Basketball superstars arguably gave Hollywood a lesson in dealmaking prowess these past two weeks, “freaking out the sports elite into shelling out $3 billion,” in the words of the Wall Street Journal. In doing so they’ve also raised this question: Will Hollywood’s superstars be far behind?
What the NBA players did was to form furtive alliances with fellow stars, then, as free agents, hammer out multimillion-dollar trades with other teams. Kawhi Leonard, for example, didn’t wait for an Endeavor agent to negotiate a deal structure; the “talent” dictated the terms as he signed with the Los Angeles Clippers.
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Intriguingly, the UTA talent agency this week signed a deal with Rich Paul, who reps LeBron James among other NBA stars, to lead a new sports division.
And Hollywood has been paying attention: In times past, when the show-business ecosystem faced serious disruption, actors and directors reached out to recapture control of their product and their finances. They did this by creating talent-owned companies to challenge the majors – entities like First Artists and The Directors Company or even the original United Artists of Charlie Chaplin and Mary Pickford. “Then and now, ego needs to exercise control,” observes an attorney who helped set up the later entities.
To a large degree, the conditions that prompted these rebellions are now being replicated. Consider the following: Behind closed doors the corporate behemoths have been quietly rewriting key financial templates as they tactically re-position for the battles of the streaming world. Led by Disney, the majors are developing a new blueprint to replace the current formulae for profit participation. Translation: The pipelines may no longer be stuffed with fat deferments.
Meanwhile, the major talent agencies themselves are re-visiting their game plans. The new Endeavor IPO is aimed at raising over $900 million to fuel moves into new arenas and insulate itself against short-term calamities, such as the writers strike — an event that itself is disrupting career paths.
When disruptions of this magnitude converge, they inevitably set off a whirlwind of dealmaking. Early in Hollywood’s development, several of its biggest stars stared disdainfully at the crop of studio leaders and banded together to form United Artists, mobilizing the clout of Charlie Chaplin, D.W. Griffith, Mary Pickford, Douglas Fairbanks, et al. The company made some extraordinary films starting in 1919 (The Front Page, Alibi), thus sending tremors through the establishment.
Generations later their scenario was replicated by First Artists, formed in 1972, embracing a superstar cast led by Steve McQueen, Barbra Streisand, Dustin Hoffman, Paul Newman and Sidney Poitier. Some 15 films emerged from that entity. At roughly the same time Francis Coppola, Billy Friedkin and Peter Bogdanovich formed The Directors Company, exercising full creative control.
I became intimately aware of the promise and also the problems of both entities since I was designated as the production chief at The Directors Company and was later approached to run First Artists. The core idea behind both entities was that the artists would have final decisions on product and budgets. They would surrender most of their upfront payday in return for a major stake in the combined profits of their company. The creative decisions were their’s; so were the rewards.
This collegial approach had both financial and psychological appeal to the stars. Most had come of age under the structure of the studio system. They’d developed love/hate relationships with the studio executives who fostered projects for them, picked co-stars and otherwise nurtured their success. By the mid ’60s, however, the studios had essentially collapsed and the stars were suddenly on their own, searching for viable projects and nervously pitching their wares to a complicated marketplace.
To be sure, the new ventures, like the widely heralded United Artists, ultimately fell victim to internal intrigues. McQueen’s colleagues at First Artists appreciated him for delivering The Getaway, a commercial hit, but were dismayed by his appetite for “arty” projects like Harold Pinter’s Enemy of the People. Dustin Hoffman irked colleagues by voting against projects embracing, what he considered, over-ambitious budgets.
Similarly, at The Directors Company, the young filmmakers applauded Paper Moon, a hit that was shot in black and while, but yawned when Bogdanovich delivered Daisy Miller, based on an obscure Henry James novel and starring the director’s girlfriend Cybill Shepherd. Each director had promised to spend time nurturing the careers of other filmmakers — Coppola’s links to George Lucas were applauded — but when Bogdanovich proposed to lavish company funding on reviving the career of Orson Welles, his partners rebelled.
Filmmaker autonomy clearly had its appeal, I soon noticed, but also its built-in problems. The ideal of supporting each other’s vanity projects was exciting in theory, but hazardous in practice. Could ventures like these ever happen again? When the SEC reviewed the funding documents for First Artists in the ‘70s, it cautioned that “giving financial control to artists represents a significant departure from traditional practice.” The same goes for agents: As analyst Todd Juenger declared when studying the Endeavor IPO, “Investments like this are not for the faint of heart.”
But then faint-hearted folks have never thrived in Hollywood, while sectors of Hollywood aspire to do better in sports. “The modern athlete wants more, they want to build separate businesses,” says Paul, who represents some 22 NBA stars under his Klutch Sports Group. Jeremy Zimmer, UTA’s chief, says his agency has taken “a significant stake” in Klutch because “we like what he’s doing.”
Obviously, the interest is mutual.