William Morris Endeavor's Wobbly Merger

How do you know a merger agreement was hard fought and perhaps is still fraught with problems? When the new company has not one, or two, but three CEOs. But this is Hollywood, which mints presidencies for everything from marketing to television syndication. The Apr. 27 announcement that talent agencies William Morris Agency and Endeavor are merging has all the earmarks of a combined company that may have as much drama among the suits as the talent they represent.

Start with the fact that William Morris Endeavor Entertainment will have three CEOs—two from Endeavor and one from William Morris—with William Morris Chairman Jim Wiatt keeping that title with the combined company. William Morris President Dave Wirtschafter will become co-CEO with Endeavor's Ari Emanuel and Patrick Whitesell.

Sound like a formula for catfighting? No doubt. Even before the agreement, at least one Endeavor power broker, agency founder Tom Sticker, resigned early in the morning of Apr. 27, hours before agents in the two firms voted to approve the deal. And he won't be the last talent broker to walk out the door. According to Hollywood blogger extraordinaire Nikki Finke, director J.J. Abrams' agent, David Lonner, wants to bolt from William Morris (although Abrams may not go with him). Reps from both agencies are also looking for new gigs, says Finke.

The merger represents a coup for Endeavor CEO Emanuel, the brother of President Obama's chief of staff, Rahm Emanuel, and the inspiration behind the character Ari Gold on HBO's Entourage. Ari Emanuel had been looking for a merger partner for his agency, which boasts some of Hollywood's hottest stars, including Michael Douglas, Steve Carell, Hugh Jackman, and Christian Bale. William Morris wasn't Emanuel's first choice. But the agency, which was started in 1898, was a logical combination because it was strong where Endeavor was weak—the music business—and had fallen from the ranks of the top-tier agencies in areas such as films and TV representation where Endeavor was strong.

Clawback for Top Stars?

The game plan was to merge the two agencies in order to provide a united and more powerful front in the face of a yearlong campaign by studio executives to cut the salaries of directors and actors whose enormous paychecks affect the profitability of even the biggest projects. Studios scaled back on films such as Paramount Pictures' 2008 release Indiana Jones and the Kingdom of the Crystal Skull, where Paramount slashed payouts to director Steven Spielberg, actor Harrison Ford, and producer George Lucas so that the trio wouldn't reap benefits until the film began to show profits. The era of the $20 million payday for stars like Julia Roberts could be over.

Can a newly merged agency powerhouse like William Morris Endeavor turn the tables on studio executives? Hard to imagine, even in an industry where talent seems to rule. Studios are seeing the economics of the business change—and not always for the better. DVD sales, which once provided a mountain of added cash, have begun to slow. Television no longer airs many movies. But to take on Hollywood, William Morris Endeavor will have to offer a unified front. And the combined agency had best hope that a large and gangly management structure won't make that impossible.

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