Deconstructing Pop Culture

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Business Plan for a Talent Agency

November 26th, 2007 by David Kronemyer · 2 Comments

It is axiomatic that in any business depending on creative talent, personal relationships are extremely important, if not decisive. They are, among other things, the vehicles or devices through which new, emerging talent is presented to institutional decision-makers at record companies, film studios and publishing houses. These firms in turn depend upon a steady supply of new talent in order to create and then exploit consumer demand for marketable properties, and to refresh and replenish their portfolios of intellectual property rights.

Strangely, however, a profound disconnect lurks in this process. Points of entry are obscure, mainly orbiting around an ad hoc confederation of agents, managers or lawyers. This is problematic, because (a) their skills, such as they are, typically lie outside the “creative” realm; (b) they mainly view evaluation and introduction as a way to drum up interest in their primary business, which is securing employment (agents), negotiation (managers) and documentation (lawyers); and (c) they are bedeviled with conflicts of interest.

Even after the entry points have been correctly identified, the neophyte must navigate a bewildering obstacle course, just to get an audition (or other form of consideration). The decision-making process is fraught with caprice, subject to pressures and factors – having nothing to do with the merits of the work – that would boggle the mind of anyone involved at a high level in, say, an industrial concern.

We have devised a way to commercially exploit this entropy. Rather than viewing it with trepidation, we welcome it as an entry barrier for other firms that might seek to emulate our business model. Our principals have superb, on-going relationships with influential decision-makers in the music, film and publishing businesses. We are on top of current trends and tendencies in the marketplace, as well as who in what company is looking for a particular style or genre of material. For a fee, we (or a person with whom we subcontract) will evaluate an aspirant’s body of work, or some selection from it – anything from a single song or screenplay, to an entire demo album or novel. It is the quality of the persons with whom we have developed business relationships, and their abilities and stature within the industry, that will qualitatively differentiate our venture and make it a success.

We then will use professional judgment and decide if there is an appropriate company that might be interested. If we are successful in brokering a relationship between that company and the artist, then we will become contractually entitled to receive additional remuneration, such as a royalties override or percentage of income. At that point, we also can refer the artist to appropriate candidates to become the artist’s professional representatives (manager, agent, lawyer, etc.).

Because our involvement with the artist will not be as labor-intensive as these other professionals, we expect we will be able to achieve economies of scale, whereas they cannot. Furthermore, in addition to fees, we also will take a percentage of the artist’s income. This only will become significant, of course, if the artist is commercially successful. However, we anticipate, to some extent, this will become a self-equilibrating process. In other words, we hope our expertise in identifying and selecting the “best” (i.e., most commercially demanded) artists, in turn will maximize the likelihood they will become financially successful, thus resulting in back-end participation. This being so, although we will be screening material and ultimately deriving revenue from the commercial exploitation of certain artists’ works, we anticipate all of our first-year income will be derived from reviews-for-hire.

We also anticipate entering into collaborative agreements with strategic music industry partners, for example, musician “community”-type web-sites, that already have relationships with, in many instances, thousands of different bands. We believe this category of site will supply desirable leads, and be a good type of place to promote, market and advertise our services. We also might create custom “how-to” media pieces for these sites, for example, “how to mic a guitar amplifier” or “how to set up a vocal chain.” These in turn will further stimulate demand for our services.

To encourage this type of interactivity, we intend to develop a robust web-site of our own. It will permit users to post songs and videos, and also will permit other users to rate them. We do not, however, intend simply to emulate other social networking sites. Rather, we want to take the aspects of those sites (like Virb and Imeem) that capture and retain visitors, thereby keeping them interested. One of the main reasons why these sites work is personalization. Thus, for example, our web-site not only will offer our services, but also sell memberships to musicians. With a membership, the musician will, for example, be able to access additional features of the site, specifically tailored to his/her needs and requirements. These features will assist the musician’s career development.

ANALYSIS

I. It Never Has Been More Difficult for Aspiring Performers to Attract the Attention of Organizational Decision-Makers

Americans love to perform. Consider the following few examples:

         The talent competition American Idol is the number one ranked television show in the United States; in its fifth season in 2005, 30-second spots cost $705 thousand each, McClellan, S., “Fox Breaks Prime-Time Pricing Record,” Adweek (Sep’t 12, 2005).

         With 198 stores, Guitar Center is the largest dealer of musical instruments in the world. There is no shortage of customers for its guitars, amplifiers, percussion instruments, keyboards, and pro-audio and recording equipment – in 2006 it had net sales of $2.030 billion, Guitar Center, Inc. 2006 10K, 30 (Dec. 31, 2006). In June 2007, it announced it had agreed to be acquired by Bain Capital for $2.1 billion – a 26% premium over its pre-announcement closing share price, Guitar Center, Inc., R. 14(a)(12) Statement (Jun. 27, 2007).

         There are 1.4 million band profiles on MySpace.com, owned by Fox Interactive Media, a division of News Corp, Haines, K., “Talented Musicians Use MySpace to Reach New Fans,” TechBeat (Aug. 15, 2006).

         And, every year, legions of contenders descend on Hollywood – aspiring singers, musicians, actors, screenwriters, artists and directors. The Writers Guild of America registers over 55,000 screenplays annually, http://www.wgawregistry.org/webrss/ (Jul. 15, 2007).

Americans love music. There is no shortage of music, nor is there any shortage of musicians. Yet, for all of this activity, conditions of entry for new performers never have been more daunting. “Record sales are tanking, and there’s no hope in sight” recently proclaimed Rolling Stone magazine, Hiatt, B. & Serpick, E., “The Record Industry’s Decline,” Rolling Stone (Jun. 19, 2007). The cause, of course, is the paradigm shift brought about by the digital music revolution. As a result, new artist signings by record companies have declined precipitously, leaving most musicians to fend for themselves. The movie business presents even longer odds. Out of those 55,000 screenplays, only 607 theatrical motion pictures were released in the U.S. in 2006, Motion Picture Ass’n of America, 2006 U.S. Theatrical Market Statistics (Jul. 15, 2007).

Seen from this perspective, the main question facing promising new talent is not perfecting one’s act, or honing new material. Rather, it’s: how does one market oneself effectively to the gate-keepers? Such a formulation of the issue hides a puzzle, because, as in all matters of artistic preference, there are no “objective” standards per se. Screenwriter William Goldman famously opined that “Nobody knows anything” about success in Hollywood, Goldman W., Adventures in the Screen Trade: A Personal View of Hollywood and Screenwriting (1989). Brandon Tartikoff, formerly President of NBC Entertainment, similarly said, “All hits are flukes,” Corliss, R., “Coming up from Nowhere,” Time Magazine (Sep’t 16, 1985).

II. Working Against Aspiring Performers Is the “Logic” of Hollywood Decision-Making

However you want to interpret these aphorisms, the fact of the matter is Hollywood decision-makers are in the grip of a herd mentality. Executives strive to emulate the accidental success of their peers by attempting to clone exactly the same thing, evidently on the principle that if the public liked it once, they’ll surely like it again. The inevitable result: a culture of conformity and a lowest-common-denominator aesthetic, Bielby, W. & Bielby, D., “Institutionalized Decision Making and the Rhetoric of Network Prime-Time Program Development,” 99 Am. J. Sociology 1287 (Mar. 1994); Miller, D. & Shamsie, J., “Strategic Responses to Three Kinds of Uncertainty: Product Line Simplicity at the Hollywood Film Studios,” 25 J. of Management 97 (1999) (although the conclusions of these authors are based on the television and film industries, respectively, they apply to the music business with equal force and effect).

One only needs to look at the logic of the creative executive (itself a misnomer) to understand how this works. First, the safest thing to do is absolutely nothing, because any decision you make inevitably will be wrong (in that it will conflict with your bosses’ preference, will result in an undemanded work, etc.). The creative executive assumes an almost unimaginable burden upon electing to become the proponent of a property, or a project. Not only is there the risk of choosing the wrong thing – there is the tantalizing prospect of all the other potentially “right” things, i.e., hypothetical alternative courses of action, that would have been available (at least in principle), if only one had not elected the course upon which one has embarked. As a result, the creative executive becomes immobilized with fear and indecision. Most of such an executive’s career trajectory is measured in prevarication, obfuscation, and, when pushed, learning how to say “no,” as politely as possible.

Second, in the unlikely event one absolutely is forced to make a decision, again the safest thing to do is whatever seems to be the prevailing mood of the herd, which is why two movies come out in the same season on, say, volcanoes (Dante’s Peak and Volcano, both released within months of each other in 1997; Deep Impact and Armageddon, both released within months of each other in 1998). From a phenomenological standpoint, this illustrates how creative choice is constrained by the industry’s “background” – its matrix of cultural practices – which, in turn, offers a disclosive space defining roles, context and significance. If one must act, the best way to rationalize or justify one’s choice is by appeal to consensus and precedent.

Third, you actually might attempt to assess an idea’s creative potential “on its merits.” Although here, you most likely will be subject to a form of hypnotism practiced by magicians with powers much stronger than yours – the creative talent, on the prowl for a deal. Take, for example, the typical Hollywood “pitch” meeting for a film proposal (which, again, just as easily could be a new-artist audition). The decision to “green-light” a picture (move it towards production), often is taken quickly, sometimes within 15 minutes. Yet, tens (if not hundreds) of millions of dollars ride on that outcome.

Bizarrely, much of the success of a “pitch” depends upon the creative frenzy into which the “pitcher” (i.e., the writer) can work the “catcher” (i.e., the studio executive) – that is, pander to the studio executive’s belief that he (she), too, is a creative soul, Elsbach, K. & Kramer, R., “Assessing Creativity in Hollywood Pitch Meetings: Evidence for a Dual-Process Judgment Model of Creativity Judgments, 46 Academy of Management Journal 283 (2003). Needless to say, this seduction process has little to do with the commercial or aesthetic merit of the property being “pitched.”

III. Organizational Decision-Makers Prefer Repeat Dealings with Known Players

One of the most common responses to these problems is for the firm to adopt a small stable of transacting partners, perceived to be successful, or at least consistent. “Film distributors exhibit a strong tendency to contract repeatedly with the same sets of principals. They also allocate more resources to the films produced by those with whom they have had prior interactions – approving larger production budgets, marketing these films more heavily and scheduling them on more attractive release dates.”

One might think such a course or pattern of dealings only could be based on shared economic success. The fact of the matter, though, is “these films actually perform worse at the box office. Distributors therefore would almost certainly benefit form allocating their resources more evenly across exchange partners,” Sorenson, O. & Waguespack, D., Social Structure and Exchange: Self-Confirming Dynamics in Hollywood 2 (Sep’t 7, 2005).

IV. Creative Executives also Are Subject to Becoming Mesmerized by “Star Power”

Another perceived solution is the widespread tendency among organizational decision-makers to “go with the biggest name possible,” that is, mobilize limited corporate resources (such as a production budget, or an A&R budget) to attempt to secure the services of a “star.” The case for doing so is simple: the star has a pre-fabricated constituency, built with some other company’s variable marketing spend, which in turn will result in greater remuneration for the firm.

Industry intuition to this effect notwithstanding, studies show stars play no role in the financial success of a film, Ravid, S., “Information, Blockbusters and Stars,” 72 The Journal of Business 463 (Oct. 1999). Similarly, the movie star’s involvement does not increase the valuation of the film company releasing the movie with the star in it; in other words, there are insufficient grounds to conclude stars add more value than they themselves capture, Elberse, A., The Power of Stars in Creative Industries: Do Stars Drive the Success of Movies? (Jul. 30, 2006). This misallocation of entrepreneurial rents has created a strange economic environment where the star frequently ends up earning more than the firm. As a result, the firm frantically seeks co-venture and co-financing relationships in order to diversify the incredible risk that any multi-million dollar venture with something as volatile, unpredictable and idiosyncratic as a “star,” presents.

V. We Have Figured Out a Way Into the System

We believe creativity is unique. In other words, it cannot be bureaucratized or delegated, nor is it amenable to efficiencies of production, or economies of scale. The market for organization and delivery of talent presently is fragmented and disorganized. In fact, it shares more characteristics with a bazaar, as opposed to an organized exchange. Buyers and sellers only coincidentally encounter each other in their peregrinations. When they do, each frequently is incomprehensible to the other. As we observed earlier, the problem is exacerbated by the fact that both parties think they know what the other wants, or needs, when only rarely is this the case. Our plan, as set forth at the Summary, creates a new template to address these issues.

VI.  The Case for Action

Our initiative comes at a particularly poignant time, when Hollywood’s market share is dramatically decreasing as it competes with the Internet, videogames, and other forms of leisure activity having nothing to do with the entertainment business per se. 

         Despite much hoopla, the 2007 summer box office is underperforming to expectations, as audiences tire (and who can blame them) of many series’ third sequels, Sanders, P., “Third Time’s No Charm for Summer Blockbusters,” Wall St. J. (Jun. 25, 2007).   

         The picture is not much better for home video.  Consumer spending on home entertainment sales and rentals slipped 4.8% to $10 billion during the first half of 2007,” Netherby, J., “Vid toppers blame movies, not medium,” Daily Variety (Jul. 15, 2007).  The under-performance of the summer box office, of course, does not auger well for the home video market around Christmas, when consumers will have a second bite at the same titles, this time on DVD.

         Another consequence of an under-performing 2007 is that studios will feel additional heat in 2008, McNary, D., “Studios feel pressure to deliver big films in 2008,” Daily Variety (Jun. 15, 2007).  And this pressure only will be exacerbated by the continued financial presence of so-called “hedge funds,” most of which could care less about abstract issues such as “creativity,” and instead worry solely about more mundane topics such as return on investment, Goldsmith, J., “Wall Street wise to summer box office,” Daily Variety (Jan. 21, 2007). 

        Finally, there are our friends in the music business.  Despite a massive surge in digital music sales last year, the popularity of the fledgling market is still not making up for the slide in physical products, such as CDs.  According to figures released by the International Federation of the Phonographic Industry, the global recorded music market in 2006 slipped by 5% year on year to $19.6 billion last year, down from $20.7 billion in 2005.  The gloomy news marks the recorded music industry’s seventh consecutive year of falling sales,” Masson, G., “Music sales continue to fall – Digital fails to replace lost CD revenue,” Daily Variety (Jul. 4, 2007).   

This disintermediation has enhanced the stakes for the remaining players, who increasingly find themselves in a death-spiral match of musical chairs at a constantly-shrinking table.  For example, as the ant-hill continues to shrink alarmingly in size, the long-knives have come out at the Hollywood talent agencies.  Ed Limato, agent for (among others) Mel Gibson and Denzel Washington, recently was fired by the agency ICM as it seeks to reorganize its financial and business affairs, Kilday, G., “Limato, ICM Marriage on the rocks,” Hollywood Reporter (Jul. 14, 2007); Fleming, M., “Agency world in Limato limbo,” Daily Variety (Jul. 15, 2007). 

And, negotiations between large media companies and the Writer’s Guild a new contract promise to be particularly contentious, as the parties argue for increased slices of a diminishing pie, Sanders, P., “Digital Era Brings Messy Bargaining,” Wall St. J. (Jul. 14, 2007).  As stated by one of the companies’ negotiators, “The source of our difficulties lies with the rapid technological and commercial changes that have been and are occurring within this industry,” McNary, D., “WGA negotiations still combative – Writers, producers still on the attack,” Daily Variety (Jul. 18, 2007).

VII.  Conclusion

An environment of constriction, rather than expansion, creates tension.  This tension in turn highlights the practices comprising the status quo.  Primary among these practices is the outmoded mechanisms that exist for the identification and cultivation of new talent.  Not only are they capricious, but they also are untimely and inefficient, in the sense that many creative newcomers simply are discouraged from competing further, because they cannot decipher the code.  Ironically, those who opt out may be far more creative, and possess greater commercial appeal, than those who run the gauntlet and blend into the system. 

We would like to be able to open the door for those who choose to retain us.  While we cannot of course unilaterally transform them into stars, we can at least assure their material receives professional evaluation – and, if appropriate, introduction to the company most likely to be receptive to it.  We believe such an entrant stands a far better chance of “making it,” than otherwise.