Music talent turf war as agency ‘land grab’ sparks legal fight

Hollywood mogul Ari Emanuel’s powerhouse talent agency WME is fighting to keep hold of music stars from Shakira and Peter Gabriel to LCD Soundsystem after a Russian-born tycoon launched a legal challenge to the company’s right to represent a swath of artists.

Alex Shustorovich, who built his fortune buying Russian science journals after the collapse of the Soviet Union, is using his newfound control of IMG Artists, a small business known for managing classical musicians, to take on his much larger rival.

Barring a last-minute settlement, the two sides will meet next week in a New York court to determine whether Shustorovich can enforce a three-year “non-compete” demand against WME. If he prevails, it could shake up segments of the global live entertainment sector — and cost WME millions of dollars in lost revenue.

The dispute dates to the pandemic, when live performances ended and the business went into freefall. As revenues evaporated, Shustorovich paid $11mn — $3.5mn in cash and another $7.5mn to retire debt — to gain a controlling stake in IMG Artists.

This represented a “change of control” in the company, which Shustorovich claimed triggered non-compete provisions dating back to 2003 — long before WME acquired the rival IMG agency in 2014.

Shustorovich has argued that the non-compete terms — which would bar WME from working as a management agency in classical, jazz, world or electronic music for three years — were no different from standard sale contracts that protect buyers from having to compete against former owners.

But WME has called Shustorovich’s moves to enforce the provisions “outrageous” and a “land grab”. It has refused to sign the 2021 purchase agreement that would allow Shustorovich to finalise the transaction.

The parties have been through two rounds of arbitration in New York, with both rulings coming out in Shustorovich’s favour. WME has stated that the judge’s findings were faulty and that “vacatur” — dismissal of the case — “is the only option”. 

WME has claimed its only remaining tie to IMG Artists was through a 1 per cent stake in a holding company called IMG Talent, which it provisionally agreed to sell to Shustorovich for $70,000 before the deal fell apart.

The arbitrator’s decision “potentially implicates hundreds of millions of dollars of WME’s business” over a “tiny little transaction”, said Jamie Wine, a partner at Latham & Watkins who is representing WME. “That makes no sense.”

Shustorovich told the FT his company was now “in limbo” because of WME’s refusal to sign the purchase agreement. “There was an arbitration, they appealed the arbitration,” he said. “At this point they are wilfully ignoring the ruling, which you do at your own peril.” 

The clash comes as Emanuel is in the process of a $13bn deal to take his company Endeavor, which includes WME, private with Silver Lake Partners. Endeavor has in recent months sold a number of businesses, including IMG’s sports-related groups, to TKO Group, a company Emanuel also runs.

People close to Endeavor said the dispute with Shustorovich would have no impact on plans to take the company private. 

The music representation company at the core of the dispute began in the late 1970s as a small agency run by two New York schoolteachers. The boutique was acquired in the 1980s by Mark McCormack’s International Management Group, which wanted to expand from sports into classical music and the arts.  

Renamed IMG Artists, the agency signed classical luminaries such as Itzhak Perlman, soprano Renée Fleming and conductor André Previn. After McCormack died in 2003, it was acquired by Barrett Wissman, a Texas financier and amateur classical pianist. 

Wissman bought a majority stake in IMG Artists from holding company IMG Talent, which granted Wissman the rights to use the IMG name in exchange for a small licence fee — an arrangement that continued without problems for years. 

But Wissman ran into legal trouble during the global financial crisis. With rising legal fees and millions in penalties, he sold a stake to Shustorovich in 2011. Shustorovich had learnt about IMG Artists through a chance meeting with the manager of soprano Anna Netrebko during a Metropolitan Opera production of War and Peace, which he had funded.  

Opera-loving Shustorovich has been described as a billionaire but will not disclose his net worth. “I have done well over the years,” he told the FT. He moved to the US as a child in 1977 with his family and earned multiple degrees from Harvard.

After the collapse of the Soviet Union he launched a publishing company that specialised in scientific journals, then branched out into property and other businesses. He had a colourful life in Russia, having once been engaged to the daughter of the mayor of St Petersburg, a political mentor of Vladimir Putin. A US citizen, he is a Republican and a supporter of classical music and opera.

Wissman and Shustorovich were uneasy partners, and tensions between them reached a peak during the pandemic, when the business collapsed.

“The opera houses stopped, concerts and festivals stopped, everything stopped during the pandemic,” Shustorovich said. “So we’re in a place where we still have the staff but we have no revenue — I mean, literally zero.”

According to Shustorovich, Wissman refused to invest more money in IMG Artists during the pandemic. But Shustorovich injected more cash through his company, PPI. 

“Once I put my money in, I crossed that 70 per cent control threshold determined by the bylaws,” he said. “I called in the cramdown clause, which lets me buy everybody else out in terms proffered by me.” 

During the negotiations with Shustorovich, WME said it was willing to sell its small share in the holding company — but also informed Shustorovich that it wanted to end the agreement to license the IMG name.

With the use of the IMG name in jeopardy, WME lawyers allege in a filing, Shustorovich then “unilaterally drafted” a contract to include a non-compete provision that “somehow obligates . . . one of Hollywood’s largest talent agencies to abandon hundreds of millions of dollars in business revenue”.

“It was totally retaliatory,” Wine told the FT. Shustorovich’s legal team disputes this, claiming that the non-compete provisions were established after McCormack died and were triggered after Shustorovich became a majority owner of the company.  

In a four-day arbitration hearing last autumn, a judge upheld Shustorovich’s claim that his 75 per cent ownership stake permitted him to force the other parties to sell, and agreed with Shustorovich’s argument to enforce the non-compete provision. 

WME countered that the non-compete agreement was “unreasonable and unenforceable” and refused to sign the sales agreement.

Even if the hearing in February ends in Shustorovich’s favour, WME’s lawyers said they would continue to fight the case in a Delaware court. 

But Shustorovich said he was already thinking about his plans for the company once the legal cases were over — including investing in classical music.

Classical music “has been a kind of orphan space that has been abandoned by many of the other players”, he said. “I want to bring more opportunity for the classical audience.”