Hollywood's Agents Tighten Their Belts

May 29, 2009— -- To be a talent agent at William Morris once meant you had made it big in Hollywood.

Working his way up the ladder, one television agent spent four years as an assistant at the beck and call of a heavyweight dealmaker, before eventually becoming a "tenpercenter" himself, with entrée to Tinseltown's back lots and backrooms and most exclusive restaurants.

On Monday, that all changed. In one of the most public displays of the recession's grip on Hollywood, that agent along with 119 other employees were laid off at William and Morris, one of Hollywood's oldest and most storied talent agencies, which for a century has represented some of the biggest names in the entertainment industry.

For months now, Hollywood's talent agents -- those notoriously cutthroat dealmakers famous for negotiating on behalf of the famous and renowned for 10 percent commissions -- have felt the pinch of the economic recession.

Each of Hollywood's major agencies has recently cut back, reining in spending on conspicuous corporate cars, expansive expense accounts, pricey power lunches and armies of attentive assistants.

"I was in a different industry before I became an agent and I was lured in by the glamour. Agents were my celebrities and then you come in and you see it and soon enough it becomes your job. But I think agents are in denial. They still think they're masters of the universe and it's not reality anymore," said the recently laid off television agent, who would not speak for attribution in fear that would hurt his chances of finding another job.

"Times are different. The times of sitting in first class, drinking Champagne and having it all are done," he said.

While companies across the country are feeling the impact of the recession and cutting back, agencies have, for years, paid for perks beyond what was typical in other corners of white-collar America.

The layoffs come on the heels of a federally approved merger between the William Morris Agency and a smaller rival, Endeavor.

Insiders said the merger would be a mutually beneficial alliance during tough economic times, combining William Morris' strong music department with Endeavor's stronger television and motion picture departments. People knew there would be cuts, but the scale of the layoffs -- the largest mass termination at an agency in recent years, described by some as a "bloodbath" -- came as a surprise.

Clients at Endeavor include superstars Kanye West, Britney Spears and Russell Crowe. Endeavour represents box-office heavyweights Robert De Niro, Matt Damon and Adam Sandler.

While companies across the country are feeling the impact of the recession and cutting back, agencies have, for years, paid for perks beyond what was typical in other corners of white-collar America.

"The motion picture business has been contracting for a while," said a film agent who works at one of Hollywood's leading firms but was not authorized to speak publicly. "There is less money to make movies. Fewer movies are being made. And there are fewer jobs for high-end actors, all of which cut into the bottom line. The same is true for TV; fewer pilots are being made."

Called "tenpercenters" for their hefty ten percent commissions, being an agent meant looking the part, driving expensive cars, eating at expensive restaurants, travelling in first class and throwing lavish parties – all on the company's dime.

Talent Agencies Cut Back on Entertainment and Commissions

Steve Ovitz, a former agent at Creative Arts Agency who went on briefly to hold the number two spot at the Walt Disney Company (parent company of ABC News) in the late 1990s, complained in a 2003 lawsuit deposition brought by shareholders against the company that he never was reimbursed for throwing a party that cost $90,000.

"There is probably no one in the city of Los Angeles that could have drawn the kind of people we did to that party and do it for $90,000," Ovitz said in deposition, prompting the lawyer for the shareholders to ask, "At CAA, you would have been fully reimbursed for the party?"

"One hundred and ten percent," Ovitz answered, according to the brief.

Those days of nearly bottomless expense accounts are over, industry insiders told ABC News.com.

"All of the agencies are tightening their belts," said the film agent.

Endeavor founder Ari Emanuel, brother of White House Chief of Staff Rahm Emanuel, is the inspiration for the agent Ari Gold character on the HBO series "Entourage."

On the show, Gold is known for a no-holds-barred style of negotiating. The character flaunts all of the lavish trappings that come with being a powerbroker. He flies in private jets; he sits courtside at Lakers games and races a rival agent through the streets of Beverly Hills in a Ferrari with a license plate that reads "ARISFRRI."

"It's an image thing," said an agent at top-five firm not authorized to speak. "Being an agent means driving a nice car. Everyone's got a BMW. But that's all changing pretty quickly. CAA is cutting its budget for cars."

At William Morris, agents have been told they no longer can fly first class, and if business with a client or studio executive can be taken care of over a cup of coffee instead of a pricey dinner, it should be.

"It used to be that if you were an agent, your actions wouldn't be questioned," said Nikki Finke, editor of Deadline Hollywood Daily, the blog that broke news of the layoffs. Some William Morris agents are said to have learned on the blog of what the company was planning before it was announced officially.

"Expense accounts were expense accounts, used at your discretion," Finke added. "If you had a client that needed you, you would hop on a first class flight to France and stay at a five-star hotel. A lot is different these days."

Hollywood Feeling the Pinch

Agents are supported by a phalanx of personal assistants. Neophyte employees looking to become agents at William Morris begin in a training program called the "mailroom." They climb their way up the corporate ladder by assisting senior agents, getting berated along the way.

"It has gotten to the point where assistants are not allowed to stay past 6 p.m. at William Morris. They're just thrown out of the building," said Finke. "They can't afford to keep them around and pay them overtime."

If not for the recession, Endeavor and William Morris likely would never have merged, said Jerry Katzman, a former WMA agent and now a professor of industry relations at the UCLA School of Theatre, Film and Television.

"The companies are a natural fit and there is a reason for them to merge beyond economics," Katzman said. "But the recession was the catalyst. The strike had a lot to do with it. Lots of money has been lost. The companies complement each other a lot."

The new company will be called WME Entertainment.

Spokespeople for William Morris and Endeavor did not return calls for comment.

Several big-name agents reportedly left William Morris in advance of the merger, including David Lonner, whose clients include "Star Trek" director JJ Abrams. Actor Kevin Spacey left the agency last month to go to CAA.

William Morris's current CEO, Jim Wiatt, likely will be forced to leave the new company, insiders said.

The new agency will employ around 300 agents, representing about 1,000 clients.