Talent Agency Biz Courted By Deep-Pocket Ad Firms

Several major talent agencies have held talks with Omnicom Group, the world's largest advertising and communications holding company, about forming strategic alliances. But talks are progressing most seriously with CAA, sources said.

Meanwhile, the Screen Actors Guild sent ICM chairman and CEO Jeff Berg a letter reminding him of financial-interest rules after the guild learned of a Nov. 30 press release issued by Razorfish Studios announcing that ICM had made "a significant private equity investment" in the entertainment company.

Berg has referred the letter to ICM's attorneys, but he and Razorfish CEO Jeff Dachis told The Hollywood Reporter that there is "no truth to (the news release) whatsoever," and "there is no investment by either Razorfish Studios in ICM or by ICM in (Razorfish)." ICM and Razorfish are privately held companies.

Razorfish owns Self-Timer Films, producers of "American Movie" and "Being John Malkovich."

Rules prohibit a production company (including ad agencies) from owning or being owned by a talent agency. Rules also state that agencies cannot use their names to form strategic alliances with other businesses.

The repeal of those rules and regulations is at the center of what has been more than a year of talks between the Association of Talent Agents and SAG. ATA wants to "level the playing field" between managers and agents. SAG says it also wants major changes in agency regulations but is asking for talent agents' help to enable the guild to accomplish some of its long-term goals.

Negotiations between the ATA and SAG over establishing a new set of financial-interest rules and regulations governing talent agencies broke off last month (HR 11/9). No further talks are scheduled.

Technically, talent agencies have not been franchised by SAG since Oct. 20. But old rules provide for a 15-month grace period during which contracts between agents and actors will remain in effect.

Since Oct. 20, the talent agency business has entered into what the ATA has called "a period of uncertainty," prompting several agencies to explore their options.

CAA has met on and off for months with Omnicom and, during the past two weeks, the entities have entered into more serious discussions to create what sources said is taking the form of a "joint venture." One person with intimate knowledge of the talks said, "We want to see how we can work together down the road."

CAA and Omnicom also have talked about the ad conglomerate possibly buying CAA, but insiders insist that those discussions have not progressed. Omnicom and CAA declined comment.

It is only coincidental, but Razorfish Studios is partly owned by Omnicom Group.

Five-year-old Endeavor also has talked with Omnicom and other advertising agencies, sources said, but it is unclear if anything substantive has come from those meetings. It is known that discussions have centered on creating alliances to further both businesses.

Ad agencies including Interpublic, Young & Rubicam, Grey Advertising and WPP also have sniffed around the talent agencies. Interpublic inked a landmark deal two years ago when it acquired a majority stake in management and production company Addis/Weschler & Associates (now Industry Entertainment). It also looked into buying into CAA, ICM or WMA.

Ad agencies thus far have backed away from buying into talent agencies because of complex regulatory hurdles that such a purchase would have to clear -- including the reversal of guild rules.

Thus far, the talent agency business through ATA has decided to abide by the 15-month grace period, but as one talent agent warned, "Someone somewhere is going to test these waters; it's just a matter of time."