02// Economies of Influence : Moves over Announcements
If you hide it in plain sight, is it actually hidden?
|Jonathan||Sep 16, 2019|
First, a little housekeeping.
The next four emails will be about a topic I’ve spent the past year thinking about deeply and will probably dedicate more time to in the coming months: influence. What it does, how we use it, and what it does and doesn’t meant.
It’s also footnote season. If you see a number, scroll to the bottom. We source things over here.
Here’s a question I never thought I’d care about:
What do Yaa Gyasi’s Homecoming , Miss Universe Pageant, and this unreasonable portrait mode photo of Guy Fieri have in common?
While you think about it, allow me to pontificate briefly on one of my favorite yet obscure documents in the world: The S-1.
S-1’s are the autopsy reports of a business; if you know how to read it and what to look for, you can be better informed about what something might look like in the market. They are required by the Securities and Exchange Commission (SEC) before a company can publicly list itself and be traded on a national stock exchange in these here United States.
What makes it unique though, isn’t that its longer than a thesis with terrible font and horrific UX design. An S-1 tells you everything and nothing about what a business may be, before it enters the irrationality of the public markets. It’s a mix of storytelling, raw financial data, thoughts about what could happen, and what has already taken place. It’s one of the only documents actively consumed by the public and mandated by federal government concurrently. And there are new ones every day. But to ground an understanding of how influence works at scale, we’re going to go through the S-1 of a company that has an undue level of impact on your daily life in ways you might not normally think about.
Back to the question at hand: Yaa Gyasi’s Homecoming, Miss Universe, and Guy Fieri are all a part of the creative portfolio of Endeavor Group Holdings,, an exceedingly large talent and management agency that recently chose to go public. We’re going to annotate some specific parts of their S-1 to explore how a a company gains influence in a crowded market without having to publicly say you’re doing it.
4 Dimensional Chess
Talent management is a crowded space. Endeavor is from the only option for burgeoning talent. You’ve got CAA, ICM, and a host of other specialized firms that work across media and entertainment. There is no shortage of competition. Endeavor though, isn’t just one thing. It’s the result of large entities companies that merged, William Morris Agency, and Endeavor Talent Agency. The key difference isn’t just what they did before the merger, but in when they started. William Morris Agency opened its doors in 1898. Endeavor Talent Agency was started in 1995 by former William Morris agents. There are levels, and this is a different one.
Endeavor kicks off it’s S-1 with a declaration:
Put simply, the aren’t interested in the pie. They own the farms, trucks, kitchens, and grocery story, and the plastic packaging you open to eat said pie. Being known for one thing never precludes you learning a skill in another. That’s the value of obscurity; you can be a beginner as many times as you want to. If you do something for one hundred years, the byproduct of your consistency is expansion. You can think whatever you want, just know its might solely be based on what you don’t know.
Event Management and Brand Licensing seem like straightforward ideas. But here’s where it gets specific and tactical. These aren’t capabilities because they are just services, they exist anywhere your eyes move.
Let’s say you wanted to get to Fashion Week, but you don’t know who you need too, You really just need to book an Endeavor Experience , and you’ll be fine. Even better, no one has to know you didn’t know anyone. You look like you belong, because the person who got you in the room, represents the talent who is showing you what’s going to be on the shelves for next year.
Or maybe you’re a brand manager at a consumer products goods company, who needs an integration for a global campaign. You’re short on time, but have the big budget. Your boss told you make a splash. So you head over to see what the licensing opportunities are, and you stumble across:
What’s bigger than Madiba? Not much, but you are definitely getting promoted if you pull the trigger. The best part? You only have to pay to use it, not deal with trying to acquire anything.
It doesn’t matter which side of Endeavor you touch. In fact, they aren’t interested in you connecting the dots when you don’t have too. Just pick the service you need, and the wheel starts spinning exactly where you need it too. The brand you build is only as valuable as what it can extend into. Licensing is a bridge and a moat.
Big Bank take Little Bank (except when you own the bank)
For an independently owned ad-agency, it’s an incredible feat to be acquired. Given how difficult it can be to secure clients, nurture relationships, and continually produce award-winning work in a dynamic environment. Droga5 made a name for itself producing world-class creative, and building brands like Covergirl, IHop, Prudential, and Under Armour. If you’ve used your phone or walked with your eyes open in a city, you’ve seen their work. When Accenture Interactive came knocking, it made headlines, for good reason.
Funny thing about the phrase independently- owned; by definition, it only tells you who doesn’t own it, and nothing about who does. The devil isn’t in the details, it’s in the deal documents. For all the coverage of the Droga5 sale, none of the details would typically be made public. Unless, you know, the seller was going public and had too.
Unless of course, the silent owner of the agency was en route to going public. See again, Endeavor’s S-1:
And that’s far from all. Endeavor has been racking up assets like a guest verse from Drake in the summer time:
“That country stuff” that other people do…
When your hairstylist stops taking your calls….
Because DP’s and set designers make the world go ‘round…
Disney+ is cool, Apple TV is dope…but how do you think the NBA is getting on your phone this year?
It’s not what they know you for. It’s what you decide to be quiet about but have full knowledge and control over.
The only game(s) in town
The biggest bet here is that entering the public market will give Endeavor a leg up and position them for long term sustainability. But it’s never about what they call you; it’s about who you answer too. Endeavor answers to some firms that do not play around about what they want. Before they can list on the stock exchange, they have to do a serious reorganization, which they clearly outlined in a diagram that is violent on the eyes:
Direct your attention to the upper left hand corner. Affiliates of Silver Lake Partners  and certain other pre-IPO investors, is short-hand for “the people who we need to pay back over the long term”. They have access to not just stock, but controlling interest in the holding company, which helps them exert influence over what Endeavor takes time to do, and what that should look like. Influence doesn’t require visibility, but it demands awareness. You don’t need to see the effects to feel them. That next level requires you to literally shift everything you were doing. We think about that as people, but it’s less common to think about an organization having to relearn itself.
There’s one final thing we need to talk about. By law, S-1’s are required to list out what’s called a Summary Compensation Table. For a public company, The executive compensation of the CEO , CFO, and the three highest paid executives is legally required. Since this is the first Endeavor is in their transition, this is the first time compensation has been publicly accessible, starting with the end of 2018.
Then the bonus structure:
And of course, equity:
Remember that hideous diagram from earlier? There’s a little bubble in the middle that called Executive HoldCo. That’s separate LLC that pays out stock to the CEO and CFO, and is owned by the executive team. You’ll also notice that compensation is tied to not just Endeavor, but also UFC, which is one of the most valuable businesses inside of Endeavor’s portfolio.
Then, there’s a little tidbit called Other Transactions, where you are required to call out things that happened in the course of business that otherwise wouldn’t be disclosed.
Like selling a few shares:
Or keeping it in the family:
What you make is rarely the extent of what you own.
Talk to me nice (and quietly)
Even after all that, Endeavor makes it abundantly clear, that despite their strong market position, profitable business lines, global consumer resonance, and investments in the future, that this could all blow up in their faces:
Loosely translated as: WE GON SEE (but buy our common stock).
This is by no means a comprehensive or exhaustive breakdown of all that Endeavor has, or its strategic positioning. What I am trying is illustrate is simply that that one company, using one document, to outline its own history and assets, has been exerting large swaths of influence that you can feel, but not might necessarily see.
It seems like the first 100 years of doing anything, helps set you up pretty smoothly for the next 100. Or not.
For the full Endeavor S-1 you can go HERE.
If the last name Ari Emanuel’s last name strikes you as familiar, that’s because it is. Ari is the older brother of Rahm Emanuel, former mayor of Chicago with a penchant for living his life in all caps and loving the smoke.
Silver Lake Partners is a private equity firm (they take ownership in private companies) with $43B or so under management as of 2018. They primarily focus on technology companies, and currently hold investments in Skype, Dell, Alibaba, GoDaddy, and Tesla.