Talent agencies are diversifying how they generate capital beyond client representation, and the race to create value has begun. Firms, including United Talent Agency (UTA) and WME-IMG, have formed strategic partnerships with investment banks, hoping to forge a valuable bond going forward. The deals come as agencies seek to rely less on the traditional 10 percent cuts they receive.
2017 is shaping up to be a defining year for some talent agencies, foreshadowing who could be at the top of the leaderboard over the next decade. In March, UTA agreed to buy a stake in New York investment bank AGM Partners. The strategic alliance between UTA and AGM allows the agency and its clients to receive financial guidance from AGM on deals. UTA will also use AGM for principal investing opportunities.
Based in Los Angeles, UTA represents a full slate of clients, including: Uzo Aduba, who portrays Suzanne ‘Crazy Eyes’ Warren in Netflix’s Orange is the New Black; DJ Khaled, a disc jockey and social media influencer; Phil McGraw, host of the Dr. Phil Show; Sofia Vergara, who plays Modern Family’s Gloria; and Constance Wu, who plays Fresh Off the Boat’s Jessica Huang. In 2015, UTA acquired The Agency Group to form a music touring and representation practice, now called UTA Music.
In 2016, Softbank Group Corp., the Japanese telecommunications giant led by billionaire Masayoshi Son, invested $250 million in powerhouse talent agency WME-IMG, joining private equity firm Silver Lake Partners as an investor. WME-IMG plans to use the Softbank funds to make investments, joint ventures and acquisitions.
Ever since 2005, when private equity firm Rizvi Traverse invested in ICM Partners, the relationship between talent agencies and private capital providers has soared. In 2010, Creative Artists Agency (CAA) received a $225 million investment from TPG Capital. CAA has single-handedly raised the bar by launching a venture capital fund, founding tech startups, creating a brand marketing company and starting a private equity vehicle. The move to diversify beyond talent representation is a potential gold mine for agencies, who look forward to initial public offerings in the years ahead.