Playing the Percentages

The whole point of amassing power in Hollywood is to use it. An industry player stores it away over the years, like a miser hoarding gold, until he just can’t contain himself any longer. Such is the claustrophobic state of the industry’s top talent agents: Constrained by razor-thin profit margins and reduced production slates at the studios, agents today no longer have that Michael Ovitz-like ability to shake entertainment moguls from the tips of their hair plugs to the soles of their Pradas. Now, instead, they’re shaking down the competition, cannibalizing their own ranks in the latest Hollywood blood sport.

“It’s self-slaughter,” says a former agency head. “The profit margins are going to shrink, and, what’s worse, the agencies are going to have to eat it.”

Despite the persistent and uncharacteristically generous importunings of International Creative Management chairman and CEO Jeff Berg, his affable No. 2, Jim Wiatt, took just a weekend to sever his two-decades-long connection to ICM. He jumped to the chief-executive’s suite at the rival William Morris Agency with Eddie Murphy, Nora Ephron, and Lorne Michaels in tow (and, according to a Morris source, a guaranteed annual minimum of $5 million). While the studios may shuffle the decks as often as blackjack dealers at the Bellagio do, such high-level change at the top agencies is rare. For one thing, the cultures are incompatible (it’s often joked that WMA is the Jewish family you want to escape, Creative Artists Agency the Corleone family you can’t escape, and ICM the Addams Family you try to escape). For another, these guys really loathe one another. And they all have golden handcuffs in the form of company stock, investment plans, interest-free mortgages, etc.

Still, Wiatt, virtually invisible to the outside world, had not exactly been shy about his unhappiness at ICM. He lived in the perpetual shadow of the brainy, aloof “Ice” Berg, not to mention ICM’s rainmaking media darlings like Nancy Josephson (whose clients include Bright/ Kauffman/Crane, the trio responsible for Friends, Jesse, and Veronica’s Closet) and Ed Limato (who represents Mel Gibson, Winona Ryder, Michelle Pfeiffer, Denzel Washington, and Richard Gere, among others). After WMA tried to throw money at Limato three years ago, Berg – already paying him a fortune – ultimately named him co-president. But there are only so many titles, and dollars, to go around. And now it seems inevitable that the Wiatt move will touch off the biggest round of agency shifting (and, consequently, client poaching) since 1995, when Michael Ovitz, Ron Meyer, and Bill Haber cashed out of CAA, which they’d created, and handed it whole to the hyperambitious Young Turks.

Some of the issues as the agencies slouch toward 2000: Manhattan-based agent Elaine Goldsmith-Thomas – whose clients include $20 million gal Julia Roberts, along with Tim Robbins, Susan Sarandon, and the red-hot Jennifer Lopez – is, as Wall Street would say, in play. According to sources at the agency, she won an extension on her ICM contract, which was up in June. Where will she alight? She’s as close to CAA’s Kevin Huvane as she is to Berg, but Endeavor and United Talent would also kill to have her. Meanwhile, Hollywood presumes that David Wirtschafter will follow Wiatt to William Morris when his contract is up at the end of the year. (But ICM is already moving Heaven, earth, and nameplates to keep him.) And can CAA hang on to Patrick Whitesell and clients Matt Damon and Ben Affleck without expanding its partnership ranks? Will ICM’s George Freeman shoot for the moon when his contract expires, now that Catherine Zeta-Jones is a major star and Russell Crowe may get nominated for an Academy Award?

The latest upheaval comes at a time, unlike ten or even five years ago, when the agencies can least afford it. As privately held companies, they don’t have to disclose their financials, but they’re all hurting, as evidenced by the not-so-quiet downsizing taking place throughout the business. ICM, in the aftermath of a brutal leveraged buyout, loudly slashed its agency roster last December after Berg confided to pals that “there were times I didn’t know how I was going to make the payroll.” (ICM insists it will finally return to profitability next year.) CAA, on the other hand, has been shrinking more subtly. A number of its agents have been prodded to find work elsewhere in the industry, as managers, producers, and consultants, among other non-agenting jobs.

Not so long ago, when the agencies faced rocketing overhead (all those fancy buildings along Wilshire Boulevard, with their butterscotch marble, private screening rooms, waterfall fountains, and Pace Gallery art), they just passed along the extra cost of doing business to the studios. But what goes around comes around. Today, with networks paying lower license fees and pushing for more and more in-house production, agencies have had to cut commissions on their once-fat TV packages. Ditto their movie packages: Once green-lighted by new studio executives scrambling to buy themselves time before their own slate of films made it to the big screen, the majority of those films turned out to be expensive box-office bombs. Moreover, out-of-control above-the-line and marketing costs have prompted the studios to trim their production schedules by a third, which translates to fewer paychecks from which agents shave their 10 percent commissions.

Such changes make for major Maalox moments in Hollywood, where show business in general is already seen as too chaotic. There was something comforting in the knowledge that star prices may rise and fall and studio executives may come and go, but agents were forever. Sam Cohn and Martha Luttrell at ICM, Rick Nicita and Fred Specktor at CAA, Lenny Hirshan and Fred Westheimer at WMA have all been around for twenty-plus years, and they’ll probably only leave their offices feet first. Top agents can boast more seniority in their jobs than almost any of the studio heads on the other side of the negotiating table. (Today, CAA’s Bryan Lourd, modeling himself after Ovitz and ignoring the obvious conflict of interest, moonlights brokering new jobs for moguls.)

Yes, agents still wear Armani (although the Generation Xers are partial to Hugo Boss). Yes, they still drive BMWs (souped-up SUVs run a close second). Yes, they still sport headsets (while compulsively e-mailing). Yet beneath these superficialities, a profound transformation has occurred. Where once CAA had a stranglehold on the industry, no single agency is that dominant anymore.

And with Ovitz’s departure, the agency business stopped being a cult of personality hyped by a fawning press. Not that it’s any less important in the Hollywood food chain. But these days, an agent’s power derives not from personality but from position: You are only who you represent. (Though Ovitz claims to be reinventing himself as a talent manager, he’s really just assembling another agency – Artists Management Group; he even refers to his hybrid employees as “magents.” That he is so obviously competing with the agencies for clients is one reason AMG hasn’t signed an A-list actor since January. Once the bête noire of anyone who dared cross him, Ovitz now seems indistinguishable from the rest.)

With the virtual demise of packaging, and talented new directors like Quentin Tarantino, John Woo, and Todd Solondz being discovered all the time thanks to the fecundity of foreign and independent films, the CAA juggernaut has slowed, and other agencies have caught up. Agent poaching has replaced client poaching, and now it’s every agent for himself. Until as late as January 15, for example, Michael Gruber kept WMA twisting in the wind about re-signing even after CEO Walt Zifkin promised to make him president of the agency in the next three to five years. That promise of power wasn’t enough. Gruber left for major bucks and merely the prospect of a partnership at CAA because, as he told his clients like George Clooney, “I wanted to play on the Yankees” (and, apparently, get paid like Bernie Williams).

Well, what did anyone expect? After all, the new breed of agent was born during the Greed Decade, which introduced to the business a litter of hungry pups armed with Harvard MBA or law degrees who’d toyed with the idea of investment banking but opted instead for Hollywood agencies. Yet they were not much different from the protégés of that other Mike, as in Milken: There but for the grace of glam went the latest incarnation of the Drexel traders. And they turned the agency business upside down. The old guys waited their turn, knowing that their patience would be rewarded with professional and financial security. The new kids weren’t as patient; they wanted the big money, and they wanted it now. The old guys were products of Brooklyn and the Bronx. The new kids were baby-boom California-bred, or cloned. The old guys looked up to Lew Wasserman. The new kids worshiped Gordon Gekko.

Agency contract negotiations used to be models of simplicity in a complex business. An agent’s bare-bones salary and all-important year-end bonus were determined primarily from a series of computer calculations of clients’ earning history from the past year and potential for the next one. Eventually, an agent’s intangibles – a winning personality, status in the community, deep studio connections, an eye for young talent – were also taken into account. Beginning this year, when the bonuses are relayed to the agents anytime from October to Hanukkah, something new will almost certainly be factored in as well: Call it anti-theft insurance, the cost of keeping today’s employee from becoming tomorrow’s competitor. ICM will worry about losing agents to Wiatt, who in turn will have to overpay WMA agents to stay put, and so on in an endless vicious cycle. Energy that the agencies used to devote to sinking Hollywood fortunes is now going to be spent just keeping themselves afloat. And it couldn’t happen to a nicer bunch of predators.

“The sharks are trapped in their own pen, and there is no escaping to the free waters of the studios,” that former agency honcho told me. “All they can do is turn on each other and see who is the last survivor.”


Playing the Percentages