Endeavor Defied the Odds by Going Public. Now, It Faces Growing Pains

Endeavor defied its critics and the odds by successfully pulling off a public offering in April, but the company — a hodgepodge of live-events brands and talent representation — is facing major obstacles navigating the global pandemic and encountering resentment among select players who feel left out in the cold.

While Endeavor’s stock has overperformed for the two quarters of its publicly traded existence, some of the roughly 300 employees with equity in the company are furious over their diluted options and the new barriers to monetizing their stakes that have been put in place, three insiders familiar with the fraught situation tell Variety.

A New York Post report from late August described some stakeholders — particularly the hard-charging dealmakers at Endeavor’s talent agency WME — as “fuming” when they were informed this spring that their stock rewards were reduced and tacked with longer vesting schedules. Daggers are pointed at CEO Ari Emanuel and other longtime players at the company, two sources say. The beef is largely among the most successful at the company who are not a part of that legacy group who have built up the firm over two decades, other insiders say.

“This is people with boats fighting the people with yachts,” says one source.

Another top Hollywood dealmaker was not surprised discontent would arise at Endeavor, saying that “when a company so bespoke goes public, the two circles of ‘haves’ and ‘have-nots’ get wider. There’s an art form to making everyone feel important when you’re growing.”

Some of the smoothing of bruised egos has fallen to Mark Shapiro. The president of Endeavor says he “can’t in good conscience really speak to the way each person feels, especially when you have 6,000 employees and often many won’t tell someone in my position how they feel. What I can say is that we have a strong, loyal and resilient global team.“

Shapiro adds that employees “weathered some serious storms in the last 18 months. I’m certain their resilience, creative abilities and team mentality will endure and pay off for them individually. I’m truly proud of that.”

Squabbles over stock are not the only contributors to a changing culture at Endeavor. Soon the company’s boutique production entity, Endeavor Content, will announce a majority stake sale that will keep its owner compliant with the code of conduct set by the Writers Guild of America. Emanuel and his team are seeking a minimum of $500 million for the asset. Potential buyers include Kevin Mayer and Tom Staggs’ new Blackstone Capital-backed venture.

At the same time, Endeavor faces headwinds from the COVID-19 delta variant, which has caused complications for two of its prize assets: Ultimate Fighting Championship and the Miss Universe pageant. That’s to say nothing of a rapidly changing landscape for content creators, who are finding that the old ways of profiting are being destabilized by new modes of distribution. And while Endeavor recently raised its revenue target for the year and slowed the pace of its cash burn, the company still has $5.9 billion in debt that requires hefty interest payments.

“It’s like what you tell recovering patients who are facing a challenging illness — they’re doing as well as can be expected,” says Gene Del Vecchio, a marketing and entertainment consultant. “Endeavor gets really high points for resilience and for persistence, but they are still saddled with a lot of debt, and they are dealing with issues surrounding live events and the other ways they make money.”

Streaming has led to some splashy deals for top talent looking to sell films and shows to a Netflix or an Amazon, but the implosion of the theatrical film business has taken a chunk out of back-end deals for top stars. Look no further than the current legal fight being waged by Disney and Scarlett Johansson, a client of WME rival CAA, over its decision to release “Black Widow” concurrently on Disney Plus and in theaters.

Endeavor is also struggling with the aftershocks of a settlement agreement with the Writers Guild of America, ending its lucrative practice of “packaging,” the industry term for the fees that agencies collected from studios for selling shows featuring their clients.

“It’s notoriously difficult to scale talent agencies,” says Hal Vogel, a veteran media analyst. “Stream- ing has disrupted or changed the trajectory of profitability for these companies, and packaging, which was a mainstay, is no more. That puts pressure on this business.”

Despite the business challenges and displeasure among Endeavor’s rank and file, analysts are impressed by Emanuel’s fortitude. After Endeavor was forced to abandon its initial plans to go public in 2019 among widespread skepticism from the investment community, many expected the super-agent to abandon his ambitions. But Emanuel persevered, managing to lead the company through the darkest days of the pandemic and improving its balance sheet to the point where it could successfully pull off an IPO.

Many in Hollywood and on Wall Street are surprised at the level of composure that the notoriously hotheaded Emanuel has maintained. CEOs of public companies need to be both diplomats and chess players, far from the barking bravado that has made Emanuel a feared leader and minor celebrity in his own right (the character Ari Gold on HBO’s “Entourage” was inspired by the agent).

“We’re impressed with how easily Ari has slipped into the role as CEO of a public company,” says one source. “It’s a transition, and he realizes that his highs can’t be as high and his lows can’t be as low.”

The question now is will Emanuel be able to maintain that equilibrium if Endeavor starts to stumble?

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