There’s been a ton of inside-the-industry conjecture recently about what the newly merged William Morris/Endeavor agency is going to be worth once the deal is formally done. Some insiders are saying $300 million. Well, here’s a little perspective. Back in 1995 when Michael Ovitz was negotiating with Edgar Bronfman for the top job at MCA (now Universal Studios), CAA was valued at $250 million. So what are the biggest agencies worth now, given that factors such as Big Media’s consolidation, and lower TV packaging fees, and fewer TV syndication deals, and less movies being made, must be measured against receivables?
UPDATE: A very smart guy I know in film financing circles just offered this opinion: “In financial circles, talent agencies are what are referred to as personal service businesses. You know the old saying, “the assets walk out the doors every night.” What if Grosslight were to get hit by a bus or Venit decide to retire? The reality is that talent agencies (like law firms or accounting firms or management firms) are worth the hard assets (office furniture, cash in the bank, real estate owned, etc) plus the receivables (the commissions that you are contractually entitled to as a rep for the talent or on tv packages, etc) minus your liabilities (overhead, loans, etc). The business world is loathe to give personal service businesses a value based on a multiple of current year or future years cash flows or profits because the future is so speculative. This is, in large part, why talent agencies have had a very hard time figuring out ways to create liquidity (how do I cash out?) for their partners. And it’s why talent agencies really can’t go public because the public marketplace is really all about projecting future revenues and future earnings. All that the WMA/Endeavor merger does is potentially create a better, more efficient mousetrap in a world of consolidation or shrinking revenue streams.”