Update: Internal Memo Says No Deal On UTA/Paradigm Merger

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Update

An internal memo obtained by Pollstar states that, while UTA and Paradigm were in talks regarding a potential merger, news of which broke Friday (June 7), no agreement was reached and the deal is off.

“After careful consideration and in consultation with leaders of both the Music and Talent/Literary executive groups, I have made the decision to shut down discussions and not make this deal,” Paradigm chairman Sam Gores wrote to Paradigm staff June 9.

“There are reasons why a combination like this would have made sense for both agencies, but in the end, what is more compelling for us is how unique the culture at Paradigm is and how powerful our independent path can be.”

“For obvious reasons, it is not possible to communicate with the entire company when a conversation like this occurs. Those who know me and the history of how we have built Paradigm know that I always make decisions regarding the future of the business by considering what is ultimately in the best interest of our agency as a whole and all of our clients.”

The memo also notes that the offer, made by UTA for both Paradigm’s Talent/Literary and Music divisions, would have represented “one of the largest talent agency transactions in the history of our business.”

Pollstar also received a statement from UTA CEO Jeremy Zimmer, which read: ““We admire Sam and the business he and his colleagues have built. We are disappointed we didn’t come to an agreement. But we wish him and everyone at Paradigm the best.”

The full memo from Sam Gores below:

Dear Colleagues:

I want to address the events of the past week and the press reports surrounding a potential transaction between Paradigm and UTA.

The fact is that our industry is in an era of significant change and also unprecedented opportunity.

The complexion of what the agency business will look like has led all of the major agencies including ourselves to look at ways to strengthen their platforms and provide more resources to clients.

UTA made an offer to acquire Paradigm that would have represented one of the largest talent agency transactions in the history of our business.

The offer was made for both the Talent/Literary and Music divisions. This offer is a tribute to the work that all of us have done and the quality of the asset we have created together.

After careful consideration and in consultation with leaders of both the Music and Talent/Literary executive groups, I have made the decision to shut down discussions and not make this deal.

There are reasons why a combination like this would have made sense for both agencies, but in the end, what is more compelling for us is how unique the culture at Paradigm is and how powerful our independent path can be. 

For obvious reasons, it is not possible to communicate with the entire company when a conversation like this occurs. Those who know me and the history of how we have built Paradigm know that I always make decisions regarding the future of the business by considering what is ultimately in the best interest of our agency as a whole and all of our clients.

The past week has given us the opportunity to make us stronger both internally and externally. We should be proud of what we have built and be proud of our courage to bet on ourselves.

Let’s all get back to work and continue to do what we do so well.

For the Art For the Artist.

Sam

Original Story

News broke Friday (June 7) Paradigm Talent Agency and United Talent Agency are considering a merger, according to reports in both The Hollywood Reporter and Billboard, a move that would significantly alter the balance of power in the agency business. Subsequent reports, however, gave conflicting accounts with Deadline claiming there is “no deal,” while a Hits story cast the deal as a foregone conclusion claiming the deal is “99% done” and UTA “is buying out” Paradigm.
 
While both Paradigm and UTA declined comment for this story, Pollstar heard rumblings several months back of just such a merger. At the time an agency source denied the rumors, but merging two mid-level agencies makes business sense considering the combined vertically integrated entity would better compete with WME and CAA, the two dominant agencies.
 
In this age of consolidation that comes amid a booming live business in which promoters, venues, management companies and agencies are expanding through organic growth and acquisitions, increasing market share is vital to survival and indeed prosperity. This is especially important for artists in the higher echelons of the business who often desire services beyond tour routing.
 
CTK Management’s Danny Nozell, who manages Dolly Parton, acknowledged as much in a statement following his client’s move to WME from APA.  “WME has a vast global network in the entertainment market,” he said, “especially in the areas that we have strategically identified as priority such as licensing and unique commercial and touring opportunities.”
 
That a UTA-Paradigm merger or acquisition would bring different and complementary assets to the table—a key to a successful partnerships—is all the more reason to believe an M&A is under discussion.

Paradigm is considered to have a more developed music roster that includes a number of major acts, including: Ed Sheeran, Coldplay, Kenny Chesney, Dave Matthews Band, Phish, Lorde, Alessia Cara,  Halsey, The Black Keys, Kasey Musgraves, Imagine Dragons, Sturgill Simpson, Shawn Mendes and Billie Eilish. It’s a roster they’ve built in part with acquisitions, including Monterey Peninsula Artists and Monterey International, the agency’s new head of music Marty Diamond’s Little Big Man, The Windish Agency and AM Only.
 
While UTA has a solid music department, especially with its acquisition of Neil Warnock’s UK-based The Agency Group in 2015 and Circle Talent in 2018 (its roster now includes Guns N’ Roses, Muse, Post Malone, 21 Savage, DJ Khaled, Mariah Carey, Lil Uzi Vert, Marshmello, Kaskade and Illenium), it’s made its bones with an A-list acting roster that includes Angelina Jolie, Sofia Vergara, Kevin Hart, Gwyneth Paltrow, Elizabeth Banks, Kate McKinnon and Chris Pratt among many others.

Some industry observers, however, are skeptical of a merger taking place, at least any time soon. The music sector is but a part of both UTA and Paradigm businesses. And these days some of the higher echelon artists, including U2, Taylor Swift, Madonna  and others are working directly with promoters and eschewing agencies for the touring side of their business. In some cases, this has led to agencies dropping fees.

Additionally, any negotiations will be impacted by the ongoing dispute between the Writers Guild of America and Association of Talent Agents that, a source told Pollstar, makes it unlikely a deal would be struck before resolution. UTA is one of the “Big Four” major agencies that was sued by the WGA in April (along with ICM, CAA and WME) alleging breach of fiduciary duty over “packaging” fees — charged by agencies for bundling talent to bring a TV or film package together. While the parties have reportedly returned to the table to hammer out an agreement, any resultant deal is likely to alter forecasting of talent costs.

It’s also possible that the recent injection of investment capital by hedge funds and venture capitalists into agencies including CAA, coupled with the recent filing of an initial public offering by Endeavor, is fueling speculation that mid-level ten percenteries like UTA and Paradigm are eyeing consolidation in order to keep up with the Joneses.

One observer told Pollstar that a major difference is that CAA and Endeavor hold far more diversified portfolios with holdings in not just music, TV, film and literary divisions but in sports representation, NCAA branding, modeling agencies and other areas making them more attractive for investment. On the downside, VCs and other investors expect rapid return on that investment, which could result in not just job losses but, some fear, a stifling of creativity and risk-taking that is vital to the entertainment industry.

When considering reports of mergers and acquisitions, it’s fair to consider cui bono — who benefits?

Another observer, who asked not to be identified, put it this way: “I think that Paradigm needs help in the film world and UTA could use help with some of the hipper music that Paradigm has to offer. We need more boutique agencies (which is what Paradigm used to be) but it seems like they are swallowing up the smaller guys. I’m not sure who benefits.”