*Note: As the scope of a complete law-and-economics-informed exposition of the dynamics currently affecting talent representation far exceeds the scope of this piece, this post will primarily focus on the interior structure of the “legacy” verticals of film and television.
When considering that the first “talkie” motion picture debuted just over 95 years ago, it is easy to understand the entertainment industry as one that “to survive, has to reinvent itself every few decades, either by embracing new technology or by rewarding the entrepreneurial energy of younger executives.” Ever the consummate insiders, talent agents have traditionally served as the nexus between the creative and the commercial. Through information gathering, trafficking in relationships, politicking, and garnering leverage to deploy on behalf of clients while navigating the value chain of a company town, agents can counterbalance the disparity in bargaining between creatives and conglomerates.
In response to consistent disruption, agencies have learned to innovate to accumulate institutional leverage. Theoretically, increasing the power on the seller’s side of the table should increase their surplus by changing a monopsony-type situation into a negotiation between bilateral monopolies. Given the obvious optimization constraints in a market known for its impenetrability, such an outcome seems reasonable under a theory of second-best.
For much of their history, agencies could not afford to risk innovation, as the contingent nature of agency commissions militated present bias. Thus, to successfully innovate, agencies had to find threshold avenues to readily-available capital within the constraints on agent conduct imposed by Hollywood’s influential guilds’ aversion to conflicts of interest, as policed solely by collective bargaining agreements, and mandatory alternative dispute resolution—which has prevented case law from elaborating contextual fiduciary standards—and the specter of antitrust scrutiny that previously foreclosed agency ownership of production companies through a series of DOJ-forced divestitures.
In 1975, Creative Artists Agency (“CAA”) cracked this double-bind with the packaging deal structure. By attaching key talent to scripts before shopping them to production companies, agencies pitched shovel-ready projects, reducing the possible opportunity costs to clients of committing to a project that never reaches production and relieving production companies of assembly problems surrounding high-quality talent. Most significantly and controversially, the practice upended traditional agency compensation by shifting to production companies directly paying the packaging agency a percentage of the project’s lifetime net profits. For the agencies, packaging unlocked regular, stable cash flows that underwrote the institution-building that, at once, transformed the modern notion of what a celebrity could be and culminated in agencies brokering corporate acquisitions and strategically advising blue chip brands. However, it also catalyzed hypervigilant skepticism by the guilds toward agency behaviors that could permit self-dealing.
At the time, the sheer profitability of packaged projects kept the guilds at bay and biased agencies toward increasing the scale and diversity of their offerings and holdings in response to shifting industry dynamics. Stretching that assumption to its logical extreme, over the last fifteen years, each major agency partnered with private equity investors to express their unique theses on the future of the representation business. The subsequent evolution from “pure talent bookers into multi-headed media ventures that invest, advise and engineer deals,” decoupled the business risk of these systematically important institutions, with CAA’s aim to build a comprehensive representation platform and Endeavor’s focus on assembling a profitable media rights portfolio demarcating the poles.
Even still, these distinct approaches overlapped in one critical regard: CAA and Endeavor established affiliates to finance and produce ready-made content to supply the ascendant streamers. Yet, unlike before, this shift occurred amidst existential uncertainty, as consolidation, streaming’s short-sighted appetite for content at any price, and increased regulatory scrutiny shook the prevailing financial models of content production. This confluence precipitated a draconian reaction from the guilds, a twenty-month strike that ultimately forced the divestiture of agency content arms and mandated the sunsetting of traditional packaging practices.
It is within this context that CAA’s acquisition of ICM must be understood. When their members are enduring palpable pain and fear, guilds have a duty to act. However, it becomes imperative to strike a delicate balance that culls harmful behavior but permits structures that supply the cash flows necessary to preserve hard-won leverage. Instead of beginning from this principle of harm reduction, the guilds have pushed their most potent allies back toward a less lucrative structure at a time when overhead costs have never been higher. It now appears that in the wake of the guilds’ most recent campaign rings the death knell of ICM, admonishing observers that fervent traditional talent representation sufficient to deserve a $750 million valuation is no longer adequate materiel to bargain productively at the highest level. It is here that CAA makes its stand.
 Richard Corliss, 80 Days That Changed the World: The First Talking Picture, Time (Mar. 31, 2003)
(positing the October 7, 1927 debut of Warner Brother’s The Jazz Singer to be one of the “80 Days That Changed the World.” “The film, an immediate sensation, cued a frantic rush to convert all studios and move theaters to sound, and signaled the end of a pristine, vigorous silent-film art. By 1930 virtually every U.S. film was a talkie, and movies haven’t shut up since.”) https://content.time.com/time/specials/packages/article/0,28804,1977881_1977883_1977937,00.html [https://perma.cc/ST35-2LFD] [https://web.archive.org/web/20221126171024/https://content.time.com/time/specials/packages/article/0,28804,1977881_1977883_1977937,00.html].
 See Brian T. Smith, Sending Agents to the Principal's Office: How Talent Agency Packaging and Producing Breach the Fiduciary Duties Agents Owe Their Artist-Clients, 27 UCLA Ent. L. Rev. 173 (2019) (contextualizing emergence of the agent role in the historical growth of the entertainment industry). See also Jeremy M. Evans, Lawyers, Agents, and the Blurred Lines Regulating Talent Representation, 34 Ent. & Sports Law 27 (2018) (attempting to situate the role of the talent agent and the disparate statutory treatment it receives in comparison to entertainment lawyers and personal managers, roles of increasing importance that blur the lines).
 As of 2012, there were approximately 12,000 individuals engaged as either independent performers/artists or talent representatives in Los Angeles. The broader industry, including production, distribution, and business professionals employs 162,000 wage and salary workers, equivalent to nearly 5% of the 3.3 million private sector wage and salary workers in the county. In addition, the industry employed more than 85,000 free-lance professionals and other independent contract workers. With a combined total of 247,000 workers, this is one of the largest industries in the county. Los Angeles Economic Development Corporation, The Entertainment Industry and the Los Angeles County Economy 2 (2012).
 Such power disparities were fast to be recognized and correspondingly exploited in the Golden Age of Hollywood. Cassady, Impact of the Paramount Decision on Motion Picture Distribution and Price Making, 31 So. Cal. L. Rev. 150 (1958). The concentrated, vertically integrated studio system used its power to lock leading talents into long-term, exclusive, woefully below-market contracts that suppressed both wages and the variety of content produced, indicative of the types of monopoly practices that were prohibited in the “Paramount Decrees.” United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948). Considered outmoded by changes in the competitive dynamics and dominant business models of the industry, the decrees were recently repealed upon motion by the FTC. See United States v. Paramount Pictures, Inc., No. 19 MISC 544 (AT), 2020 WL 4573069 (S.D.N.Y. Aug. 7, 2020).
 Bowley, A.L. (1928). Bilateral Monopoly. The Economic Journal, 38 (152), 651-659.
 Lipset, R.G., & Lancaster, K. (1956). The General Theory of Second Best. The Review of Economic Studies, 24(1) 11-32.
 Budd Schulberg’s acclaimed 1941 novel What Makes Sammy Run?, provides a contemporaneous, satirical distillation of the excesses of agent personalities and practices during the early studio era, informed by the life of his father B.P. Schulberg, a pioneering producer who won the first ever Academy Award for Best Picture in 1929.
 While California courts maintain that the “[exploitation of artists by representatives has remained the [Talent Agency] Act’s central concern through subsequent incarnations to the present day,” Marathon Ent., Inc. v. Blasi, 42 Cal. 4th 974, 984 (2008), as modified (Mar. 12, 2008), the legislation itself and regulatory discretion vested in California’s Labor Commissioner, impose de minimis material constraints on agent conduct apart from threshold licensing requirements to “procure” business on behalf of artists. Cal. Lab. Code § 1700.4; Cal. Lab. Code § 1700 et seq. (West) (hereinafter the “Talent Agencies Act”). Even the licensing requirement itself is routinely subverted—typically by personal managers and, perhaps, unintentionally by entertainment attorneys—corroding the value of exclusivity and safety it intends to confer while introducing legal uncertainty. Such violations go routinely unenforced by artists. Further, these violations routinely go unenforced by the creatives the Act aims to protect. See generally Gary E. Devlin, The Talent Agencies Act: Reconciling the Controversies Surrounding Lawyers, Managers, and Agents Participating in California's Entertainment Industry, 28 Pepp. L. Rev. 381 (2001) (discussing the arbitrariness and futility of the Act’s protections, as demonstrated by agents seeking reinvigorated flexibility to participate in content profit and lower scrutiny from guilds, violations of the Talent Agencies Act that routinely go unenforced due to the reputational disincentive from suing industry power brokers in a close-knit industry and imposing the draconian remedy of voiding the entire contract and any compensation due thereunder).
 Hollywood’s key guilds, including the WGA and SAG-AFTRA have effectively constituted the definitive third-party regulators of the agent-client relationship, securing jurisdiction by requiring that their members exclusively contract for representation with “franchised” agents, with an agency securing the franchise for its agents by coming to terms over the governance structure of the relationship. Blaine Roth, Tuning into the On-Demand Streaming Culture-Hollywood Guilds’ Evolution Imperative in Today's Media Landscape, 27 UCLA Ent. L. Rev. 141 (2020).
As an institutional coalition, the agencies are supported by the Association of Talent Agents (the “ATA”). In aggregate, ATA members represent 90% of the artists working in the entertainment industry. The association of Talent Agents, https://www.agentassociation.com/ [https://perma.cc/VUC9-VA6N] [https://web.archive.org/web/20221126171735/https://www.agentassociation.com/].
 Brian T. Smith, Sending Agents to the Principal's Office: How Talent Agency Packaging and Producing Breach the Fiduciary Duties Agents Owe Their Artist-Clients, 27 UCLA Ent. L. Rev. 173, 198 (2019).
 The practice of packaging involves taking a high-quality client script, attaching premium actors and directors, and presenting buyers with a shovel-ready project, with the goal of creating gravity sufficient to pull a project rapidly through the bureaucratic piping of media companies to production.
 At the height of CAA’s power, Ovitz brokered the sale of Columbia Pictures to Sony and advised Coca-Cola on some of their most influential branding campaigns throughout the 1990s. Mike Mills, Disney Hires Michael Ovitz, Hollywood's Star Dealmaker, Wash. Post (Aug. 15, 1995), https://www.washingtonpost.com/archive/politics/1995/08/15/disney-hires-michael-ovitz-hollywoods-star-dealmaker/84610c49-07bb-4257-8731-678ecb5cf592/ [https://perma.cc/4YM4-QBFV] [https://web.archive.org/web/20221126172433/https://www.washingtonpost.com/archive/politics/1995/08/15/disney-hires-michael-ovitz-hollywoods-star-dealmaker/84610c49-07bb-4257-8731-678ecb5cf592/].
 Organizational Mediation of Project-Based Labor Markets: Talent Agencies and the Careers of Screenwriters, 64 Am. Soc. Rev. (1999) (Violaine Roussel & Denise Bielby eds., 2015) (discussing the disparity in stances, bargaining positions, and outcomes between those successful enough in Hollywood to attract representation at major agencies and those who are represented by boutiques).
 Scale is the most traditional point of leverage exercised by agencies, as it imposes an increased reputational restraint on buyer conduct through the looming threat of losing access to a plethora of crucial talent.
 Matthew Blake, Private Equity Shines Spotlight on Talent Reps, L.A. Bus. J. (Apr. 4, 2019), https://labusinessjournal.com/news/weekly-news/private-equity-shines-spotlight-talent-reps/ [https://perma.cc/KUE2-8VNT] [https://web.archive.org/save/https://labusinessjournal.com/news/weekly-news/private-equity-shines-spotlight-talent-reps/].
 Brandon Drea, The Current Antitrust Dispute between the Writers Guild of America and Hollywood Talent Agencies: A Modern Retelling of a Favorite Hollywood Classic, 9 Ariz. St. U. Sports & Ent. L.J. 98 (2020)
 Scott Roxborough, Why Production Companies in 2022 Will Need to Get Big or Go Home, Hollywood Reporter (Dec. 29, 2021), https://www.hollywoodreporter.com/business/business-news/entertainment-consolidation-trend-2022-1235059819/ [https://perma.cc/2RSJ-QCLE] [https://web.archive.org/save/https://www.hollywoodreporter.com/business/business-news/entertainment-consolidation-trend-2022-1235059819/].
 The commercial realities anticipated by most, if not all, high-profile streaming ventures have failed to come to fruition, shifting the necessary operating outlook from growth at all costs (Disney+ is slated to spend $30 billion on content his year alone, with an operating loss of over $5 billion) to scarcity-conscious profitability. Sarah Krouse, Robert Iger Returns to Disney Facing Radically Different Streaming Landscape, Wall St. J. (Nov. 22, 2022), https://www.wsj.com/articles/robert-iger-returns-to-disney-facing-radically-different-streaming-landscape-11669150125 [https://perma.cc/A9QT-JP33] [https://web.archive.org/save/https://www.wsj.com/articles/robert-iger-returns-to-disney-facing-radically-different-streaming-landscape-11669150125]. As the bedrock assumptions that motivated these paradigm shifts are proven outmoded, the macro-outlook remains bearish, and the domestic streaming market grows fiercely competitive and oversaturated, pricing structures will continue to shift, and a producer’s decision to default to distributing content through a vertically integrated streamer increasingly suspect, possibly ignoring greater commercial potential lying in selling, licensing, or releasing shows on linear television and movies theatrically, at least initially. Nicole Sperling, Netflix Loses Subscribers for the First Time in 10 Years, N.Y. Times (Apr. 19, 2022), https://www.nytimes.com/2022/04/19/business/netflix-earnings-q1.html [https://perma.cc/24X6-MATU] [https://web.archive.org/save/https://www.nytimes.com/2022/04/19/business/netflix-earnings-q1.html].
 Winston Cho, Fear for Your Megamergers: The Justice Dept. is (Finally) Taking Action, Hollywood Reporter (Nov. 19, 2022), https://www.hollywoodreporter.com/business/business-news/paramount-doj-simon-schuster-penguin-random-house-1235265709/ [https://perma.cc/Y3JN-PF6T] [https://web.archive.org/save/https://www.hollywoodreporter.com/business/business-news/paramount-doj-simon-schuster-penguin-random-house-1235265709/]; Alex Weprin, CAA-ICM Merger Pushed to Q2 Amid Justice Dept. Scrutiny, Hollywood Reporter (Jan. 13, 2022), https://www.hollywoodreporter.com/business/business-news/caa-icm-merger-pushed-to-q2-amid-justice-dept-scrutiny-1235074691/ [https://perma.cc/7GVW-VPLA] [https://web.archive.org/save/https://www.hollywoodreporter.com/business/business-news/caa-icm-merger-pushed-to-q2-amid-justice-dept-scrutiny-1235074691/]. The economics of streaming meant that the traditionally lucrative feature of back-end residual payments through syndication and relicensing content was changed for higher, one-time, upfront payments. See generally @gvaughnjoy, Twitter (Sept. 5, 2022), https://twitter.com/gvaughnjoy/status/1566899284569722882 [https://perma.cc/EL4V-58ZH] [https://web.archive.org/save/https://twitter.com/gvaughnjoy/status/1566899284569722882].
 Cynthia Littleton, WGA Sues Talent Agencies in Battle Against Packaging Fees, Variety (Apr. 17, 2019), https://variety.com/2019/biz/news/wga-sues-talent-agencies-1203191199/ [https://perma.cc/6HXE-KTBD] [https://web.archive.org/web/20221126183201/https://variety.com/2019/biz/news/wga-sues-talent-agencies-1203191199/]; “Sideletter to Franchise Agreement” (reflecting the terms which ended the strike between the WGA and CAA) https://www.wga.org/uploadedfiles/members/member_info/agency_agreement/WGA-CAA_Sideletter.pdf [https://perma.cc/893L-4WYE] [https://web.archive.org/save/https://www.wga.org/uploadedfiles/members/member_info/agency_agreement/WGA-CAA_Sideletter.pdf].
 Jennifer Mass, CAA Acquires ICM Partners in $750 Million Deal, Variety (June 28, 2022), https://variety.com/2022/tv/news/caa-acquires-icm-partners-1235305067/ [https://perma.cc/C36L-67TG] [https://web.archive.org/save/https://variety.com/2022/tv/news/caa-acquires-icm-partners-1235305067/].