Agents and Agencies
Agents and AgenciesBEGINNINGS
RADIO AND THE MOVIES
Agents are the middlemen of show business. They represent talent, which is to say actors, writers, directors, producers, and other artists, and their job is to sell the services of their clients to buyers of talent—film and television producers, publishers, and entertainment promoters of all stripes. To best serve their clients, agents need to have access to information about the availability of scripts, the pictures in development, and the going prices being paid for talent—information that they can use to close deals. Agents even with college degrees have traditionally started out in the mail rooms of talent agencies learning the ropes before being given actual responsibilities. At William Morris and MCA, they were also required to abide by a conservative dress code.
Governed by state employment-agency laws and regulations and by agreements with Actors Equity and other talent guilds, agents are allowed to collect a fee for their services, usually 10 or 15 percent of their clients' earnings. In signing with an agency, the client authorizes the agency to represent him or her in all areas for a specified term, usually five or seven years, and to collect a fee from all sources of income. Agencies can be grouped into two categories, compound and independent. Compound agencies, such as William Morris (1899–1989), International Creative Management, and Creative Artists, are the largest in the business with offices in New York, Beverly Hills, and in European capitals. They represent a broad range of established talent, including Olympic stars and former US presidents, and are organized into departments representing different fields of entertainment. Independent agencies are much smaller. They typically specialize in representing a single type of client, such as writers or actors, and are more prone to solicit new and untried talent.
Once concerned mainly with getting the highest possible salary for their clients, agents have gradually taken an active role in shaping their clients' careers. Stars sometimes also retain managers or personal representatives to assume this function. Unlike agents, managers work on an exclusive basis and devote as much attention as possible to the individual and business needs of a star. And because managers are allowed to produce films and television shows with their stars and others, they can collect 15 percent or more of their clients' earnings.
Although agents have been much maligned by clients and producers alike, they perform a valid economic function within the sprawling, loose, and disjointed confines of show business. By separating the involved parties in the negotiation process, agents, first of all, enable buyers to deal with professionals on a business level for the services of artists or for literary rights. Secondly, they enable artists and buyers to concentrate on creative matters. Agencies have regularly raided one another for clients, sometimes using aggressive tactics. But the intense competition that exists among them invigorates the business.
The modern talent agency has its roots in vaudeville with the founding of the William Morris Agency in 1898. A German-Jewish immigrant, William Morris (1873–1932) established his agency on the Lower East Side of New York and catered mostly to independent vaudeville managers who were forced to book their acts individually from numerous employment agencies. Morris offered to take over this function for them by packaging entire shows for distribution. When motion pictures became big business in the 1920s, Morris offered these same services to the new motion picture theater chains that included vaudeville in their programs. William Morris prospered as a result, but the movies soon killed vaudeville and the road for legitimate theater, forcing the agency to exploit new entertainment fields.
William Morris entered Hollywood in 1927 and radio soon after. By 1938, William Morris was once again the preeminent talent agency with some 850 persons under contract. Most of its business came from radio and the movies, but Morris's clients also included night-club performers, musicians, and performers in vaudeville and theater.
Lined up against William Morris was MCA, the Music Corporation of America, which was formed in 1924 by Jules Stein (1896–1981), an ophthalmologist turned agent, who organized the chaotic band business during the 1920s and capitalized on the post-war entertainment boom. Starting out in Chicago as a booker collecting 10-percent commissions, Stein offered to bill bands under their leader's names in return for exclusive representation rights. Stein then convinced nightclub operators and hotel managers that rotating bands would draw larger crowds and new business. After the plan proved spectacularly successful, Stein introduced the exclusive deal whereby MCA, in a form of block booking, secured from operators of amusement places the sole right to book talent into their spots. By guaranteeing a continuous flow of bands at the right prices, MCA assured itself a steady market for its clients and attracted new names to the fold. MCA represented over half of the major bands in the United States by the late 1930s, including Harry James, the Dorseys, Guy Lombardo, Kay Kyser, and Benny Goodman. Control of the band business led quite naturally to representing singers, comedians, jugglers, and other performers. Around 1938, Stein branched out into practically the whole gamut of marketable talent. This meant all-out war with all other agencies, particularly with the William Morris Agency.
Radio became a national pastime during the Depression and offered new opportunities for talent agencies. With unemployment high and disposable income dropping for most people, audiences had time to spare. Radio manufacturers had huge inventories, creating a buyer's market. And as the average of price of a radio fell from 90 dollars in 1930 to 47 dollars in 1932, 4 million families purchased receivers. By 1934, radio was reaching 60 percent of all American homes and had become a common habit. Since radio networks left to advertising agencies the job of putting shows together, talent agencies responded to the opportunity by honing a talent-selling technique called packaging. A practice as old as vaudeville, packaging offered a complete show—star, orchestra, announcer, writer, guest stars, and even a producer. In selling a package, an agency such as William Morris waived its standard 10 percent commission on the salaries from each of its clients and instead levied a 10 percent fee on the package price to the network. MCA honed the practice by becoming an employer of sorts and generating more money. MCA hired its own clients for its radio shows and sold the packages for lump sums. The difference between what MCA paid for the ingredients of the shows and what it received from sponsors went into MCA's pockets.
The most popular radio shows of the era starred former vaudeville headliners, among them William Morris's Fanny Brice, Burns and Allen, and Eddie Cantor, and MCA's Edgar Bergen and Charlie McCarthy, Rudy Vallee, Abbott and Costello, and The Great Gildersleeve. By the 1940s, MCA had a hand in more than ninety radio shows a week, ranging from the highest-rated coast-to-coast headliners down to soap operas.
Agents fared less well in Hollywood. Close to one hundred and fifty registered agents worked in Hollywood during the 1930s. A dozen or so firms did most of the business, among them the William Morris Agency, Joyce and Selznick, Charles K. Feldman, and Leland Hayward. As a group, they played a marginal role in the industry during the era of the studio system. They sometimes succeeded in negotiating higher salaries for their clients, but it was the studio that nurtured talent, selected properties to develop, and took the long view in developing screen careers.
Because stars played a key role in the marketing of motion pictures, studios devised numerous ways to keep them under control. The most potent device was the option contract. In signing an aspiring actor or actress, the studio used a contract that progressed in steps over a term of seven years. Every six months, the studio reviewed the actor's progress and decided whether or not to pick up the option. If a studio dropped the option, the actor was out of work; if the studio picked up the option, the actor continued on the payroll for another six months and received a predetermined raise in salary. The contract did not provide reciprocal rights, meaning that an actor or actress could not quit to join another studio, could not stop work, and could not renegotiate for more money. In short, the contract effectively tied a performer to the studio for seven years.
Before 1930, the majors had tacit nonproselytizing agreements with one another to tie the knot tighter. In essence, studios agreed not to hire an actor away from a competitor, even after a contract had expired. A star therefore had to negotiate a new contract with the old company. This cozy relationship was broken up by Myron Selznick (1898–1944), the agent brother of David O. Selznick (1902–1965). Warner Bros. had gotten a head start on its competitors by innovating sound, but it needed stars to stay ahead. Understanding this, Selznick offered the studio three of his clients—William Powell (1892–1984), Kay Francis (1899–1968), and Ruth Chatterton (1893–1961), all of whom were working for Paramount. Warner capitulated and hired them away. Paramount sued, but Warner quelled the controversy by agreeing to loan Miss Francis to Paramount when it needed her. By then, nonproselytizing agreements were on their way out.
Producers tried to outlaw star raiding and to hem in the power of agents during the days of the National Recovery Act (1933–1935), but an executive order from President Roosevelt prevented them from doing so. Nonetheless, the studios got their way by instituting the practice of loanouts. Talent was scarce, and although studios developed young talent and recruited personalities from the stage, radio, and foreign fields, nothing proved sufficient to meet all their needs. Rather than raiding one another to bolster star rosters, the majors found it easier and just as effective to loan one another talent. As always, economics played a role. Try as they might, studios found it impossible to keep high-priced talent busy all the time. An idle star was a heavy overhead expense. Why not loan out the idle star and recoup the overhead? Studios devised various formulas to determine the fee: the most common one was to charge a minimum fee of four weeks salary plus a surcharge of three weeks; another was to charge the basic salary for however long the star was needed plus a surcharge of 25 percent.
After the war, the film industry entered a ten-year recession, during which weekly attendance declined by around one half. The stock system that enabled the studios to turn out a new film every week of the year went by the board. Cutting back on production and trimming budgets in an attempt to reduce overhead, studios took actors, writers, producers and directors off long-term contracts or pared them from the payroll. In the process the majors abrogated the functions of nurturing and developing talent—and in so doing, relinquished power to the talent brokers.
MCA led the way. MCA's entry into the movie business was accomplished principally by buying out several other agencies. The company's most important acquisition came in 1945, when it bought the Hayward-Deverich Agency in New York for about 4 million dollars. Headed by Leland Hayward (1902–1971), this was the prestige company of the agency business, whose 200-odd clients included Fredric March, Ethel Merman, Barbara Bel Geddes, Henry Fonda, James Stewart, and Billy Wilder. The star power on MCA's roster after the war enabled Lew Wasserman (1913–2002), who succeeded Jules Stein as president of MCA in 1946 at the age of thirty-three, to exact new terms for his clients. Instead of asking for higher salaries, Wasserman began demanding a percentage of the profits. In a percentage deal, a star worked for a lower salary than usual, but received a share of the profits if the picture was a success. The arrangement lowered the cost of production for the producer and provided an opportunity for the star to take home more money and save on income taxes as well by sharing in the risks of the venture. In a landmark deal with Universal-International in 1950, MCA negotiated a 50-percent profit participation for James Stewart to star in Winchester '73. Stewart earned more than 600,000 dollars from the picture. In comparison, a star such as Clark Gable in his heyday at MGM never earned more than 300,000 dollars for an entire year's work. James Stewart's deal with MCA changed the face of the business; thereafter, profit participations for top talent became standard practice.
Profit participations also played an important role in convincing stars and directors such as Kirk Douglas, Burt Lancaster, Frank Sinatra, Otto Preminger, and others to become independent producers and assume complete ownership of their work. In doing so, the star or director typically engaged a support staff consisting of an associate producer, production manager, story editor, accountant, legal representation, and, of course, an agent. Theoretically, the staff concerned itself with business affairs and the logistics of production, whereas the independent producer pondered creative matters. In turning independent, artists still required the services of agents. A good agent not merely negotiated as good a deal as could be made, but also tried to take the long view to nurture and sustain the client's career.
Most stars played safe and sold their services on a picture-by-picture basis. In such cases, talent agencies imitated the traditional functions of the old studios by effectively putting together packages consisting of stars, literary properties, directors, and other ingredients and offering them to the highest bidder. Packaging movies went hand in hand with the big-budget blockbuster policy the studios were relying on to revive the business. By the 1960s, it was estimated that of the 125-or-so films Hollywood made each year about 80, or nearly two-thirds, were prepackaged by agents for their clients. No packaging fee was assessed in movie deals; agencies got their money from the higher salaries their clients were now able to command.
b. Lewis Robert Wasserman, Cleveland, Ohio, 15 March 1913, d. 3 June 2002
The man who transformed Music Corporation of America (MCA) from the world's strongest talent agency to one of the largest global media conglomerates, Lew Wasserman was for forty years generally regarded as the most powerful man in Hollywood. Although he shunned the limelight, Wasserman was renowned for his business acumen, his political connections, and his ruthlessness. He was also admired for his philanthropy and was awarded a special Oscar® for humanitarianism in 1973 as well as the Presidential Medal of Freedom, the country's highest civilian honor, in 1995.
The son of Russian emigrants, Wasserman started in the entertainment field in high school, ushering for a Cleveland movie theater seven nights a week. Unable to afford college, he got a job booking bands and doing publicity for the Chicago-based Music Corporation of America, then a fledgling agency. Impressed with Wasserman's resourcefulness, Jules Stein sent him and his wife, Edith, to Hollywood in 1939 to take MCA into the film business. In 1946, Stein named the thirty-three-yearold Wasserman president of MCA.
Wasserman opted to take MCA out of the talentagency business in 1962, foreseeing greater opportunities elsewhere in entertainment. He then solidified MCA's position as a film and television producer by buying out Decca Records, the parent of Universal Pictures, and by transforming the Universal lot into a profitable theme park and shopping complex. Afterward, MCA consistently captured a substantial share of the box office with hits such as Airport (1970), American Graffiti (1973), The Sting (1973), Jaws (1975) E.T. the Extra-Terrestrial (1982), and Back to the Future (1985). For years MCA's remarkably stable television operations had more network prime time shows on the air than any of its rivals.
MCA diversified in the 1980s, acquiring toy companies, music companies, a major independent television station, and an interest in a large theater chain. The diversification strategy strengthened MCA's existing positions and extended the company into contiguous businesses. Wasserman's most successful investment was the Universal Studios Florida theme park in Orlando near Disney World, which opened in early 1990.
Having exercised near total control of MCA since the death of Jules Stein in 1981, Wasserman decided to sell the company in 1990 to Matsushita, a Japanese electronics giant, for 6.6 billion dollars. Wasserman stayed on as chief executive, but his plans to make MCA more competitive were ignored by Matsushita executives. Dissatisfied with MCA's performance, Matsushita sold MCA to Seagram, a Canadian liquor company, in 1995. Edgar Bronfman Jr., the new chairman of MCA, retained Wasserman as a consultant but he was given no real responsibilities. In 1997, Wasserman departed MCA, marking the end of an era, and Bronfman changed the name of the company to Universal Studios.
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The post-war recession in the motion picture business was caused in no small measure by television, which began its commercial expansion during the 1950s. At the start, prime-time programs were produced mostly live out of New York. As in radio, programming was left to advertising agencies, which bought blocks of time on the networks and negotiated with talent agencies for shows. Since many of the most popular shows on TV were patterned on the variety format of live radio, the old line agencies easily made the transition to the new medium. William Morris, for example, entered television in 1948 by converting its radio show, Texaco Star Theater starring Milton Berle for NBC (1948–1956). It went on to package other variety shows for the network such as The Jack Carter Show (1950–1951), Your Show
of Shows (1950–1954), and The Colgate Comedy Hour (1950–1955), among others.
By the end of the decade, prime-time television was produced on film in Hollywood. Regardless of the format of the package or the medium in which it was produced, agencies collected a 10 percent commission on the package price of the show to the network, just as in radio. Once again, MCA devised a way to wring more money out of the situation. In a daring move to provide employment for its unemployed clients, MCA went into television production in 1949 by forming a subsidiary called Revue Productions. Its first venture was a live variety show called Stars Over Hollywood. When it became apparent that filmed shows, particularly series, would become a TV mainstay, MCA moved into television production in a big way by negotiating a blanket waiver from the Screen Actors Guild in 1952 that allowed the agency both to represent talent and to produce television shows in which talent appeared. The head of the Screen Actors Guild at the time was Ronald Reagan (1911–2004), an MCA client. Generally, the Guild had prohibited agents from producing programming because it would allow them to act as both the seller and the buyer. Since no other company won the same rights, the blanket waiver was a watershed for the company. MCA through its Revue subsidiary quickly became the un-challenged giant of television production. By 1960, MCA, by then referred to as The Octopus, was producing some forty hours worth of television shows every week, among them The Danny Thomas Show, The Andy Griffith Show, and The Loretta Young Show.
Unlike William Morris and other agencies that packaged shows, MCA through its television production arm was able to maximize its takings. Launching a television series, MCA-TV went fifty-fifty with the star. Selling the show to the network, it collected 10 percent of the package price of the show. Revue Studios, the MCA subsidiary that actually produced the show, collected a 20 percent fee of the costs to physically produce the show for its services. The remainder of the production budget went to Revue to cover studio overhead, labor, and other expenses. After a successful network run, MCA received syndication fees when the show was sold to individual television stations for off-network programming and a cut of foreign sales.
By 1960, MCA was the largest talent agency in the business, with double the revenues of William Morris, its nearest competitor. Strengthening its position as a television distributor, MCA had purchased the syndication rights to Paramount's pre-1948 film library for 50 million dollars in 1958. Within months, MCA strengthened its position as a television producer by purchasing Universal's 367-acre back lot in the San Fernando Valley for 11.3 million dollars and spent an additional 30 million dollars to renovate the facility. The expansion ultimately led to a three-year investigation by the Justice Department of the Kennedy Administration into the possible antitrust violations by talent agents. In 1962, MCA signed a consent decree in which it agreed to immediately get out of the talent agency business.
After MCA's divestiture put its clients and agents in play, William Morris regained its former preeminent status in the industry, based primarily on its strength in television. But other agencies captured the spotlight as they moved into the movies. For example, Creative Management Associates, which was founded by Freddie Fields (b. 1923) and David Begelman (1921–1995) in 1960, carved a niche for itself in the business by becoming a boutique agency for stars. Its client list included Henry Fonda, Paul Newman, Kirk Douglas, Peter Sellers, Steve McQueen, and Phil Silvers, among others. After signing some of MCA's best agents, Ashley-Steiner merged with Famous Artists in 1962 and strengthened its position in motion pictures. Renamed Ashley-Famous, the agency was acquired by Kinney National Services and then sold to Marvin Josephson Associates in 1969. Marvin Josephson, which started out agenting in 1955 representing Robert Keeshan (Captain Kangaroo) (1927–2004), was a mini-conglomerate that included a TV production firm and a concert-booking bureau. Expanding further, Josephson bought out Creative Management Associates in 1974 and formed International Creative Management, a compound talent agency with 2,000 clients that rivaled William Morris.
William Morris, whose top executives were being described in the trade press as "gentlemanly and geriatric," faced a threat of another sort in 1975, when five of its agents left the company to start Creative Artists Agency (CAA). Headed by Michael Ovitz (b. 1946), a UCLA graduate from the San Fernando Valley who started out in the William Morris mail room, and Ron Meyer (b. 1944), a senior agent, CAA lured away the top directors and stars in the business with the promise of securing top dollar for their services and delivering on their word. CAA also aggressively took on many of the traditional functions of the studios, searching out properties and putting together packages consisting of star, director, and writer, which they offered to the studios on an all-or-nothing basis. With names such as Tom Hanks, Tom Cruise, Robert De Niro, Demi Moore, Martin Scorsese, Robert Zemeckis, and Sydney Pollack on its roster, CAA could just about dictate the terms when it came to salaries.
Ovitz could exercise this power because of a vacuum in the motion picture business. Beginning in the late 1960s, the movie industry had entered the age of conglomerates, when the Hollywood majors were either taken over by outside conglomerates engaged in a range of businesses or became conglomerates themselves through acquisitions. In the new order, film production became just one of several "profit centers" for these conglomerates and not necessarily the most important. Hollywood studios more and more took on the function of financiers and left the development of projects to suppliers—independent producers and agencies.
Not content in jacking up salaries and compensation to record highs to earn more in commissions, CAA branched out into corporate acquisitions, consulting, and marketing. Ovitz helped Sony buy Columbia Pictures from Coca-Cola for 3.4 billion dollars in 1989 and negotiated Matsushita's 6.6 billion dollars acquisition of MCA in 1990. Ovitz also advised Credit Lyonnais, the French bank, on how to manage and ultimately dispose of its subsidiary MGM/UA. Then Ovitz and his partner Ron Meyer, CAA president, left the agency business for the movies. Meyer departed first to replace Sidney Sheinberg (b. 1935) as president and chief operating officer of MCA (renamed Universal Studios) when Seagram acquired MCA from Matsushita in 1995. In taking the job, Meyer joined the select group of talent agents, likes Lew Wasserman, David Begelman, and Freddie Fields, who had earlier became production chiefs of major studios. Ovitz also joined the group in 1995 when he became president of the Walt Disney Company. Afterward, Ovitz and the other CAA founders sold the agency for more than 150 million dollars to a group of company insiders headed by Richard Lovett, who became the new president of CAA.
Many big names left CAA for rival agencies during the transition, but the ranking among the major talent agencies did not change as much as some predicted. Creative Artists still maintained the top talent list in the movie business, with over one thousand names. And William Morris and International Creative Management held steady. Michael Ovitz, meanwhile, saw his career plummet. After just fourteen months in office at Disney, he was fired, with the explanation that Ovitz was unable to carve a role for himself in the company. But Ovitz's imperial manner might have also contributed to the decision. Nonetheless, Disney gave Ovitz a severance package estimated at over 125 million dollars. Ovitz attempted to reestablish himself in Hollywood by forming a new company, Artists Management Group, that was intended to represent high-profile talent in film, music, sports and publishing and to produce feature films and television programs. The venture never got off the ground and Ovitz lost an estimated 70–100 million dollars of his own money before he sold off the vestiges of his operations to an upstart agency called The Firm.
During the post-Ovitz era, talent agencies continued their search for new sources of revenue and naturally gravitated to Silicon Valley. Virtually all the leading agencies opened media divisions to explore ways in which the Internet might have an impact on the form and content of entertainment and serve as a new distribution conduit for their clients. Breaking into the business, agents sought opportunities for their stars, directors, and writers to shape material for the Web, such as short films, both live action and animation, and to link hightech companies to Hollywood. The foray into Silicon Valley suffered a temporary setback when the high-tech bubble burst in 2000, but the marriage of the Internet and show business seems inevitable.
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