Endeavor Is “Well-Positioned” For A Potential Writers Strike, CEO Ari Emanuel Says

Endeavor CEO Ari Emanuel isn’t making many predictions or taking sides as the WGA deadline approaches.

But on the company’s fourth-quarter earnings call with Wall Street analysts, the exec said his company, parent of talent agency WME, is “well-positioned” in the event of a strike.

“There are important issues on both sides,” Emanuel said. “We support our clients as they work through their issues with the studios.” He added that he has “been through many strikes” over the years, giving him perspective on the current labor scene. “Compared with last time [in 2007-08,] this one’s very different and our company’s very different,” he said. “So, I think we’re pretty well-positioned.”

The WGA and the AMPTP are getting set to begin negotiations on March 20, ahead of the May 1 expiration of the company’s current contract. Emanuel said if a strike does happen, it would likely take place “later in the year,” though he added that he had “no idea how long it’s going to last.”

Emanuel and his executive team have stressed for years how diversifying into areas like sports, fashion, live events and technology has helped decrease the vulnerability of the company to any pressure experienced by WME. That theme was a prominent one on the earnings call. CFO Jason Lublin noted that more than 50% of WME revenue comes from non-film or TV activity.

Along with the strike threat, a cool wind is blowing through the media business as far as streaming spending. Even top player Netflix has reined things in and newer rivals are pledging moderation. Emanuel was asked about any potential impact of a pullback on the agency business. There are “some spending more, some spending less,” he mused. “Strategies change.” Beyond subscription streaming, though, sports rights and theatrical box office are poised for strong growth in 2023, which will provide a boost, in the company’s view.

During his prepared remarks at the start of the call, Emanuel said Endeavor’s “unique portfolio” offers “multiple lanes for growth and helps insulate us from volatility in any one area.” In 2022, for example, revenue from WME’s three largest SVOD buyers in the aggregate amounted to just 2% of overall company revenue.

At the time of the last writers strike, which lasted from November 2007 to February 2008, no Hollywood talent agency was part of a publicly held firm. Endeavor’s April 2021 IPO changed that, and also unlocked enormous wealth for Emanuel and senior management. The proceeds from the offering totaled $511 million on Day 1, but shares in the firm have spent the past year below the IPO price of $24.

Friction with the WGA and other guilds has occasionally prompted business changes even outside of contract negotiations with producers. Endeavor Content, the former subsidiary that created friction with the WGA and other guilds, was sold to Korea’s CJ ENM last year and has been renamed Fifth Season. The transaction was necessitated by an agreement reached by agencies and the WGA, which labeled Endeavor Content and other production entities affiliated with agencies as self-dealing packagers or projects. Endeavor retained a 20% stake in Fifth Season, but CJ directly manages the operation.

Another topic on the earnings call was a potential combination of Endeavor, which already owns the UFC, and the WWE. The pro wrestling outfit has been pursuing an M&A deal in recent months, ahead of major rights renewals with U.S. media partners.

“Unless you want me to go to jail, we don’t comment on our M&A practices,” Emanuel quipped. “We’re truly focused, as Jason said, on de-levering.” (The company posted strong free cash flow in the fourth quarter and got its debt load down below four times trailing earnings, a goal it met earlier than expected.) “We’re not going to do anything that would increase our leverage.” The acquisition of the UFC, accomplished in stages, carried significant debt, as did other deals as Endeavor grew into its current configuration. Nevertheless, Emanuel noted that the WWE is a “valuable business.”