Endeavor’s Patrick Whitesell: WarnerMedia strategy will “torpedo” traditional revenue waterfall

From: Patrick Whitesell

Date: Friday, December 11, 2020 at 12:56 PM

To: !WME Agents

Subject: Important Update Regarding Warner Bros./HBO Max Negotiations

I’m writing to everyone today to provide an update on where we are with our negotiations with Warner Bros. As I made clear to the Motion Picture group last week and will reiterate now: WME rejects their unilateral decision out of hand.

When Warner Bros. called us to inform us that they were going to announce their decision to simultaneously release movies in theaters and on HBO Max last Thursday, we immediately told them that we are disappointed with this decision, and quickly gathered the Motion Picture group for a call. Since then, we have engaged in follow up discussions with the highest levels at Warner Bros. and we are setting up a meeting today to work toward reaching a solution that protects the creative and economic interests of our clients.

We have already been at work on the movie “Little Things” – the first film on Warner Bros. release schedule and one that includes multiple WME clients. We have the most business with Warner Bros. out of any of the agencies and we are aggressively working to ensure that our clients are protected.

As I stated last week and will reiterate here:

• Warner Bros. announced a strategy across an entire slate of 2021 movies without consulting with their partners (our clients), not only disregarding our clients’ feelings about the strategy but in many cases constituting a contractual violation.

• This is a blatant attempt to self-deal and use our clients work to build their HBO Max streaming service, which our clients have no financial interest in.

• The simultaneous release on HBO Max will cannibalize the domestic box office and torpedo the traditional waterfall of economics that make movies profitable in the near and long-term for the studio and for our clients (a point our client Chris Nolan very articulately made this week: “Long-term, I think all of the studios know that the movie theater experience will bounce back and be a very important part of the ecosystem long-term. What you have right now in our business is a lot of the use of the pandemic as an excuse for sort of grappling for short-term advantage. And it’s really unfortunate. It’s not the way to do business and it’s not the best thing for the health of our industry”).
• In the current environment with COVID, studios by and large have been delaying releases, or with clients’ consent and inclusion in the process, selling the movies to streaming platforms. But what Warner Bros. has decided to do is push forward with a theatrical release in the darkest days of COVID. At a time where our own government leaders are telling us to stay home and away from loved ones, Warner Bros. is doubling down on ensuring box office failure and even worse, putting movie-goers who want to see a movie in a theater at risk.

• This decision is even more baffling and egregious knowing that a vaccine is here, eventually putting an end to the incredibly challenging storm we have all been living through the past nine months.

• Moreover, we don’t see this decision as a lifeline to the exhibitors or a way of supporting the existing business. Rather, we see this as a purely opportunistic attempt to re-write the rules of windowing to WarnerMedia’s favor, while the theater owners themselves have been brought to their knees due to COVID.

• Given that every movie is unique in how it is financially put together for our artists, and given that inside each movie there are unique characteristics from artist to artist, we will not accept a ‘one size fits all’ approach.

• Lastly, we take seriously the notion that moving our clients’ work to the HBO Max platform is effectively a free advertisement for HBO Max and we expect and will negotiate that consideration for our clients.

Again, these are all the points that we made last week and have been reinforcing since then. Going forward, we will engage with Warner Bros. on a movie by movie basis, and we will not stop until our clients’ creative and financial needs are satisfied.

Obviously, there is a lot of press attention around this—especially with public statements from other agencies and prominent artists—but we have a fiduciary responsibility to our clients to do our negotiating work in the confidential manner we always do to protect our clients’ privacy and interests.

We will continue to keep you informed as our negotiations progress. Please feel free to share this letter or use the content as talking points with your clients.

Thanks,

Patrick