What CAA-ICM Deal Means for Future of Talent Representation

An earthquake hit Hollywood at 8:17 a.m. PT on Sept. 27, but it didn’t register on the Richter scale.

The weekend was filled with marathon negotiations between leaders of CAA Partners and ICM Partners that culminated in the agreement for CAA to acquire its smaller competitor. The acquisition promises to shrink Hollywood’s Big Four talent agency landscape down to a Big Three, if regulators approve it.

Agency insiders were shocked by the news and it rocked Monday morning staff meetings across town. The consolidation gripping entertainment and media has made it clear that there is no entertainment industry safe from the effects of this.

In particular, the merger of CAA and ICM will bring about aftershocks for the talent representation sector. Industry insiders point out how deeply the talent market has been divided up over recent years into superpowers (CAA, WME), with UTA at No. 3 — and busy boutiques (Verve and Innovative). This large-ish agency that is similar in size to Paradigm, APA or Gersh seems to be endangered. UTA’s next moves will be closely watched for sure.

“For years now, you’ve had the three major players in CAA, WME and UTA,” One talent agency leader spoke on condition of anonymity. “ICM was close behind but not in the same category. Now there’s no runner-up. This is what consolidation does to any business in this country — it eliminates the runner-up.”

CAA getting “even just a bit bigger,” according to another top dealmaker, will lead to disruption. It could force smaller companies to either seek out acquisitions on their own or to join forces to fight monoliths like Endeavor, a hulked up CAA parent company or WME parent Endeavor. Endeavor has proved to be a formidable public entity and has performed admirably since its April IPO.

Many predicted that the smaller agencies would use the CAA transaction to lure clients and agents who have defected. Any merger of this size will result in significant layoffs, which CAA managing director Bryan Lourd tells Variety is now under “careful and measured” review. Some are skeptical that the smaller talent shops can survive as independents for the long term. However, the boutiques are optimistic.

“We’re excited about the opportunity this creates for our friends and creates for us,” says Verve Talent & Literary head Bryan Besser. “We are sticking to the path we’re on, the one that’s been working for us, which is to go left when most go right.”

ICM Partners has existed on the block for many years, as some skeptics of this deal point out. ICM Partners was particularly hampered by the Writers Guild of America mandate that it stop charging packaging fees for movies and series starring its clients. This was a major revenue source. CAA’s acquisition of the company may well be a public exercise in proving it can handle a significant M&A transaction on the road to an IPO. Still, Lourd tells Variety that taking the enlarged agency public is “not at the front of our brains right now.”

At the heart of any agency is client services, which means finding jobs and landing paydays for actors, writers, directors and other artists responsible for content creation. These Big Three agencies have pursued aggressive diversification and private equity funding over the past decade. They have expanded into other areas, such as sports, live entertainment and music, comedy touring, and corporate brand exploitation. Both CAA Partners and ICM Partners are taking a step back from extracurricular activities in recent times, with the exception being sports. CAA will insist that ICM was bought by it to increase its strength in traditional areas like TV lit and publishing. But CAA’s rivals will also spin the agency as too big to give the kind of TLC that major stars demand.

CAA president Richard Lovett says the group “looks at our business as a very intimate thing. That’s the truth of how we experience it. What is indisputable, though, is that we have more resources for clients as a result of working together. We have been very clear for quite a long time about what our agenda is — that is serving clients and understanding this moment of gigantic shift and change in the business environment. Clients need really strong, committed advocacy.”

Lourd, who became a vocal advocate this summer on behalf of his client Scarlett Johansson in her legal battle with Disney over her compensation for “Black Widow,” hinted that this dispute is only the beginning of the new-world challenges for talent. CAA hopes to convey to content distributors and producers that it has the ability to leverage its connections to the most prominent names in the industry its power.

“We’re optimistic; we’re not remotely negative,” Lourd adds. “It’s incredibly difficult right now, as people on both sides of the financiers, the distributors, the marketing companies analyze what does and doesn’t matter to them. The one thing that’s certain is every person we represent, everyone we work with, is more important than they’ve ever been. And,” he adds of the acquisition, “we’re doing this to rise to that need to be great and be a new agency for the future.”

Cynthia Littleton contributed to this report.

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