Everything you ever wanted to know about talent agencies

Hi! Welcome to Click Track: A Music Business Newsletter.

Our inaugural post is about talent agencies. This post actually covers more about film, TV, sports, and esports as opposed to music, but I think this is all information that people in the music industry should know, even if it is not about music itself.

(I may earn money from links in this post to books on Amazon.com.)


What is a talent agency?

Broadly, a talent agent finds work for their client in exchange for a commission (usually 10%, but this can vary). Agents typically work for actors, musicians, comedians, athletes, directors, writers, and other people with high-powered entertainment industry careers. However, the major talent agencies increasingly derive their business from “packaging” TV shows and movies to studios.

A talent agency is not a recruiting firm

It's common for white-collar employers, especially in Silicon Valley or Wall Street, to retain an executive search or recruiting firm. These firms are hired by the employer and typically get paid 30% of the first-year salary of the job candidate hired by the employer from the firm.

Because the employer pays the recruiting firm (as opposed to the job candidate), talent and employment agency laws do not apply. It is not required for executive search or recruiting firms to be licensed and bonded. (However, in New York City, executive search firms must comply with New York State Employment Agency Laws even though they do not need to be licensed.)

Additionally, the firm has the incentive of getting their job candidates to sign offer letters with only one of the employers that have retained the firm. If the candidate signs with a higher-paying offer from an employer that isn't a firm client, the firm makes no money at all.

In contrast, because a talent agency is the client of the candidate and not the employer, the agent can make money from getting their candidate hired anywhere. And because the agent is paid by the client, the employer does not directly pay more to hire a client that has an agent.

The Big Four talent agencies

The top four Hollywood talent agencies are as follows. They are responsible for the majority of top film talent as well as packaged television shows and movies.

Endeavor Group Holdings (Endeavor)

Endeavor Group Holdings was formed by the merger of the William Morris Agency (founded in 1898) and the Endeavor Talent Agency (founded in 1995), and subsequently the acquisition of IMG (founded in 1960). IMG was originally known as the International Management Group. The predecessors to Endeavor Group Holdings were previously known as WME-IMG and WME (William Morris Endeavor).

Creative Artists Agency (CAA)

CAA was formed by the five William Morris agents Michael Ovitz, Mike Rosenfield, Ron Meyer, William Haber, and Rowland Perkins in 1975. Initially, they branded themselves as focusing on the television market, partially to avoid the incumbents that were leading in the movie industry. However, CAA grew to become the market leader in the movie industry, even expanding to marketing, investment banking, and sports.

Depicted: CAA’s Century City office in the Los Angeles Metro Area. Photo Credit: Minnaert on Wikipedia.

United Talent Agency (UTA)

UTA was formed by the merger of the Leading Artists Agency and the Bauer-Benedek Agency in 1991.

ICM Partners (ICM)

ICM was formed in 1975 through the merger of Creative Management Associates and the International Famous Agency—itself formerly known as the Ashley-Famous Agency started by Ted Ashley.

The infamous talent agency “mailrooms”

The original William Morris Agency (WMA) was founded in 1898. The “mailroom” was their agent training program established in the 1940s. Trainees would start off literally delivering the mail and getting informal (and later on, more formal) training experience designed to prepare them to be promoted to being an assistant and eventually an agent. The success of the WMA mailroom led to the creation of similar mailrooms at the other big agencies.

David Geffen—former WMA trainee and current multibillionaire—once referred to the WMA mailroom as "The Harvard School of Show Business – only better: no grades, no exams, a small stipend, and great placement opportunities.” (I have written more about David Geffen here.) Barry Diller—another multibillionaire—is also an alumnus of the WMA mailroom.

Two great pieces to read about Hollywood mailrooms are the book The Mailroom (also listed at the end of this email) and this piece from The Hollywood Reporter.

Talent agency laws

The Association of Talent Agents keeps track of the various US state laws about talent agencies. But given the sheer quantity of both talent and talent buyers in New York and California, these two states have the most relevant laws for the industry:

California laws

The 1978 California Talent Agencies Act is a powerful law that requires talent agents to be licensed by the California Labor Commission and gives the Commission broad tools in terms of enforcing the law.

The Act is controversial because it is broad enough to have allowed various artists to nullify management and other contracts on the basis that their counterpart was acting as a talent agent without a license.

New York laws

Talent agencies are covered under the Employment Agency Law of Article 11 of the New York General Business Law.

Talent agencies that also want to do business within New York City must be licensed with the New York City Department of Consumer Affairs (DCA). Talent agencies that operate within New York State but outside New York City must be licensed with the state.

New York does not require a license for personal managers that incidentally procure employment for clients, but does require a license if procuring employment is a significant part of a manager’s business. This is different from California, which always requires a license for procuring employment.

Overlap with employment agency laws

Many states have laws for governing employment agencies and then do not different between talent agencies and employment agencies.

The distinction between talent managers and talent agents

An artist management contract typically takes 15% of the client’s earnings and offers a wide variety of services, although typically excluding soliciting for work in ways that would make the artist manager subject to talent agency laws.

However, many jurisdictions (like Maryland, Massachusetts, and Pennsylvania) do not distinguish between agents and managers. And as mentioned before, some California management contracts are vulnerable to being disgorged under the California Talent Agencies Act.

Record label “360 deals” and the California Talent Agencies Act

A traditional recording contract between a label and an artist generally did not involve the label earning money from the artist’s live events. But as royalties fell in the face of digital piracy and online music stores, labels began signing “360 deals” that give the label a stake in many revenue streams that previously only belonged to the artist—including events. A 2007 piece from The New York Times covers the negotiation process for one of the first 360 deals in the industry—between Atlantic Records and the band Paramore.

Music industry attorney Erin M. Jacobson wrote a piece about the potential that record labels may be violating the California Talent Agencies Act if they are “procuring work” for their artists and getting paid for it. The Act exempts the procuring of recording contracts, but not other types of contracts such as music publishing. The recording contract exemption may not exist in other states with significant talent agency or employment agency laws.

Talent agencies vs. Hollywood and music unions and guilds

SAG-AFTRA

SAG-AFTRA is a labor union created through the merger of the Screen Actors Guild (SAG) and the American Federation of Television and Radio Artists (AFTRA). It is the largest labor union for performing artists.

SAG-AFTRA has regulations for talent agents in order for agents to be franchised with SAG-AFTRA. SAG-AFTRA union members are required to only work with agents that are franchised through SAG-AFTRA.

SAG-AFTRA has instructions on their website on how an agent can apply to be franchised. A few things that are required to apply include:

  • At least one year of applicable experience in the entertainment industry.

  • Three recommendation letters from industry professionals in SAG-AFTRA’s jurisdiction

  • An in-person office inspection of the agent’s office (where they presumably meet clients).

  • Applications for sub-agents working under the applying agents.

Writers Guild of America (WGA)

The Writers Guild of America is the combination of the two labor unions Writers Guild of America West and Writers Guild of America East. They were responsible for the 2007-2008 writers’ strike and the handful of writers’ strikes before it.

In 2019, the WGA sued the Big Four talent agencies (WME, CAA, UTA, and ICM) over packaging fees. “Packaging” is explained further below in this email. The Association of Talent Agents has this FAQ on their website aimed at answering questions about the packaging dispute from their perspective.

Association of Talent Agents (ATA)

The Association of Talent Agents is the trade association for talent agencies. They are responsible for helping negotiate franchising agreements with SAG-AFTRA, WGA, the Directors Guild of America (DGA), and Actors’ Equity Association (AEA).

To join the ATA as a talent agent, the application requires two recommendation letters from owners or executives at separate ATA member companies.

Packaging: what is it?

Originally, talent agencies sold their movie and TV clients to studios one at a time for a 10% commission from the client. Starting in the 1940s, Lew Wasserman pioneered packaging at MCA. In 1962, Wasserman divested the talent agency in exchange for Decca Records and Universal Pictures. This gave the opportunity for the William Morris Agency to sell more packages. CAA would go on to scale the practice of packaging, and they were the first to package movies to the film studios.

Packaging fees are paid by the studio accepting the package—not the talent. The Writers Guild Association argues that packaging fees change agent incentives to no longer be aligned with their own clients, thus sparking the WGA lawsuit against the Big Four talent agencies.

What are some new things that talent agencies are up to in the 21st century?

Selling out

In 2014, CAA sold a majority stake to the private equity firm TPG Capital (formerly known as Texas Pacific Group), which previously owned a minority stake in CAA.

In 2018, UTA sold a minority stake to Investcorp and the Public Sector Pension Investment Board (PSP Investments).

Endeavor Group filed for an IPO in May 2019 but then announced in September that they were postponing their IPO. The private equity firm Silver Lake Partners and the Japanese conglomerate Softbank own minority stakes in Endeavor Group.

In December 2019, ICM Partners announced that they have sold a minority stake to the private equity firm Crestview Partners. Before this deal, ICM Partners was owned 100% by its agents after an agent-led buyout of then-majority owner Rizvi Traverse Management.

The Writers Guild of America-West published a report in 2019 titled “Agencies For Sale” that goes into detail about how agencies have sought liquidity from private equity and other investors.

Breaking into the esports world

Hana Tjia of United Talent is building a reputation for signing female esports athletes. Valkyrae, the 100 Thieves streamer, is one of Tjia’s clients. At the time of this writing, United Talent breaks esports into a distinct category on its website with 59 esports athletes. Tjia was a talent manager at the esports management firm Everyday Influencers until United Talent acquired them and Everyday’s sister agency Press X Agency.

In January 2015, Endeavor (then known as WME-IMG) announced its acquisition of Global eSports Management, a talent agency focused on competitive esports athletes. In 2017, Endeavor’s global head of esports, Tobias Sherman, and three others left. In November 2017, Sherman announced the launch of his own game studio, Foundry IV, although currently the Foundry IV website mostly advertises consulting services.

CAA currently represents Dr DisRespect (Hershel “Guy” Beahm IV). A few months ago, CAA signed the five-personality YouTube channel Neebs Gaming. In 2010, Fast Company reported on CAA’s plans to represent game designers. Since then, CAA’s Ophir Lupu moved to UTA and Seamus Blackley left to found and then join various startups. In 2015, Jonathan Pan and John Kim wrote a piece that predicted that CAA would take on a dominant position in the esports world, but their predictions have yet to materialize.

In June 2018, ICM announced a joint venture with esports talent agency Evolved.

FaZe Clan and other esports leagues

Esports leagues don’t refer to themselves as talent agencies, but maybe in the future, they won’t have a choice unless they change the types of contracts they sign with talent.

Tfue (Turner Tenney) is an esports athlete previously associated with the league FaZe Clan. Tfue sued FaZe Clan over his contract that he alleges violates the California Talent Agencies Act. I am not an attorney and do not have a professional opinion on the merits of the case, but Tfue’s contract—legal or not—is very interesting. He claims that he only gets to keep 20% of revenue from branded videos and only 50% of the revenue from touring or appearances.

Signing virtual influencers

In May 2020, CAA announced that they signed the virtual influencer Lil Miquela. Miquela is notable for being a CGI-powered Instagram account where she initially denied not being real.

Responding to the #MeToo allegations

The New York Times broke that at least eight CAA agents knew about Harvey Weinstein’s sexual misconduct, but CAA continued to arrange private meetings with him.

The early gatherings for the Time’s Up movement happened at CAA headquarters, prompting Rose McGowan—whose allegation of being raped by Harvey Weinstein played a key role in uncovering the scale of his abuse—to criticize Time’s Up for being “fakes” and referring to CAA as “pimps”. The previous link, from The Daily Beast, also cites Tamara Holder stating that ICM was “complicit in the destruction of women’s careers.”

At Endeavor, agent Adam Venit made the decision to retire after Terry Crews identified Venit as the agent that groped him at a party. Venit was suspended, but not fired, from Endeavor after Crews named Venit.

In September 2018, California Governor Jerry Brown signed into law AB-2338, which requires talent agencies to provide educational materials around sexual harassment prevention, eating disorders, and other topics to their clients.

Are people building talent or employment agencies in the tech industry?

In general no, but Silicon Valley is growing the following types of agency- like businesses:

The tech industry and tech-influenced executives from the entertainment industry are building numerous businesses that are adjacent to the concept of talent agencies. In many cases, these businesses are clearly defined to avoid having talent agency laws apply to them.

UnitedMasters

Steve Stoute is a former executive at Sony Music Entertainment and Interscope Geffen A&M Records and was CEO at hair/body care company Carol’s Daughter. In 2004 he founded Translation LLC, a marketing agency with big clients like HP, McDonald’s, and State Farm. In 2013, he was Ad Age Magazine’s Executive of the Year.

Currently, he is the founder and CEO of UnitedMasters, a music distribution service focused on providing indie artists with deep analytics as well as access to brand deals. TechCrunch’s initial announcement for UnitedMasters does a great job laying out their vision. Since then, UnitedMasters has partnered with NBA2K (the video game) to create a dynamic soundtrack featuring music from UnitedMasters independent artists.

It is important to note that the $70 million Series A from Google Ventures, Andreessen Horowitz, Floodgate, and 20th Century Fox did not go to UnitedMasters directly, but to a parent company called “Translation Enterprises” that contains both UnitedMasters and Translation LLC. UnitedMasters is very much an institution designed to use data to scale brand deals specifically, as brand deals were Steve Stoute’s bread and butter when he founded Translation LLC.

UnitedMasters is not a talent agent, in the sense that brand deals aren’t “work” that agents get for their clients. The NBA 2K20 deal also gives exposure to artists algorithmically. Individual artists are not signed to the deal—instead, the game continually updates with new music.

Instrumental

Instrumental is a startup building a data-driven platform for record label artists & repertoire (A&R). Much like UnitedMasters, Instrumental advertises their ability to broker deals between brands and artists, as well as help event promoters and agents scout for talent.

Snafu Records

Record labels aren’t talent agencies in that traditionally labels made money from recording contracts rather than procured work, although as mentioned above, 360 deals are the beginning of this change.

I don’t know whether they sign 360 deals or not, but Snafu Records just launched with their inaugural TechCrunch piece. They claim to use artificial intelligence to find artists to sign.

10x Management

10x management bills themselves as a talent management firm for elite software engineers. The name comes from the concept that a great software engineer might be ten times productive as an average one. The concept was laid out in the engineering management bible “The Mythical Man-Month” but was popularized after Paul Graham’s essay “Great Hackers”:

A great programmer might be ten or a hundred times as productive as an ordinary one, but he'll consider himself lucky to get paid three times as much.

As such, 10x management promises to offer software engineering contractors that are “10x” as productive to employers. A 2014 piece from The New Yorker describes the underlying hiring problem and how 10x Management claims to solve it.

Free Agency

Like 10x Management, Free Agency is also branding themselves as the talent agent for the tech industry The company is about a year old, but they received their inaugural TechCrunch post just at the end of January 2020. Notably, Free Agency is not just for software engineers. Their website also advertises their services to workers in product, design, operations, marketing, business development, and management.

Human Capital

Human Capital, formerly known as Nav Talent, is a venture capital firm run by two 25-year-olds—Baris Akis and Armaan Ali. They are known for raising a $5 million fund as Stanford University undergrads and being the first investors in the credit card issuer Brex.

The Wall Street Journal covered Human Capital’s raise of a nearly $75 million fund. Outside of the venture fund, Human Capital runs a recruiting service that helps place promising junior engineers at startups. They are trying to develop talent agency vibes, having brought on Michael Ovitz as an investor and an advisor, but Human Capital is paid by startups for their recruiting service—they don’t take a commission from the talent. This makes them more like a traditional recruiting firm than a true talent agency.

Coding (and other) bootcamps

Lambda School, App Academy, and Hack Reactor are a few of the many bootcamps that instruct students in the art of practical software engineering. OnDelta is a similar school that teaches marketing. Instead of asking for tuition upfront, these schools often offer Income Sharing Agreements (ISAs). In an ISA, the student agrees to pay the school a certain percentage of their salary for a certain length of time, capped at some maximum tuition value. If the student does not get a job with a salary above a certain minimum value, then the student is not on the hook for tuition. In this way, ISAs are different from student loans, which generally cannot be forgiven if the student is unable to find a high-paying job.

What makes bootcamps vaguely similar to talent agencies is the sheer length that the bootcamps will go in order to get their students into high-paying software engineering jobs. Lambda School is famous for having a “sales team” to pitch hiring Lambda School students to employers.

I'm not familiar enough with the law to say whether bootcamps behave in a way that requires licensing under the California Talent Agencies Act or similar laws in other states. ISAs have a level of abstraction in that it supposedly is for the education that a bootcamp provides and is not payment for finding a job. Furthermore, ethical rules for talent agents generally forbid them from running “schools.” It is an old scam for (so-called) agents to sign (would-be) model as a client and then require the client to go to the agent’s “modeling school.”

Placement

Placement is a brand-new San Francisco-based startup that brands themselves as “everyone’s talent agent.” Last November, TechCrunch went on a deep dive into Placement and its business model. Placement helps job candidates find jobs that pay more (when adjusted for cost of living) in various American cities, and Placement only makes money if the candidates find higher-paying jobs (once again, adjusted for cost of living). Placement, like the coding bootcamps, refers to their contracts as Income Sharing Agreements. In the TechCrunch piece, Placement bets heavily on the thesis that there are better COL-adjusted jobs in other cities that their clients wouldn’t otherwise be looking for.

Notably, CEO Sean Linehan spoke with me over Twitter, clarifying that Placement does not send their clients into California because of the cost of living. Of course, that (might?) conveniently allow them to not register in California as an agency. California is famous for its Talent Agencies Act, but employment agencies focused outside of the entertainment industry are still required to be licensed and bonded.

Pathrise

Pathrise describes themselves as, “online program for tech professionals that provides 1-on-1 mentorship, training and advice to help you land your next job.” They also offer Income Sharing Agreements—charging about 9% of the client’s annualized salary at their new job.


Further reading

Who Is Michael Ovitz? by Michael Ovitz

This is Michael Ovitz’s autobiography where he tells the story of becoming the most powerful man in Hollywood through his own (slightly self-sympathetic) eyes. The book gives a fairly detailed account of what he thought, but not always how people saw him. The book is also wonderful for describing Michael Ovitz’s efforts in expanding CAA into

The Mailroom: Hollywood History from the Bottom Up by David Rensin

This is an absolutely extraordinary read. This book is an oral history written by organizing interview quotes by topic and lays out the history of talent agency career development from the late 1930s to about 2000. The book has an ample amount of quotes from both of the mailroom boys turned billionaires, David Geffen and Barry Diller.

Powerhouse: The Untold Story of Hollywood's Creative Artists Agency by James Andrew Miller

Powerhouse covers a lot of the same territory about the history of CAA, except the story is told in the same format as The Mailroom—direct interview quotes from a lot of different people, all woven together to give the idea that the interview subjects are all in the same room responding to each other.

In Who Is Michael Ovitz, Ovitz writes about his dabbling in investment banking and his career after leaving CAA. In Powerhouse, the interview subjects describe the power vacuum created at CAA after Michael Ovitz and Ron Meyer left.


More Click Track articles


Updates

  • April 18th, 2020: This post has been updated with a link to a Click Track piece about David Geffen and a WGA-W article paper titled “Agencies For Sale.”

  • May 6th, 2020: This post has been updated with the news of Lil Miquela signing with CAA.

  • May 23rd, 2020: This post has been updated with the picture of the Century City office. The title of the post has been shortened.

  • January 11, 2021: Minor formatting and editing changes.