New Report Details $3 Billion in Private Equity Investments in WME and CAA, Hundreds of Millions Cashed Out, Clients Left Behind
LOS ANGELES AND NEW YORK – A new report from the Writers Guild of America sheds light on how the $3 billion in investments into Hollywood’s largest talent agencies, William Morris Endeavor (WME) and Creative Artists Agency (CAA), is upending Hollywood talent representation. The report, titled “Agencies For Sale,” lays bare the growing disparity between soaring agency valuations, executive payouts, and declining writer pay during an era of industry growth and success.
Attracted by the major agencies’ exclusive access to talent and lucrative packaging fees, the billions received from private equity firms, sovereign wealth funds, and other institutional investors has transformed WME and CAA from agencies with the primary purpose of representing talent to conglomerates singularly focused on expanding their bottom lines and returning value to investors. Of great concern to writers, the outside capital has driven the agencies into the business of acquiring and owning content, in effect making them employers of their own clients.
Today’s report reveals just how profitable these agencies have become for outside investors and agency executives. The report notes:
WME and CAA’s private equity owners have already seen their investments double and triple in value. The Guild estimates that TPG’s $340 million investment into CAA had more than tripled in value between 2010 and mid-2017. Silver Lake Partners’ $750 million investment in WME had doubled in value to almost to $1.5 billion by mid-2016.
Meanwhile, the writer clients have not shared in these gains, instead seeing their earnings slip, with a 23% decline in TV writer-producers’ median weekly income between 2014 and 2016.
“As this report makes clear, big investments by private equity firms have pushed the talent agencies into even more conflicted business practices,” said Writers Guild of America West President David A. Goodman. “It’s no longer just the problems caused by packaging fees. They are also aggressively moving into producing content – making them both the representatives and the employers of their writer clients. The conflicts of interest will only continue to grow if we don’t do something now to realign agents’ economic interests with their clients’ interests. The solution will come from either a negotiated agreement with the Association of Talent Agents or through a code of conduct.”
While Association of Talent Agents (ATA) President Jim Gosnell recently attributed declining writer pay to“consolidation, streaming, globalization and short orders,” the report reveals that many of these changes have benefitted the major agencies. In December 2018, credit rating agency S&P wrote of CAA, “The explosion of content from over-the-top (OTT) players such as Netflix, Amazon, and Hulu has favorably affected the company’s television revenue, particularly its TV packaging revenue…The packaging of talent, along with the massive increase in TV content production, has driven most of the growth in the company’s TV segment…”[i]
These conflicts of interest behind this outside investment and agency expansion are at the center of talks between the WGA and the ATA, which represents CAA and WME. The current agreement between the WGA and ATA expires on April 6, 2019.
The Guild has proposed a code of conduct that would restore the proper fiduciary relationship between talent agencies and their writer clients by ensuring that agencies put the interests of their clients first. The agreement would also prohibit the conflicted agency practices of packaging and producing.
Read the full report, “Agencies For Sale.”
The Writers Guild of America West (WGAW) is a labor union representing writers of motion pictures, television, radio, and Internet programming, including news and documentaries. Founded in 1933, the Guild negotiates and administers contracts that protect the creative and economic rights of its members. It is involved in a wide range of programs that advance the interests of writers, and is active in public policy and legislative matters on the local, national, and international levels. For more information on the WGAW, please visit: www.wga.org.
[i] Standards & Poor’s Credit Research, CAA Holdings LLC at 5 (Dec. 4, 2018).