What level of transparency are we going to have?”
Robert Jones, California’s acting labor commissioner, whose office regulates talent agents, said the state’s labor code has a provision banning conflicts of interest by agencies. The law, from a time when models were sometimes sent for hair and makeup work by operators with a close connection to their agencies, says that no agent may refer a client for services to any entity in which the agency has a direct or indirect financial interest.
The law’s wording has a broad sweep, but does not specifically address film financing. Mr. Jones said he was not aware of any complaints related to the Media Rights-Endeavor association. Any ruling on a conflict, he added, would depend on the facts of a particular case.
An overall franchise agreement under which the Screen Actors Guild restricted the right of agencies to engage in film production expired in 2001, and Hollywood’s major agencies have since operated without a formal agreement with that guild.
Media Rights has been careful to distinguish itself as a financier rather than a producer. Representatives of Endeavor and Media Rights said the two companies became involved only after a legal review, conducted by an outside labor lawyer, persuaded them that agency law and guild regulations permitted the venture.
Meanwhile, the studios are wary because they are likely to have only so much appetite for films in which they are not the principal owners. Last year, Universal paid $42.5 million to acquire the rights in English-speaking regions and some European territories to Mr. Baron Cohen’s “Bruno,” based on its namesake character, a gay Austrian fashion expert.
Some rival executives considered the figure excessive, given the limited scope of the rights (Universal will not own the negative) and the risk factor in returning to the mockumentary format that worked in “Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan.”
“From my perspective, this kind of deal is only bad for the business if you did it all the time,” David Linde, the studio’s co-chairman, said. He pointed out that his company had agreed to make more than two dozen of its own movies over the last 10 months; adding “Bruno” would only strengthen its release schedule.
Yet John Lesher, president of Paramount Vantage, which released “Babel,” said a similar arrangement was ultimately sound, if not spectacularly lucrative, for his company. Paramount Vantage bought rights in English- and Spanish-speaking territories, and left the rest. “I’m not going to make a tremendous amount, but I’m going to make money on the film,” said Mr. Lesher, who made the deal as the director’s agent before joining the boutique studio.
The film has made about $114 million at the box office, almost 70 percent of that abroad. Paramount will most likely have strong sales from DVD, thanks to the movie’s Oscar nominations, but it also invested heavily in a sustained award campaign.
According to Jon Kilik, a producer of “Babel,” the film cost about $30 million to make, and Paramount Vantage paid less than the production cost for its rights. Mr. Kilik said Media Rights assisted the process by providing what he called bridge financing, which held the movie together for several months while talent deals and more conventional film lending were put in place. Financial benefit from the deal was ultimately split among Mr. Iñárritu, the producers, stars and writer of the film, he said.
Endeavor had a jolt last week when Mr. Iñárritu — whose film was a showcase for that agency and Media Rights — bolted to the competing Creative Artists Agency. People associated with the director said his departure had nothing to do with Media Rights, and in a statement on Friday, Mr. Iñárritu said he hoped to find a new project with the financier.
Mr. Whitesell of Endeavor, in a phone interview, said he believed that the information-sharing tack taken by Media Rights would persuade other agencies to embrace its projects, though he suspected that some might foster similar financing entities rather than signing on.
“I have mixed feelings about other people getting into it,” Mr. Whitesell added. “But that will just create more opportunity for clients.”