The long expected cutbacks at WME will happen Monday. At the agency, 20% of its employees will either be laid off, furloughed or reduced to part time during this pandemic. This will include some agents, a lot of support staff and cuts will be felt deepest in music and non-agents in areas like shared services, and less so in core areas like lit and talent. The cause is the coronavirus fallout that has shut down productions, movie theaters and live arenas event, starving the debt-heavy parent company Endeavor of most of its revenue streams.
A spokesman confirmed this to Deadline: “WME is reducing its workforce by approximately 20% as a result of COVID-19’s impact on our business. We appreciate the contributions of our former colleagues, and out of respect for their privacy, we will not be commenting on the status of specific employees. While we are making these difficult decisions now to safeguard our business, we believe in the resilience of our team and our industry.”
The formalization of the layoffs comes after an ungodly swirl of speculative rumors that have raced around Hollywood, involving everything from agents exiting to become managers or to run the companies of star clients, to other star agents who likely would not be laid off being courted by rivals, to leaders Ari Emanuel and Patrick Whitesell focusing specifically on running IMG and WME respectively (they already have oversight on these businesses). There are probably shreds of validity to some of these rumors, but Deadline has chosen to wait until these moves are formalized because, actually, these are peoples’ lives we are talking about. I haven’t seen this fevered a level of rumoring in as long as I can remember, perhaps since Endeavor swallowed the much larger WMA, to create WME. Every day has been a fire drill, checking this supposed exit or that one.
Today’s move brings clarity on Monday, but also a lot of pain to a proud bunch. There will be some solid agents here raised from mailrooms and trained at desks who were building their businesses and are hitting the prime of their deal making careers, only to have that upward track interrupted by an unforeseeable pandemic.
Lit agents caught in the layoff nets were certainly not helped by a scorched earth standoff between the major agencies and WGA over packaging and affiliated production businesses that left reps of writers of TV and film hanging on after those writers were pressed by the Guild to fire their agents a year ago. At the time, those agencies pledged to stand firm and make no layoffs, but that was before COVID-19 hit the communal experience-reliant Hollywood like a meteor in March and brought revenues to a screeching halt.
These layoffs were no surprise. The overall company, which employs 7500 and has holdings that include talent agency WME, the UFC, sports and fashion management firm IMG and the Professional Bull Riders, has been setting the stage for this for some time. Among the moves was an initial layoff of 250 staffers in late March, coming mostly from the elimination of operational roles across Endeavor in which staffers could not perform their jobs from home. That included staffs at hotels, and restaurants owned by the parent company. On April 1, they announced that Endeavor president Mark Shapiro would take a 50% pay cut, this after chiefs Ari Emanuel and Patrick Whitesell informed staff just before that that they will go without salary the rest of this year, in a note that foreshadowed the current cuts. Pay cuts were expected to be as high as 30% for those making over $65,000 per year. This impacted top earners at companies across Endeavor but not UFC because that is not wholly owned by Endeavor. UFC has been a bright spot; beyond leader Dana White’s vociferous efforts to get his brawlers back in the ring, UFC has a deal with ESPN that brings in regular payments.
All of this has been a particularly bitter pill to swallow for longtime partners at WME who rep some of the biggest stars, directors and show creators in Hollywood. They had played the long game in the area of salaries and bonuses with the expectations that an IPO last September would allow them to cash out their shares at a high premium.
The company made expensive acquisitions to create a conglomerate that would be attractive to Wall Street, creating the current debt burden. When that IPO didn’t happen — the pullback was attributed to a softening market and shrinking demand from investors that made it clear targets wouldn’t be hit — those partners then waited for an April opportunity to cash out 20% of their shares on a $3.6 billion valuation. In a difficult partner call on March 20, that event was indefinitely postponed. After the COVID-19 wallop, having tens of millions of dollars paid out to partners would have been fiscally irresponsible. However, all of these agents saw the S-1 disclosure documents made public during the IPO that showed Emanuel, Whitesell — each took $162.5 million — many other equity holders cashed out before any of the current turbulence surfaced over the past eight months, including the failed IPO. Star agents — there are between 150-180 partners with equity — who waited their turns and tempered their asks for raises and bonuses over several years were left with dashed hopes and bruised feelings.
But everybody at every agency is hurting right now, and the mission is to survive long enough to see clients get back to work, and for arenas and live event stadiums to fill again. The irony is that Endeavor’s diversity would have cushioned it against a possible writer’s strike this May, which many believe would have been a real possibility. Revenues from live events would have helped even if production dried up. Who could have predicted the world, and live revenue, would be shut so suddenly. Endeavor’s prime backer Silver Lake Partners continues to see its fortitude tested, along with the agents who have been bracing for the layoffs that will come Monday.
Every agency out there has enacted some form of these cuts and more will likely occur at percenteries and studios, so this is just the latest of the pain that will only get worse in the long road to recovery ahead, altering the Hollywood landscape forever. For Silver Lake, unless it wants to strip off assets in a fire sale, I don’t see any move other than for it to stay the course and weather the losses, made slightly easier by the painful cuts like the ones that will be made Monday.