New player: Tin­sel­town power bro­ker goes global

There’s a new player in town as En­deavor’s Ari Emanuel moves from Tin­sel­town power bro­ker to global mogul with deal af­ter deal

The Sunday Telegraph - Money & Business - - Front Page - By Christo­pher Williams DEPUTY BUSI­NESS ED­I­TOR

Ari Emanuel is tired. He is pre­ceded by a rep­u­ta­tion as the archetype of the mo­tor­mouth Hol­ly­wood agent, with a mo­bile phone clamped to his head as he en­er­get­i­cally flat­ters, ca­joles and con­soles his way to the next big deal. Not this evening. He had three hours’ sleep on the flight to Lon­don last night. Emanuel then spent the day press­ing flesh as part of an am­bi­tious cam­paign to par­lay his power-bro­ker sta­tus in Tin­sel­town into bona fide global mogul­dom. Now, aboard his jet as it is pre­pared for the re­turn to Los An­ge­les, he is tired. It has been a good day, though. Emanuel, who over­sees his em­pire as joint chief ex­ec­u­tive of En­deavor, came to Bri­tain to cast his eye over one of its re­cent ac­qui­si­tions, the Frieze Lon­don art fair in Re­gent’s Park.

En­deavor also re­ceived a boost in its pur­suit of the tele­vi­sion pro­duc­tion gi­ant En­de­mol Shine, as ITV, a po­ten­tial ri­val, ruled it­self out of the £2bn auc­tion. De­spite his weari­ness, Emanuel re­mains an ex­pert in ar­ti­fice.

“I guess ITV just pulled out, right?” he dead­pans as if he does not well know that En­deavor is now in a bat­tle with Bani­jay, a French pro­duc­tion com­pany. “I hear that there’s other peo­ple po­ten­tially in­volved, I have no idea.”

Frieze Lon­don and the bid for En­de­mol Shine show how the 57-yearold and his part­ners are ex­pand­ing En­deavor far be­yond the tra­di­tional bounds of a Hol­ly­wood tal­ent agency.

Its list of star clients is im­pres­sive. Hol­ly­wood A-lis­ters Matt Da­mon, Char­l­ize Theron, Idris Elba and Emma Stone have the com­pany’s army of agents on call. In mu­sic they rep­re­sent Adele, the Arc­tic Mon­keys and Ri­hanna. En­deavor’s sport­ing ros­ter in­cludes Lewis Hamil­ton and Ser­ena Williams. Kate Moss and Cara Delev­ingne are on the books of its mod­el­ling agency.

How­ever, Emanuel and joint chief ex­ec­u­tive Pa­trick White­sell have big­ger am­bi­tions still. They have raised bil­lions of dol­lars to bolt on a vast ar­ray of re­lated busi­nesses in re­cent years.

En­deavor pro­duces cov­er­age of the Premier League and Wim­ble­don, owns the Ul­ti­mate Fight­ing Cham­pi­onship and Miss Uni­verse, funds pro­duc­tions such as The Night Man­ager and La La

Land and is build­ing its own stream­ing ser­vices to deal di­rect with con­sumers. As well as Frieze Lon­don it owns events in­clud­ing Win­ter Won­der­land in Hyde Park and at New York Fash­ion Week. It has mar­ket­ing agen­cies, a Chi­nese joint ven­ture and Pro­fes­sional Bull Rid­ers, a tele­vised rodeo com­pe­ti­tion. It goes on.

Emanuel and White­sell be­gan em­pire-build­ing by merg­ing their tal­ent agency, also called En­deavor, with ri­val Wil­liam Mor­ris in 2009 to cre­ate WME. In 2013 they ex­panded into sport, fash­ion and events by buy­ing IMG for $2.2bn (£1.7bn) to cre­ate WME|IMG. The deals have not stopped and as the whole en­ter­prise threat­ened to dis­solve into an al­pha­bet soup, last year the hold­ing com­pany was re­named En­deavor.

“We looked at the busi­ness and re­alised, long ago, I’d say al­most 23 years ago, that three of the pil­lars that have made the busi­ness were be­ing com­modi­tised,” says Emanuel, who was raised in an af­flu­ent sub­urb of Chicago, where his brother is mayor.

En­deavor saw that the old or­der of the en­ter­tain­ment in­dus­try would be torn down. Stu­dios, broad­cast­ers and pub­lish­ers would lose their stran­gle­hold on dis­tri­bu­tion as the in­ter­net rad­i­cally low­ered the bar­rier to en­try for new out­lets. The rise of dig­i­tal ad­ver­tis­ing would mean re­la­tion­ships with brands and spon­sors would be dis­rupted. Cru­cially, Emanuel and White­sell saw that Hol­ly­wood’s mo­nop­oly on money to fund pro­duc­tion, dis­tri­bu­tion and mar­ket­ing would come to an end as a re­sult of more mo­bile and ad­ven­tur­ous fi­nan­cial mar­kets. For agents, there were threats and also new op­por­tu­ni­ties.

Scale would be vi­tal. Film stu­dios and tele­vi­sion broad­cast­ers merged. Nb­cu­ni­ver­sal and Time Warner have since be­come part of even big­ger beasts of the tele­coms in­dus­try, Com­cast and AT&T, as they seek to re­spond to the vast dis­tribu­tive power of Face­book, Ama­zon, Ap­ple, Net­flix and Google. Emanuel sees a more com­plex world where rep­re­sent­ing stars and rights hold­ers and tak­ing 10pc of their fee is not enough. Faced with gi­ants, En­deavor is de­signed to pro­vide al­ter­na­tive ways to cash in around the world. The com­pany is as­sem­bling a net­work of as­sets. The fi­nan­cial model re­lies on con­nec­tions be­tween them en­abling En­deavor to take mul­ti­ple cuts of the in­come from a film, for ex­am­ple. It might part-fund the pro­duc­tion, and rep­re­sent one of the lead ac­tors, then in­tro­duce brands for prod­uct place­ment and help dis­trib­ute the on-tele­vi­sion rights once its cinema run has ended. The the­ory is com­pa­ra­ble to that of a ma­jor ad­ver­tis­ing group such as WPP.

“Ab­so­lutely,” says Emanuel. “When you’re talk­ing to Visa, who are a client, they need help nav­i­gat­ing FIFA, or the Olympics, or the NFL. But also, they want to cre­ate ex­pe­ri­ences for their peo­ple, and they want a dif­fer­ent way to dif­fer­en­ti­ate them­selves.

“You can’t get that at a WPP. Ac­tu­ally, you can’t get that at a Google ei­ther, right? And you can’t get that at Dis­ney.

“The kind of har­mony be­tween each di­vi­sion, which has taken a lot of years to do, is now func­tion­ing.”

The takeover of IMG was the big move. IMG’S bil­lion­aire con­trol­ling share­holder Teddy Forstmann died of brain can­cer in 2011, prompt­ing an auc­tion of the busi­ness. Emanuel cooked up a deal with Egon Dur­ban, a ven­ture cap­i­tal­ist at the Sil­i­con Val­ley firm Sil­ver Lake, over lunch. Sil­ver Lake would put up cash to buy IMG and take a 51pc stake in the com­bined busi­ness, which would bor­row more than $2.4bn to com­plete the pur­chase. De­spite be­ing re­duced to mi­nor­ity share­hold­ers, Emanuel and White­sell would re­tain cor­po­rate con­trol un­der a 10-year deal.

“Pa­trick’s my friend, Teddy Forstmann got sick, and Egon and I would, on oc­ca­sion have lunch, or talk on the phone,” Emanuel re­calls.

“So, we had lunch and he gave me his the­sis which lined up with ours, and he said we should go af­ter IMG.”

As soon as IMG was se­cured, En­deavor set about fur­ther ex­pan­sion. The deal had left it still heav­ily skewed to­wards the tal­ent and rights rep­re­sen­ta­tion busi­nesses it knew best. The trio of Emanuel, White­sell and Dur­ban wanted half its in­come to come from own­er­ship of rights, events and pro­duc­tions.

Ioris Francini is in the van­guard of that shift. As Lon­don-based co­pres­i­dent, the Ital­ian is a ris­ing star in the En­deavor fir­ma­ment and tasked with spot­ting op­por­tu­ni­ties out­side the bub­ble of Hol­ly­wood in sport, pro­duc­tion and dis­tri­bu­tion. He is work­ing on a new part of the em­pire to be sep­a­rately es­tab­lished, fo­cused on stream­ing ser­vices that deal di­rectly with con­sumers. Still in the plan­ning stages, the ven­ture will be called ei­ther En­deavor X or En­deavor Dig­i­tal.

The par­ent com­pany will be a ma­jor share­holder, but En­deavor X aims to raise money from new in­vestors seek­ing ex­po­sure to the growth of stream­ing and the eco­nomics of sub­scrip­tions. It will wrap up as­sets such as the UFC stream­ing ser­vice Fight Pass, Ital­ian foot­ball sub­scrip­tion Serie A Pass, a joint ven­ture with Har­vard Busi­ness School in on­line mas­ters cour­ses and pod­casts.

“If you look at Net­flix the in­vest­ments are based on the amount of sub­scribers you gen­er­ate at scale as

‘If you don’t have a con­flict you don’t have a busi­ness. Every­body man­ages through con­flict. That’s the na­ture of your life’

op­posed to earn­ings,” says Francini. “There’s scarcity for in­vestors so it’s very ap­peal­ing. We iden­tify ter­ri­to­ries and mar­kets where the in­cum­bent broad­cast­ers have per­haps been a bit slow. The at­trac­tions are pretty high.”

Such quasi-in­de­pen­dent fi­nanc­ing was key to En­deavor’s big­gest deal to date, its $4bn takeover of UFC in 2016. It was again fu­elled by pri­vate eq­uity and debt, but the bor­row­ing was kept off En­deavor’s own bal­ance sheet and within UFC. In­vestors snapped up the high-in­ter­est bonds that were is­sued to load the mixed mar­tial arts com­pe­ti­tion with debts of more than six times its earn­ings. The scale of the debt bur­den placed on UFC earned Gold­man Sachs, which ran the bond sale, a re­buke from the Fed­eral Re­serve. Emanuel is un­re­pen­tant. “I’ve never had a prob­lem rais­ing money,” he says. In­vestors seem keen on En­deavor’s grand plans. In 2016 par­ent com­pany took $250m from Soft­bank, Masayoshi Son’s ac­quis­i­tive Ja­panese tele­coms gi­ant, and $1.1bn last year from the Canada Pen­sion Plan In­vest­ment Board and Sin­ga­pore’s sov­er­eign wealth fund. The maths of the UFC deal mean En­deavor must ex­ploit the sport as never be­fore. In the US it sealed a $1.5bn five-year rights deal with ESPN, Dis­ney’s sports broad­caster. In Bri­tain the rights have been lost by BT and ac­quired by Eleven Sports, in which En­deavor it­self is a share­holder.

The sale last month fu­elled con­cerns across the en­ter­tain­ment in­dus­try that En­deavor’s ex­pan­sion cre­ates po­ten­tial con­flicts of in­ter­est. It was both the owner of the rights and the part owner of the buyer. In Hol­ly­wood, the pow­er­ful Writ­ers Guild is re­sist­ing the in­volve­ment of agents in pro­duc­tion, ef­fec­tively ar­gu­ing its mem­bers can­not trust that their in­ter­ests are pro­tected if their rep­re­sen­ta­tives are also buy­ing their work.

En­deavor is try­ing to de­sign a struc­ture to al­lay such con­cerns.

“We ad­dress these kind of com­plex­i­ties and po­ten­tial con­flicts by hav­ing an arm’s-length ap­proach, al­most church and state, in the dif­fer­ent busi­nesses in which we’re in­volved,” says Francini. “The UFC is not the same share­holder and credit group as the agen­cies so we say for sure we have a stake in this chan­nel but we will give you, as a client, ev­ery sin­gle op­tion to de­cide on. The de­ci­sion is based on what­ever the man­age­ment team in UFC for ex­am­ple thinks is best.” Emanuel is less con­cil­ia­tory.

“Here’s what I would say about con­flict,” he says. “If you don’t have a con­flict you don’t have a busi­ness. Every­body man­ages through con­flict. That’s the na­ture of your life.

“I own the UFC. We’re sit­ting in a sit­u­a­tion with Eleven Sports, in Lon­don. Guess what? They man­aged through lawyers and et cetera, and then made a de­ci­sion and ne­go­ti­ated to­gether. Every­body’s gotta try and do the best deal. And it’s sim­ple, you don’t want to do the deal, you don’t do the deal.

“Oh your agent’s go­ing to be your pro­ducer? Shut the f--- up. The law that they are talk­ing about [the Writ­ers Guild] I think is from the mid­dle of the Fifties. Re­ally? Is this the con­ver­sa­tion I’m hav­ing in 2018? Some­body needs to get a cup of cof­fee.”

The speed and fi­nan­cial de­mands of En­deavor’s ex­pan­sion have drawn spec­u­la­tion that Emanuel and White­sell will be forced to float the com­pany on Wall Street to pay back in­vestors sooner rather than later. Wideawake now, Emanuel is hav­ing none of it. “I can stay pri­vate… we don’t have to do any­thing. We can just keep on op­er­at­ing the busi­ness, which is grow­ing at an in­cred­i­ble rate, fi­nan­cially.

So it’s all good.”

Ari Emanuel (right) and Ioris Francini are build­ing a net­work

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