You could feel the weight of a million tons of Ari-Freude that has been held back for so long suddenly released Thursday afternoon. If there wasn’t dancing in the streets, there was certainly chortling at the valet lines when at last, the brashest, most outrageous player Hollywood has seen in ages, got a comeuppance.
But Mother of Mercy, is this end of AriCo? Where does this leave the swaggering agency which would be king? Where does it leave us all?
Some early takeaways:
• As every writeup has suggested, this was a bad week to be a visionary founder with an iffy balance sheet. In this stage of corporate Hollywood, these charismatic visionary founders are a rare breed these days, but on Wall St, every time you turn over a rock there’s one of them wrecking a startup. Three in the last week, as it turns out.
• After the WeWork debacle in particular, the appetite for taking future earnings and global conquest on faith was pretty slim.
• The problem, at the bottom, is that if you've got mega-sized dreams, the agency business is a terrible place to be—and always has been. It's a high overhead business dependent on the eternal greasing of client relationships; you can never ever take your feet off the pedals and let the business grow itself. At some level, as we see with the WGA action, the more you try and get beyond a life of just servicing talent, the more your clients like anxious children will pull you back in.
• It's not as though the Agenting Giants of the Past didn't want to turn to Wall St. to raise money to become something bigger. But they could never get past the key question: How do you value you a high-overhead, low-margin business where the sole asset is relationships?
• When that is your primary asset and you want to come out with a valuation bigger than Viacom, eyebrows are bound to be raised.
• Ari, indefatigable, relentless, big ideas guy he is tried to build the agency into something more: the entertainment hub of the future. Recognizing that branded talent can be the driver of all sorts of business, he brought a bunch of those businesses under his roof to build out into a new kind of studio with talent at its center.
• Not unlike say, what United Artists thought they would be 90 years ago, but with digital divisions and rodeos as well. But also an agency, which clients, for now, still expect to be fielding offers and not just pointing them down the hall. Not unlike the sort of business, Lionsgate say, would like to build, but with the difference that they are also bringing a talent agency along for the ride.
• But despite all this, they were still an agency and none of these other spokes functioned as bigger than Just a Rodeo without that core asset: relationships. A fact the WGA action inconveniently kept reminding everyone of at this moment.
• How much did the WGA action hurt them? It didn’t help. But even if relations with the writers were like an endless honeymoon, you’ve still got the basic problem of: What is an Agency Worth?
• The WGA tonight claimed that it was the conflicts of interest that sunk the IPO. Would be nice to think that Wall St would be so bothered by that. But it’s hard to imagine that if Sacramento and Washington don’t give a damn about agency’s conflicts, Wall Street would.
• And to be clear, neither Sacramento nor Washington have given a shadow of a glimmer of an iota of a damn about affiliated production ever, for a moment.
• So what happens now? Endeavor still has this debt that they need cash to cover.
• They could sell off some of the acquisitions—the whole strategy could survive minus an art fair or two—but that would fight trying this again, down the line, if that’s possible. Then they really have to face life as Just an Agency, with massive overhead and declining margins in the streaming Hollywood.
• They could find another investor, or even patch things up with a certain Crown Prince they were forced to distance themselves from not too long ago. After its brief spasm of conscience following his murder of a journalist, Hollywood seems to have returned to shrugging off ties to the House of Saud as business as usual.
• Or they could truly make the leap out of agenting. Not ideal to walk away from that income, but you know Ari has drawn up the plan for what this sort of escape pod looks like.
• One trickle-down effect of the WGA action, where they are encouraging managers and attorneys to take on roles traditionally and legally performed by agents, is that agents can now say, “Okay now we’re managers!” It’s one idea anyway.
• And what of that WGA action? Now that they’ve got their election done and the IPO is off the table, does everyone sit down and make a deal? Given that making a deal is in the best interests of everyone. Maybe. But on the one hand, you’ve got the Writers Guild leadership that post-election more than ever seems on a holy mission to build a new Hollywood led by writers across the table from big agencies many of whom aren’t sure they want to be agents anymore. Where the will to resolve this comes from we’ll have to see.
• Or, given how this has played out, does Endeavor seek revenge and say: okay, you want to take this to court? We’ll see you there in five years.
• The course that we can say there is a zero percent probability of: Ari Emanuel decides to dial it all down and enjoy a prosperous but not world-devouring, low key, career representing talent on deals in Hollywood.
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WINDOWS! WHAT ARE THEY REALLY WORTH ANY
IS IT TIME TO LOWER THE CURTAIN ON THE EMMYS?
PUBLIC BOOTLICKING OF THE WEEK!
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