Talent firms to vote on merger

Talent agencies William Morris and Endeavor are expected to vote today on a merger creating a new giant in Hollywood at a time when the longtime role and power of the firms that represent actors, directors and writers are coming under severe strain.

The combined entity -- easily the most talked about hook-up in town since Angelina and Brad -- would be better positioned to survive the shrinking economy of the entertainment industry, in which fewer films and scripted television shows are being made and studios are squeezing the salaries paid to talent. Reliant on commissions and fees for income, Hollywood’s talent agencies are competing for scarcer top clients in a contracting market.

A unified William Morris and Endeavor -- WME Entertainment is currently the favored name -- hopes its new heavyweight status will give it added leverage to counterbalance a power shift that in recent years has tilted back toward the studios. WME would boast more than 300 agents, a formidable client roster and combined annual revenue of about $325 million.

Although that’s a modest sum in an age of billion-dollar government bailouts, it belies the outsized influence an agency wields by virtue of its position at the nexus connecting talent with producers and distributors.

“This is a somewhat historic reset in the industry. I don’t think we have seen anything quite like this,” said Larry Gerbrandt, head of Media Valuation Partners and a media analyst. “It’s more than just a merger of two agencies; it’s about what all of this implies.”

The deal could trigger a new wave of consolidation, putting pressure on other smaller agencies to combine or find larger partners. The last significant talent agency merger was in 2006 when International Creative Management bought the smaller Broder Webb Chervin Silbermann Agency in a move to inject new life into ICM’s television business.

Blending the disparate cultures of William Morris and Endeavor -- the former rooted in vaudeville, the latter only 14 years old -- will entail upheaval and numerous layoffs.

Rival agencies will seek to exploit this period of disruption by pursuing talent or disaffected agents, who would bring with them valuable clients. Others may leave the combined firm to form new management companies or agencies, just as Michael Ovitz did when he broke away from William Morris Agency in 1975 to found CAA.

Talks between William Morris and Endeavor have been taking place for months, with the chairman of William Morris, Jim Wiatt, encountering internal opposition from some agents who worried they would be cut out of the merged firm’s new power structure.

William Morris is the bigger, more diversified player. The agency was able to weather last year’s strike largely because it had millions of dollars rolling in from its music and reality television business when the production of film and scripted television shows stopped. “The Biggest Loser,” “Deal or No Deal,” “Extreme Makeover: Home Edition” and “Dancing With the Stars,” all represented by William Morris, buoyed the networks during the strike.

But 111-year-old William Morris is burdened by enormous overhead. The privately owned company has 800 employees, including about 250 agents, an operation that has become increasingly costly as the studios have dramatically curtailed their spending on the production of movies and television shows.

Although William Morris has added younger clients such as sought-after directors J.J. Abrams and Michael Bay, several of the agency’s star actors, including Mel Gibson, Denzel Washington and John Travolta, have either peaked or are too old for the youth-targeted pictures that are now favored by the studios for box-office hits.

The smaller Endeavor, which has about 280 employees, including 80 agents, has been seen as the hip agency, a valuable cache in image-obsessed Hollywood that helped it to land A-list young clients such as Adam Sandler, Keira Knightley, Shia LeBouf and “Slumdog Millionaire” director Danny Boyle. However, the firm also has a reputation for maintaining a more lavish corporate lifestyle, rich with perquisites and big salaries.

Under the combined entity, Wiatt is expected to retain the chairman’s title, with Endeavor founder Ari Emanuel and co-managing partner Patrick Whitesell assuming management of day-to-day operations. William Morris President Dave Wirtschafter is also expected to have a role.

William Morris would contribute five members on the board of the new agency: Wiatt, Wirtschafter, music division head Peter Grosslight, motion picture head John Fogelman and publishing head Jennifer Rudolph Walsh. The smaller Endeavor is expected to gain four seats on the board: managing partners Emanuel, Whitesell, Rick Rosen and Adam Venit.

Endeavor is expected to run the television, talent and film divisions, while William Morris agents would continue to run the music and book literature divisions.

The deal, however, is contingent upon approval by William Morris’ 20-member board and Endeavor’s 28 partners. It would also be subject to approval of the U.S. Justice Department and Hollywood’s labor guilds.

William Morris was founded in 1898 when a young German Jewish immigrant affixed the cross-hatch trademark, four X’s that represent a ‘W’ superimposed on an ‘M,’ above his door in New York City and opened his shop as William Morris, Vaudeville Agent. Eventually, the agency represented people in the silent pictures and later such artists as Al Jolson, the Marx Brothers, Mae West and Charlie Chaplin. It later expanded into radio, and then television.

By 1950, William Morris achieved even greater influence in the industry with the acquisition of another powerhouse agency which brought such clients as Frank Capra, Clark Gable and Judy Garland.

The firm also cemented itself as a critical cog in the Hollywood machine when it recognized that television would not destroy the film business, as many feared, but would become an even more powerful and profitable business to tap.

The agency began to package its actors, producers, writers and show concepts for sale to corporate sponsors, which was how television was made in the early days. Packaging fees for TV shows grew into William Morris’ most lucrative and reliable business, sustaining it throughout lean years.

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dawn.chmielewski@latimes.com

meg.james@latimes.com