Hollywood Report II: A Powerful Agent System Holds Hollywood Together, but China Has No Use for One Yet

In Hollywood, agents are the glue. If everyone is content to stick to their own job, someone has to stand in the middle and keep the whole thing running.

Xu Zhihao called us from a plane bound for the United States. It was three weeks before we left for Los Angeles, and from the cabin he hurriedly told us to be sure to find out why China has no Hollywood-style agent system.

I wrote that down in my 11th memo file. Around then we were asking a number of respected figures in China's entertainment industry the same question: "What in Hollywood is especially worth watching?" Xu Zhihao was one of them. He is a managing director at China Media Capital (CMC), which has worked with Hollywood often in recent years. Its best-known deal is its Shanghai joint venture with the animation studio DreamWorks, Oriental DreamWorks, which is now finishing post-production on Kung Fu Panda 3.

Still, I have to admit that until I too boarded a plane to the United States, the "Hollywood-style agent system" was the most baffling answer of them all.

More than two weeks later, we drove from downtown Los Angeles to Century City to meet Todd Hoffman. He spent 13 years at talent agencies, which makes him a veteran agent. Two years ago he left ICM, the fourth-largest agency in the United States.

He has no trouble recalling his life as an agent. When Hoffman said "crazy busy, completely worn out," his hand drifted to his collar, as if tugging at that damned, crisp necktie. He was probably also remembering the hundreds of emails a day, so many that agents often got used to working on their feet to spare their spines.

Screenwriter Bob Nelson is one of Hoffman's clients; they have worked together for 12 years. Hoffman's job was to find Bob work. In recent years most of the contracts were with television networks: not glamorous, but at least a steady income. Then Hoffman handed Bob's original screenplay "Nebraska" to independent producers Ron Yerxa and Albert Berger, who persuaded Paramount Vantage to buy it, and suddenly Bob was at the Oscars.

You could say Hoffman made Bob's dream of being a screenwriter come true. Even after Bob signed in January 2014 with WME, the second-largest agency in the United States, he still seemed unable to let go of his partner of 12 years. Todd had moved into management in July 2013, and Bob became his client once more. This time Todd only has to look after scripts behind the scenes; he no longer has to put on a tie and go out to cut deals for Bob. Yet Hoffman said, quite seriously: "Bob wants me to stay in his life, as his adviser and his producing partner."

That sounds a bit too sentimental, but the story of Bob and Hoffman is no great exception. "Everything starts at the agencies," said Lucia, an agent's assistant at UTA, the third-largest agency in the United States. "In Hollywood, everyone knows the agency is the core of the entertainment industry."

It's true. Tim Dragger graduated from the USC film school five years ago and is still only a writers' assistant, which leaves him somewhat discouraged about his career. Sometimes he puts it down to not having an agent. "If you have an agent, it's pretty common for your first job to be as a writer on a TV show, without ever going through the assistant or coordinator stage," Tim said.

Writers' assistant Tim Dragger's career has not gone smoothly

In the agency business, people call this "giving you a chance to be seen."

For others, agents matter because they nail down every money-related detail of a deal. Stern Sergei is a film composer from Russia who plans to find an agent in the next two or three years. "An agent will handle the business side for me," he said, "and then I won't have to worry about money at all."

Even fresh graduates know perfectly well that if you want to survive in Hollywood and get into the studio system, agents matter. "Whether it's the Big Six or the strong independent production companies," said Zhang Xu, who has just graduated from film school, "an agent is pretty much the only way to connect talent with money."

That is why nearly every textbook on the Hollywood film industry and its economics devotes a separate chapter to agents, usually placed in the middle of the book so that it can tie all the other parts together. It feels as if so many people have crowded into Hollywood that someone has to stand in the middle and manage them.

One statistic: roughly 80% of the people who work on the business side in Hollywood have spent a year or so at an agency. You will also find that the big names in entertainment management are more likely to come from the ranks of these managers. Barry Diller was once CEO of Paramount and co-founded the Fox network with Rupert Murdoch. Recalling his days at WME, Diller said he learned everything there:

"At 19, I thought it was a gold mine, and I wanted to profit from everything that was happening. I would carry home piles of files and read every detail in them... Some people boast that they studied at Oxford. I was proud to have studied at WME. To me, WME was the greatest library in the world. That may sound pretentious, but it's an accurate comparison."

Another famous name "studied" alongside him: David Geffen, who served as vice chairman of Warner Bros. Pictures in the 1970s and later founded Geffen Records.

Barry Diller, image from Bloomberg

But lately the gold mine seems to have hit hard times. Artists like Sergei still complain that agencies "only see money," yet changes in the film business and the wider entertainment industry mean that money is no longer as easy for agencies to make.

Take agents who represent screenwriters. Studios lean more and more on existing IP and spend less on developing scripts, so writers earn less, and the 10% commission agents take shrinks with it. Hoffman joked: "They used to swagger around in Mercedes; now they drive Hondas." And back when Entourage, HBO's series about agents, first aired, they were even riding around in rumbling Hummers.

Entourage has since been made into a film. A day after it opened, we met TV producer Tim Marx, who worked on the show's first season. He told us: "The talent agencies' (good days) are over."

TV producer Tim Marx said: "The talent agencies' (good days) are over."

Remembering the instruction we had been given before we left, we were taken aback.

He may well be right. The internet is changing where careers in Hollywood's entertainment industry begin; people no longer need an agent to get "seen." If that 10% commission once paid for what Ronald Coase called "transaction costs," it now looks unnecessary.

So before meeting Franklin Leonard, the question that interested me most was this: now that major producers can read almost every original English-language screenplay directly on the "Black List" website he founded, are the inboxes of screenwriters' agents any emptier than they used to be?

I also tracked down a software engineer who used to work at IMDb Pro. This film database, owned by Amazon, also looks like a threat to the agencies. It gives registered users information on the cast and crew of all kinds of film and TV productions, contact details included. And the tags in the IMDb Pro database are almost as detailed as the agencies' own, down to the color of an actor's eyes.

But Franklin said firmly that he has no wish to replace agents, and that both agencies and management companies matter. (Add the law firms, and you have Hollywood's three pillars.)

The "Black List" website

"What we can do is increase the number of people interested in a script. Where there used to be two, we can make it four or five. The greater the demand, the higher the price," Franklin said. "But in the end, someone still has to talk money. If three people want to buy it, someone has to tell the writer which one to pick."

If anything, the database sites have done agents quite a few favors. Take Verve, which has only one-tenth as many clients as CAA and WME, Hollywood's two biggest agencies. The small firm has struck a deal with the Black List to post every undeveloped script by its screenwriter clients on the site. That probably saves it a few wasted phone calls.

Wang Jue, a former IMDb Pro engineer, said that for many moderately known artists, it is their agents who maintain their accounts. Some agents also take great pains over an actor's profile, on the logic that the more complete and clear an artist's information, the more likely they are to be "seen." Even the STARmeter ranking on IMDb Pro has become a bargaining chip in agents' negotiations.

Marx, too, explained that he did not mean agencies had become dispensable. After a few gloomy-sounding remarks, he eagerly pitched us a company co-founded by his old friend Brian Robbins. Called AwesomenessTV, it is one of the top short-video companies in the United States, on a par with Maker Studios. But because it represents a large stable of YouTube stars, Marx calls it an agency.

AwesomenessTV signed online stars and cast them in the film "Expelled"

"For all the agencies, it's nothing but the internet," Marx said. "They've all seen the trend." In other words, the business is very different from what it used to be, but it is still a terrific business.

Besides shifting more resources to a new growth area, sports (widely attributed to the arrival of big financial groups), the two biggest agencies have also started adding new departments tied to film and television. Even where they seem to be digging deeper into film, the agencies have followed the money.

CAA's endorsement and lifestyle departments have grown to 10 agents over the past few years. They are trying to get involved in stars' business outside their film contracts, including product endorsements and their own brands. UTA, meanwhile, has hired 12 agents to build up its electronic and video game business.

Besides offering clients new services, agencies also have to warn them which new opportunities may be full of traps. Talent all over Hollywood is trying to rush into Amazon and Netflix, whose video businesses seem to be booming. But agents also worry that these companies' business models could undermine the old syndication model of reselling content and cut into what a film actually earns.

Agents still seem to have a sharper eye than most. "We don't have that experience; we don't know who can actually make a good film," Franklin said. Professional agents do.

This is a specialized Hollywood. Huge as it is, its division of labor may be finer than you imagine. David Altenau, founder of the visual effects company FuseFX, compared this specialization to being an "athlete," while Rolan Poindexter, who makes TV animation in Fox's film division, said everyone has their own niche, and "switching careers here isn't that easy."

If everyone is content to stick to their own job, someone has to stand in the middle and keep the whole thing running. Just as lawyers have not been abolished, specialization means agents will be around for a while yet.

Now we can return to the question Xu Zhihao raised at the start: why does no such system exist in China? Perhaps the answer is that for the Chinese market all of this is only just beginning, and the division of labor and specialization still fall short. And people always think about "transaction costs" far too simply.

In Hollywood, we met someone like that too. Jennifer Warren, 70, was once a fairly well-known actress and had an agent for most of her life. When she grew older and turned to producing, she no longer wanted one. She told us she was "fed up" with people who stick their hands into everything. And Jennifer believes she has lived in Los Angeles long enough to know on her own "which doors are open."

Jennifer Warren, 70, is "fed up" with agents

But most people are not like that.

Ten years ago, New York Times reporter Susan Dominus interviewed Maggie Cheung to understand why this brilliant actress would not become a Hollywood star. In the end, this American, so enthusiastic about Chinese culture, wrote in a noncommittal tone that Hollywood's relatively autocratic system was hard for Maggie Cheung to imagine. For example, when an agent is choosing scripts, even a major star cannot read them alongside him.

"But even something as basic as an audition was unfamiliar territory for Maggie Cheung. In Hong Kong, from the age of 18, those roles had come straight to her."

Agents connect everyone along the industry chain and keep the whole Hollywood system running. But all of this is still a long way from the Chinese market. The next installment is about "Hollywood's money": for example, why Alibaba can't find anything suitable to invest in.