The Stranglehold of Streaming, With United Talent Agency CEO Jeremy Zimmer

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It's Friday, December 16th, which is actually the last workday of the year for Hollywood's major talent agencies. They traditionally close for the final 2 weeks of the year. The agents set off to Aspen or the Four Seasons Maui to read scripts or strategize about how to steal clients and their rivals. This has been quite a monumental year in the agency world. The market for talent has absolutely shifted. Many studios and streaming services are now watching their budgets more closely. The great Netflix correction. All of Hollywood is sort of in this weird transitional slash buildings on fire phase. HBO Max just unrenewed a couple shows, part of its cost-cutting efforts. We'll talk about that. To many agents I talked to, it feels like a perpetual earthquake under their feet. Used to be these agencies thrived on taking their 10% from movie stars and TV packages. Those are shows that agencies help put together with writers, directors, or stars. It was a great lucrative business. Now it's unclear what a movie star even is, and packaging fees have been banned after a prolonged fight between the agencies and the Writers Guild. On top of that, there's been consolidation in the space. With CAA buying ICM Partners, creating the largest pure representation company in Hollywood. Meanwhile, the screenwriter clients are making threats about a strike when their deal is up in May. My guest today is in the middle of all of that. Jeremy Zimmer is the CEO of United Talent Agency, one of the big 3 agencies in town. He's got his fingers in everything from film to TV to books, music, influencers, games, sports, even the lowest form of talent, podcasters. I'm kidding. Actually, I'm not. Jeremy's got great insight into all aspects of the business, where it is today, where it's going tomorrow and beyond 2023. No call sheet today. Let's get right into it. From The Ringer and Puck, I'm Matt Belloni, and this is The Town. All right. We are here with Jeremy Zimmer. Jeremy's the CEO of United Talent Agency. First of all, welcome.

Thanks for having me. I'm, I'm excited to be here.

All right, so let's— I'm gonna ask you a bunch of questions today, but the first thing I wanted to start off with is UTA represents a writer-creator named Ellen Rapoport who has a show called Minx, which is on HBO, produced by Lionsgate.

Yeah.

Warner Bros. Discovery renewed the show and then this past week unrenewed it and said, yeah, we're not gonna air that, even though the show was almost finished shooting its second season. This is happening a lot this year, especially with this company Warner Bros. Discovery, which is going through some pretty painful cuts as it tries to, you know, manage its transition to the streaming age. As the head of an agency, when you have a client like that, how do you respond?

I mean, that's, that's among the more disrespectful things that can happen to a creative person is to have their show scrapped before the season is Yeah, I mean, you, you respond by expressing the fact that this, the, this kind of action creates and continues to create a level of distrust within the creative community and within the representation community. Because it's one thing to say, look, it's not working, we're sorry, and da da da, we're not going to continue. But to say, okay, let's do it, let's go make a whole new season, and then go, oh, never mind.

Right. We'd rather have a tax write-off.

There's so much in that that, that is, you know, any idea of, you know, having these relationships, building a brand, connecting to an audience, all of the things that go into the decision of making a show seem to be thrown out the window for the expediency of a tax write-off. And that's really, uh, it's really unfortunate.

What's interesting though is that people don't realize how this works. I mean, you The whole point of having a big powerhouse agency like UTA is you don't just represent Ellen Rapoport. You also represent Mike White, who's the creator of The White Lotus. You also represent Jesse Armstrong, who is the creator of Succession, probably HBO's 2 most important shows right now.

And we represent James Gunn, who's now in charge of the entire DC Universe.

So also a Warner's property.

There's a lot of elements at play in terms of those relationships and You know, anytime you have these moments of sort of real concern and consternation, they tend to make these very sort of short-term decisions, throwing away any sort of long-term planning. You know, it takes years and years to build the trust of artists, to build the brand, you know, the brand of Warner Bros., what it means in the creative community. And that gets— it doesn't take long to destroy that.

So you think it is being destroyed?

I don't want to say it's being destroyed, but I think the decisions like this certainly put people at edge and concern people in terms of how am I going to— if I have something that's very desired, what's the place that's going to be most likely to stay in love until there's absolutely no reason to be?

Right. Because that's what the answer is when people say, well, where are they going to go? HBO is still HBO. you know, there's only 6, 7 buyers for these big high-end projects, but it's not necessarily a writer like Ellen Rapoport. It's the next Mike White show. It's the next, you know, Jesse Armstrong show.

In moments of where there's so much consolidation and so much chaos, it, it becomes difficult to, you know, have a full-on, oh, we can't do business with them, because that's not really fair to a bunch of other clients who may Right. Excited to sell their show to HBO or HBO Max or Warner Brothers or whatever it is. So you have to be smart and thoughtful about all the concerns you have for all the people you represent. And sometimes you go through periods where the buyers have a little bit more leverage and clout, either because there's, you know, usually because there's less of them.

Right.

And other times you go through where all of the clout and leverage resides with the talent because there's a lot of buyers and a huge sort of boom in booming environment.

Speaking of booming environment, we've had that for the past 10 years or so. I think we would say it's certainly the last 5 where this peak TV run-up in content has really benefited talent. Then we've seen the complete market rejection of the streaming model over the past 8 to 10 months. How has that trickled down to your world? Uh, you know, you see people like Ari Emanuel saying, uh, we don't, we haven't seen it. That's bullshit. He has seen it. He's boostering, you know, which, whatever, that's his right. What are you seeing the current state of play is for talent and how these companies are pulling back?

Well, there's a couple of factors because actually the, the, the revenue for now has actually remained pretty strong. But the cost basis of running businesses has skyrocketed. So profitability becomes much, much harder to achieve. And I think that's part of why—

Are you talking for the buyers or for your own company?

I think for every company.

Yeah, I mean, these costs, just with COVID alone, the cost of producing a movie, a show has gone up 20, 25%.

Cost of the— the cost of all the goods, the cost of catering, the cost of people, the cost of insurance across the board. Costs have skyrocketed and revenues remain strong, but it doesn't even come close to keeping up with the cost increases. So that's why profitability has been such an issue. And you see a lot of the companies, you know, you're dealing with Netflix was a $700 stock. Well, you look like a genius when your stock's, you know, when your stock's at $700 and you look like an idiot when your stock's at $250.

But are they buying less? Are you seeing the streamers buying fewer products?

The streamers are definitely slowing down now in this moment, evaluating what they have, what they They need, what they want. It doesn't as yet seem like a completely systemic slowdown because still the best stuff is still— there's a very aggressive market for the best things still. So what we— what I imagine will occur is that second and the second tier, you know, where Netflix would need everything, right? They're being much more discriminating, it seems. And I think you'll see more of that across the board.

Who's the A buyer right now? A-list project, top writer, fully packaged show, great stars. Who is going to outbid?

I mean, I would say right now, you know, Apple is, you know, seems very aggressive and Amazon remains very aggressive about, you know, the best, the, you know, the A-list projects, the things that seem undeniable.

Right.

And I mean, look, Hulu is a place that our clients love to work. And, you know, they seem to do a great job with a lot of their programming. So they're in the mix as well. But there's so much of it goes into relationships, you know, people who have a relationship with HBO and that specific nature of the way they do things so well, the way they market their shows so incredibly, you know, there's a lot. So you can't just go— it's never as routine as this one, not that one.

Right.

But, you know, right now Apple seems like— Apple and Amazon are being very, Are places people love to go right now.

Okay. So I wanna talk a little bit about the way that your clients and talent in general are paid in this industry, because you've been a vocal proponent. I, I, I had Jason Blum on the show a couple months ago and he was talking about the backend model, the disappearance of the backend and how that has really impacted the way that content is made. I mean, he went so far as to say that People are not as incentivized to do their best work when they are being paid upfront rather than having a piece of the success of their work. And this has been something that has been transitioning for years now. Netflix came into the industry, they said, we're a tech company. We're not gonna do the whole profit participation thing because we're a closed ecosystem. We don't sell advertising. We don't have distributors around the world. It's just us. We don't wanna release our ratings numbers to the public. So we're just gonna pay you whatever you would make plus 10, 15% as a premium, and we'll own it forever. You'll get nothing in a profit participation sense. You and others are pushing back on that now, and I'm curious why that has come about, because you, as all the agencies have, have really enabled this model by putting your clients into these situations where they are making more money upfront in exchange for giving up that back end. Why is this a change of heart lately, or is it?

You know, I hate to be— I've been saying this for years, but I have been saying for a couple of years that the destruction of back ends is, is something we all have to be worried about. I mean, you know, frankly, for several years I've been talking about how do we bring back ends back and why I believe backends will be better for all, everybody, not just the participants, but also for the, the streamers, the people paying for the programming, to have more of an alignment with artists, to not have to pay so much upfront, to have artists and buyers aligned on how do we manage costs more effectively.

So you think it does incentivize people to do better work when they're paid after the fact?

Well, I said manage costs, so I'm not gonna You know, I think all, all creators are different, right? Some creators, they don't care whether they're getting paid a dollar or $100 million. They're going to kill themselves to make something as perfect as it can be. And other people have a different approach. They're, you know, producing stuff at scale. They're not as— whatever it is, everybody's different. But what is true is that if you're a real profit participant, you're going to have more of a— you're going to keep more of an eye on the on the cost basis. And if you see that if I can keep this show on the air for 3, 4, 4 or 5 years, the upside is going to be tremendous to me. So I'm going to do those things that I need to do to keep the quality consistent, to stay involved, because I have that long-term participation that could be very meaningful.

It's just an incentive alignment. Makes, makes sense.

Then Netflix changed the rules because the bargain was, hey, come to us, You're going to get an order for a full season. You're not going to have to live up and down with the, you know, the, the, the vicissitudes of, of reviews and ratings. You're going to live in this perfect ecosystem. We're going to market your show to the best people through our, you know, through our algorithm. We're going to go straight to the people who are most likely to watch your show. More people will see your show, and there's not going to be those commercials that interrupt the creative flow of what you're doing. And now they've changed the rules.

How— wait, say how they've changed the rules. Now they have advertising.

Now they have ad-supported television, so there will be ad breaks. They're getting additional revenue from outside of the original bargain. And secondly, I think it's only a matter of time until all of the streamers start selling not just the shows they don't want, like HBO, like Warner Discovery, but they're also going to be selling the shows that are most successful because those will be, you know, there will be a revenue model there that's going to be very lucrative for them.

Meaning taking the shows from their platform, selling them off-platform to other outlets around the world to make more money. And because they now own the shows, they don't have to pay your clients anything to do that.

Exactly. So the bargain has been changed. So not only is it best for everybody to have alignment around backends and transparency around success, but it's also a fair reimagining of the bargain because of how people entered into these agreements initially. And I think on both sides it needs to be discussed, it needs to be thought about, and we gotta come to a reasonable resolution that ultimately will be better for everybody.

How realistic is that? I've heard people say that ship has sailed. Netflix changed the model, everybody else followed, and to put that, you know, genie back in the bottle would be very difficult.

I think it's absolutely realistic because it's, it's an imperative. Because the way they're doing it doesn't work for them and it doesn't work for the artists.

Because the costs are too high. Yeah.

The idea that these guys have inventory sitting on a shelf that is moved from the front of the store to the back, back, back of the store because no, you know, I don't believe people are watching, you know, a 5-year-old Netflix show. And I don't believe a 5-year-old Netflix show is driving subscription. In to any degree the way the hottest, newest Netflix show is.

Yeah, everyone's freaking out about these HBO shows that are leaving, and it's like, well, okay, who's watching them? And, and this is sort of the history of the television business, is that stuff gets repurposed everywhere. It's only the past 3 or 4 years where we have come to expect everything everywhere all at once on your streaming service.

But the more interesting question is Take, for example, I mean, I wrote this thing, you know, Bridgerton. At a certain point, people aren't subscribing to Netflix to watch Bridgerton. But what would Bridgerton be worth to NBC or another platform or in some sort of syndication mode? I think it could be very valuable. That could be very valuable to Netflix. It could also be very valuable to Shonda and the other creators of that show.

Sure.

So why not unlock that value for everybody? Good for Netflix. They get more cash to make more shows. Good for the creators, they get that show rec, and, and ultimately I think good for everybody because the show gets, you know, maybe everybody's on Netflix, but there's a lot of people who aren't. And for those people to have access to that show could be a win for them as well.

And for whatever reason, Reed Hastings has always been very allergic to that. And although he was also allergic to advertising, and now they've got that, so we'll see.

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I want to get into this topic of the writers' strike that many believe is coming next spring. Your writer clients are agitating. They're very upset by the economics of this streaming ecosystem where they believe they're not getting paid as much as they once were. The 22-episode show is no longer. These seasons are now 8, 9, 10 episodes. White Lotus was 7. The agents need to get them 3 jobs per year to get them paid a full year's salary rather than 1 job as it used to be. These are some pretty significant issues. You guys are in an interesting spot here because you're coming off this fight with the Writers Guild where they actually were involved in litigation with the agencies over packaging. Fees, which you guys have agreed not to take anymore. Um, you've also agreed that you're going to limit your ownership of shows to 20%, which was another big claim that the writers had, that they didn't want to work for their agents if the agents owned scripted shows. There were a lot of ill will, a lot of hard feelings around that. Now a possible strike. Where does that put the agencies in this battle?

We had— we went through our issue with the writers. I, you know, I don't know that I— I'm pretty certain I don't believe it was the right fight at the right time at all.

Right.

But I do understand this fight, and I think this fight makes a lot of sense. I think that for a solid working writer, the economics of the business as it currently stands is just not commensurate with what their value would be and should be. And I think it is a fair fight. Whether this is the right way to do it, whether this is the right approach on it, whether, you know, the sort of the damage of a real strike and how the impact of that, whether it'll actually get recovered as a result of the strike, I don't know. And that's always the concern is, is the damage you do going to be worth the victory you have?

And that's— Right.

Sometimes that seems to get lost in these labor issues.

So you were around during the last strike. Do you believe that the writers in the 2007-2008 strike— do you think that damage was worth it?

I definitely don't.

Why not?

Well, because it created an environment where studios really rethought a lot of their relationships that they have with writers and producers. They canceled a lot of overall deals. They canceled They kind of said, oh, wow, well, look, we have all this IP. Let's just lean on IP. Let's lean on remakes and sequels. Let's, you know, lean on non-scripted television. And opportunities disappeared and many of them haven't come back. You know, and that's what concerns me most is where are the opportunities and where's the appetite? And I think that the appetite for originality is diminished. And I think the more these these kind of things happen, the more, you know, the right— the studios kind of go, oh, you know what, we don't really need these overall deals, or, oh, we'll find other— we'll find other ways to figure out our product. And I think it's just damaging. I understand the urgency of the fight, and I understand that. I just, you know, feel like there's got to be another way. And— but I'm not a labor activist, so I may be wrong.

Right.

Yeah, I mean, it is interesting because we have had this run-up over the past 4 or 5 years in these gigantic overall deals and the breadth of the overall deals where we're in a different environment right now. It's almost like the worst time for a strike because these companies are rethinking these costs anyways. And if there is a work stoppage and they have the opportunity to get out of some of these deals, I think we could see pretty significant damage to writers in what they're getting paid.

I mean, I'm concerned that there is going to be sort of a damage, not just overall deals, but to all, all the working writers. And if, if you don't work for 6 months, you know, and you lose however much you lose, $300,000, $400,000, whatever it is, I don't know that you recapture that money through the increases you're going to get. It may take you years to recapture that money. I just don't know.

Not to mention the entire industry shuts down, which impacts—

And the entire industry shuts down. That's bad for everybody.

And— But, you know, let's— I don't want to, I don't want to be pro-studio here. Let's, let's take the other side here, because If the writers just let this go and say, okay, well, we'll get a higher increase in minimums, we'll get some better benefits, the things that they traditionally settle for, that doesn't change the fundamental problems in this system, which— I mean, the entire value proposition of professionally produced content has changed over the last decade. The way it's monetized, the way these companies are using this product, as we've talked about, Yet the pay system is still stuck in this system from 15, 20 years ago where you could be a guy on a show and make your living on one show for a year. And it doesn't really work that way for the writers.

It doesn't pencil out for a lot of the writers. It pencils out for a few. And there's always been, to some degree, a pretty significant inequity between the high-end creators and the guys, sort of the day-to-day writers driving the shows. I think the problem is, is that both sides become extremists. The studios, networks, they're all walking around going, oh my God, our whole, our whole business is collapsing. The model we thought was going to work isn't working. What are we going to do? What are we going to do? And many of them go into a state of sort of hyperbolic hysteria. And we're going to cancel this and we're not going to do that. We can't do this and that. And it's, it's really what has to happen is a little bit more. First of all, can we see this coming? Yes, of course we can. Can we plan more accordingly? Yes. And in the midst of a crisis, can we sit down and be thoughtful about solution as opposed to focused on problem? And what I've been hearing a lot is focus on problem and not a lot of thoughtful guiding towards solution. That's where you kind of wonder like, well, wait a minute. And the problem is You know, I'll say to them, you know, when everything's going great and you have massive tailwinds, your business is going through the roof, every CEO looks like a genius. But suddenly, you know, you get a strong, you know, headwind and it, you know, it's hard to look as smart and as thoughtful when you're really trying to work through very difficult changes in the environment. And I think this is where everybody needs to, you know, hopefully would really sit down and go, well, wait a minute. We have a bunch of different concerns and, and, and it's impacting all of us differently. How do we get to a place that's going to be smart and thoughtful and reasonable and sustaining for the business as opposed to these very polarizing positions?

Right. All right. So it's been a pretty active couple years for your company, UTA. You guys, you know, you have a big partnership with Clutch for sports. You Brought in MediaLink for brands, Curtis Brown in the UK. Uh, you got some private equity money from EQT this past year. Uh, ultimately though, you guys are in the service business, which is a great business, but you know, the saying always goes, your assets go home at night. And you, one of your competitors, WME, has taken a different tack. It started buying assets over the past few years. UFC, professional bull riding, a bunch of other things. They took the company public. Do you see the future of UTA as a purely service business, or do you believe that to ultimately grow and grow, you need tangible assets?

Well, there's like 7 things in that question. First of all, tangible assets. We have a huge amount of tangible assets.

Please list them.

Plus year relationship with clients and buyers.

Okay, but you know what I mean. I know what clients are clients. They go home and they get.

But yeah, the and and our tangible assets are are our clients, but they're also our colleagues and their expertise.

Again, wonderful people, but they are they they can they are subject to the whims of their competitors. They can be bought by other competitors very easily.

I wouldn't say very easily, but I understand what you're saying. And, and if you actually look at the facts of that, you'll know it isn't that easy, but I understand what you're saying. So the question is, are— would we, for the right asset that is a sort of IP-grounded asset that makes sense for us and could create— would be good for us financially and a good business opportunity for us and potentially be beneficial for our clients, would we do that? Of course we would. Honestly, when they bought the UFC, I didn't get it. I thought it was ridiculous and da da da, and I was wrong. And they did something incredible, which has become an important basis for a lot of other businesses that they built, beneficial for some of their clients. It's allowed them to build a tremendous sports business and sports marketing business. I admire, you know, I admire it. I think that the whole thing to being an effective CEO is to not go, I'll never do that. I'll only do this. You know, we are a representation business. We love representing clients. I think there's an absolute nobility in representing artists. I, and I believe in that at the core of my soul. But I also believe I'm, I'm a businessman and I need to look, continue to look for opportunities that make sense to be aligned within my business.

All right. I, I, that's a diplomatic way of saying, sure, we'd look at it. And, uh, if it made sense, but what's out there, literally, when you look at assets, what's out there?

That's the thing is it's, it's, you know, we haven't seen what that thing is, which, oh my God, we have to do it.

Yeah. So 2 of your rivals, CAA and ICM Partners, merged this past year.

Yes.

What, what's your view from your office on that deal? Do you, do you look at CAA now as the industry leader in terms of size and scope? Do you think that that was a smart acquisition, or should it— should they have just picked off the 5, 7, 8s?

I think it was a super smart acquisition. It helped them, you know, profoundly in a couple of areas where they really had a need, both in publishing and in television. Those are the 2 areas where ICM was the strongest.

And we're seeing—

They have Shonda Rhimes, they have Vince Gilligan, they have Bill Lawrence.

Yeah. So they brought in some great television creators. They brought in incredible literary assets, you know, And they brought in some really great colleagues. And CAA had not done any real acquisition at scale and had to go through the complexities of merger and integration and the things that, that asset, that doing that will require them to do. And I think if they do that and do it successfully, it'll be really good for them in terms of their ability to continue to grow.

So that leads to the question, What are you looking at? Do you guys look to Paradigm? Are you looking at Gersh, APA? Any of these other agencies make sense to merge with UTA?

Well, I'm certainly not going to tell you, but I can tell you ICM was a great acquisition. We would have loved to have made that acquisition. There aren't lots of other opportunities underneath that that make sense for us. And so we have to look outside of the obvious, oh, where are the other agencies? So we have to look sort of outside of that. into areas that aren't directly in our category. We have to be more thoughtful and more creative, and that's what we're— and that's what we're trying to do right now.

It's pretty clear the industry is gonna go through, or is already going through, a pretty rocky time for the next— for the foreseeable future. As someone in the agency business, how do you navigate that?

Well, look, what I know is having been through a few rocky times, on the other side of rocky times is tremendous opportunity. So the first thing you do is you, you keep your eyes focused on the future and you don't allow the, the choppiness to freak you out and start making bad decisions. You have to protect your culture and you have to protect your company. The second thing is you look at, wait, where's the real value in this business? And the real value is in people who make great things. And our job is to align with them and help them find the ways and means to do the things they do best. And what always happens in a situation like this, in these kind of times, is there's a lot of consolidation. A lot of valuable things get thrown out the window because people don't have the time or attention to figure out how to make them work. And those valuable things then reconstitute into new growth-oriented entities. And our job is to be part of that reconstitution, is to find the the players and align with the people who really can create value and make sure we're helping them reemerge. And I think that's what we'll do again. I think there'll be tremendous opportunity on, on the other side of this, this bumpy stretch we're going to be in.

All right, Jeremy Zimmer, thanks for coming on the show. Appreciate the time.

Great seeing you. Thanks so much.

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