William Morris merger hardly had Hollywood ending for Jim Wiatt

Over a May 15 lunch at the Beverly Wilshire hotel, William Morris Agency Chairman Jim Wiatt received sobering advice from his close friends, entertainment attorney Skip Brittenham and former Viacom Inc. executive Tom Freston.

The more than century-old talent agency was on the cusp of merging with hotshot rival Endeavor, and it was becoming clear that there would be no place at the table for Wiatt.

The best course, Wiatt’s intimates diplomatically suggested, would be for him to quietly step aside.

Wiatt was taken aback, according to friends and associates who asked not to be identified because the lunch was a private matter. He had initiated the merger -- and spent the last five months fighting for it -- overcoming some fierce internal opposition. When the deal was formally announced April 27, Wiatt was named chairman of the new William Morris Endeavor Entertainment.

Merging the two agencies, which would allow the new firm to challenge the dominance of Creative Artists Agency, was the capstone of Wiatt’s three-decade-long career. The deal is expected to close as early as Tuesday, at which point Wiatt will step into a role to help with the transition through the end of the year.

Wiatt had been telling people that he planned to remain at the helm for at least a couple years. But it wasn’t to be.

“At the end of the day, he wasn’t going to have a real operating role,” Freston said. “It’s sometimes hard to pull yourself away from the day to day.”

It was hardly the Hollywood ending that Wiatt, 62, had envisioned. He saw the merger as the best way to secure a future for the 111-year-old William Morris at a time when Hollywood is making fewer films and television shows, ad revenue is shrinking along with DVD sales, and technology is upending the way consumers watch entertainment. Talent agencies are at the nexus of connecting talent with producers, and the only way to stay competitive, Wiatt has argued, would be to make a bold stroke at getting bigger.

Uniting the rival firms would also reinvigorate William Morris by bringing in Endeavor’s young, dynamic managing partners, Ari Emanuel and Patrick Whitesell, Wiatt has maintained.

But a transformative deal would not come without a heavy cost to Wiatt, including alienating several of his closest colleagues, triggering more than a hundred employee layoffs -- and ultimately accelerating his own exit. Agency executives say Wiatt believed the benefits outweighed any risks and bad publicity.

“It would have been easy not to do this. It would have been easy to glide along -- it wasn’t as if the company was doing poorly,” said William Morris President Dave Wirtschafter, who will serve as co-chief executive of the new firm, along with Endeavor’s Emanuel and Whitesell. “To his credit, he was the one who pushed to get this done, knowing it would be turned over to others. That’s a pretty significant thing.”

The closely scrutinized Hollywood hook-up, however, eroded support for Wiatt within his own firm.

William Morris partners and agents complained they were kept in the dark about discussions, to the point of being misled about the status of talks with Endeavor in a meeting led by Wiatt earlier this year. Others felt slighted that Wiatt sought leadership from outside the agency. Some were bruised by what they felt was a ham-fisted manner in which the layoffs were handled.

Perhaps most damaging for William Morris was how the merger was perceived by image-obsessed Hollywood. In the eyes of the hyper-competitive and gossip-fueled agency world, Wiatt had been out-maneuvered and out-agented by Endeavor’s Emanuel, who had unceremoniously ushered the original deal maker out the door within three weeks of the merger’s announcement. According to those running the new agency, the reality is more nuanced than the speculation.

As months of talks dragged on, it grew evident that even though Wiatt would assume an elevated title, he nonetheless would have no role in day-to-day operations.

Though neat on paper, the structure in practice would be untenable. It would be difficult for Wiatt, accustomed to running a company, to have to take a back seat. And it would be no less difficult for the new managing triumvirate to assert authority, with the former William Morris chief looming above them on the organizational chart.

In order to avoid that conflict, Wiatt elected to step aside so the new leadership could forge a unified culture, said Whitesell, the Endeavor managing partner who will serve as co-chief executive of WME Entertainment.

“Jim was not voted out of the company. That rumor out there -- it’s completely false,” Whitesell said. “He made the decision to move on. We’re grateful for what Jimmy’s done.”

Wiatt left the co-chief executive position at International Creative Management in 1999 to become co-chief executive at William Morris under conditions oddly similar to today. Hollywood then was undergoing one of its periodic cycles of economic contraction, with studios cutting back on the number of films they made, leaving fewer jobs for actors, directors, writers and producers. William Morris, once the most powerful agency in the world, had slipped behind rivals CAA and ICM. Charged with bolstering William Morris’ sluggish movie business and luring more marquee names to its talent roster, Wiatt became an unrelenting change agent, easing out several senior partners and hiring a cohort of younger executives. With a reputation as affable and gregarious, he stunned many with a tough approach to reviving the agency, overhauling the New York staff and trimming the London unit without compunction.

Several agents headed for the exits and William Morris lost some key clients, mostly to CAA. But under Wiatt’s tenure, the agency’s publishing unit has thrived, its music business has grown sharply and its reality television group -- helping to create such shows as “Dancing With the Stars,” “Hell’s Kitchen” and “Project Runway” -- is one of the biggest in Hollywood.

William Morris ventured into nontraditional businesses, joining with Silicon Valley venture capital firms Accel Partners and Venrock and telecommunications company AT&T; Inc. in establishing the Mail Room Fund, to invest in digital media start-up companies in Southern California. The agency also created a $100-million film-financing company with Screen Capital International to fund independent films.

Although Wiatt has never been known as a big talent schmoozer in Hollywood, he has established close relationships with many of the industry’s top executives, who credit him for peacekeeping during the frequent clashes and flare-ups of egos at play.

Film producer Harvey Weinstein said Wiatt played a pivotal part in helping sever his relationship with Walt Disney Co., which in 1993 had acquired Miramax Films, the independent film studio he started with brother Bob. The 12-year relationship had deteriorated into an acrimonious war of art versus commerce. Wiatt played the role of behind-the-scenes diplomat, helping defuse tensions between the Weinsteins and Michael D. Eisner, who at the time was Disney’s chief executive.

“Until Jim got there, it was a war zone,” Weinstein said. “By the time Jim left, we were all going out to dinner.”

Google Inc. Chairman and CEO Eric Schmidt said Wiatt helped reach out to wary entertainment industry executives, who a few years ago viewed the Silicon Valley technology giant with trepidation. He said Wiatt offered personal introductions to the media elite, invited Schmidt to dinners with other entertainment figures at his Pacific Palisades home and encouraged business discussions.

“These are two very different business structures, the Hollywood structure and the technology structure,” Schmidt said. “He is the foremost person trying to bridge the two.”

Wiatt last week appeared to be transitioning into a post-William Morris life several days ahead of the formalization of the merger. On Wednesday night, he was seated courtside at a Lakers playoff game with Whitesell and actor Tim Allen, a longtime client.

But a few miles away, Ari Emanuel, the new power at William Morris Endeavor, was hobnobbing with a star-studded crowd at the Beverly Hilton at a Democratic Party fundraiser. Among the Hollywood glitterati crowding into the ballroom were Jennifer Hudson, Jamie Foxx, Seth Rogen and Kiefer Sutherland. The honored guest: President Obama.

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dawn.chmielewski@latimes.com

meg.james@latimes.com

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(BEGIN TEXT OF INFOBOX)

William Morris Endeavor Entertainment

Combined revenue: $350 million to $400 million*

Number of employees: 800 to 900**

Actors: Russell Crowe, Denzel Washington, Adam Sandler, Matt Damon, Ben Affleck, Robert Pattinson, Amy Adams, Keira Knightley, Sacha Baron Cohen, Tyler Perry

Directors: Martin Scorsese, Michael Bay, Ridley Scott, Tim Burton, Quentin Tarantino, J.J. Abrams

Music: Eagles, Kanye West, Pearl Jam, Taylor Swift, Britney Spears, Brooks & Dunn, Rascal Flatts, The Killers, Amy Winehouse, Pussycat Dolls, Mary J. Blige, Alicia Keys, Eminem, 50 Cent

Corporate: American Express, Revlon, Hasbro, MySpace, General Motors, Coke Zero

*Estimated

**Not final

Source: Times research