Profit and loss: how much do the modeling agencies really take?

Cutting the cake: high premiums and commissions in the modeling industry

Allegations of price-fixing and excessive commission charges have long been rife within the modeling industry, but as with all money matters an ounce of proof is worth a ton of conjecture. That proof was finally deemed sufficient on March 29th of this year, when a New York Judge ruled both ways in a lawsuit brought by a group of models against no fewer than thirteen top model agencies, including Elite Model Management, Next Model Management, Ford Models Inc, the IMG agency, and Wilhelmina Models, most of whom were members of the International Model Managers Association, or “IMMA”. The lawsuit, led by former super model Ashley Richardson, claimed that agents charge illegal commissions and use nefarious means to cheat their clients out of money. Although the industry until recently had been able to fend off such claims as the bitter resentments of failed models, the lawsuit filed by Ms Richardson gained credibility by virtue of the fact that she herself was once a magazine cover girl with earnings in excess of £500,000 a year.

The models had alleged that major representatives of several model management companies had violated Section One of the Sherman Act by entering into a conspiracy through their membership of IMMA. The key portion of the models’ lawsuit to survive the motion for summary judgment was their claim that the “defendants colluded to fix models’ commissions … at IMMA meetings.” In lay terms lawyers alleged that, under the umbrella of IMMA, the agencies met monthly at fancy Manhattan restaurants primarily to discuss and to fix fees. It is alleged that the agencies typically received upwards of 40% of the fee charged for a model’s assignment comprising a 20% commission fee from the agency’s clients and some 20% of the model's pay for the work. All but the most powerful and famous models pay as much as 20% commission upon their earnings, despite a law limiting employment agency fees to 10%.

However, through the use of the term model ‘management’, agencies have in the recent past attempted to exploit a legal loophole. The court found “undisputed . . . evidence of parallel pricing,” accompanied by “a motive to conspire and a high level of inter-firm communication.” The court found that there was evidence that IMMA members colluded to fix client service fees, which were a “close cousin of models’ commissions”. In a nutshell there was broad agreement within the industry as to what prices and commissions models should be charged, in effect creating a cartel in place of a free market. The court found that the majority of the evidence presented demonstrated “extensive evidence of agreements between IMMA members, on various components of their businesses, such as client service fees…[which] may reasonably be inferred to demonstrate an industry inundated with collusion.” To make their positions worse the Elite Model Management Agency handed the plaintiffs what appeared to be a ‘bloodied blade’ when Monique Pillard, Elite's former president, warned rivals in a 1986 memo they risked in her alleged words "committing suicide if we do not stick together" in setting fees.

The models bringing the class action claimed that the artificially inflated fees charged by the agencies caused agency clients to be less willing to pay a higher fee to the models themselves, although the court found that the models did not have the necessary ‘anti-trust’ standing to seek such damages. The ruling captured the attention of the legal system in that the models were legally not “downstream purchasers”, but “upstream sellers” who were credibly injured by a conspiracy to raise fees in a manner that allowed the modeling agencies to retain the entire fee increase, in effect constituting a gainful manipulation of commission payments. In other words this ruling appears to suggest that the law sees modeling agencies as agencies, rather than as ‘management’ companies. This is by no means the only recent lawsuit relating to agencies charging excessive commissions for models’ work. This recent success in pursuing litigation against the established model agencies follows a tidal wave of lawsuits brought against less well known talent and model ‘agencies’ throughout the United States (see Spring article, “Beauty beware! An epidemic of talent agencies sweeps America”).

By far the biggest casualty so far is Elite Model Management, New York, which has found itself mired in bankruptcy and lawsuits. Elite, the largest modeling network in the world, has represented such models as Naomi Campbell, Claudia Schiffer, Cindy Crawford, and Linda Evangelista, and presently has over seven hundred models on its books including Lauren Bush, and former supermodel Paulina Porizkova. For some two years Elite has been at the center of this giant $50 million class action lawsuit originally filed on behalf of some ten thousand models against Elite and twelve other agencies. Most of the agencies named in the suit, including Ford Models (who represent the supermodels Christie Brinkley, Jerry Hall and Rachel Hunter), the IMG agency, and Wilhelmina Models opted to settle on the first day of the trial, one spokesman stating that "It was more economical to settle" on the basis of time constraints, as their businesses were flourishing.

Elite were however not so fortunate. In a separate case last year, a jury awarded $5.2 million to a former sales director of Elite New York, Victoria Gallegos, which was later reduced on appeal to $4.3 million. Ms. Gallegos, an asthmatic, successfully sued Elite over a hostile work environment and wrongful termination which forced her to part company with Elite after just seven weeks, arguing that she was a victim of passive smoking and of a series of malicious practical jokes. As though things could not have seemed worse for the company, John Casablanca, a then director of Elite, has been named in a sex abuse lawsuit brought by a former teenage model who claims that he made her pregnant aged 15, and then arranged an abortion in the late 1980’s. If successful, Mr. Casablanca, a self-confessed playboy, may ultimately face a string of further potential sexual harassment lawsuits from a number of former teen models resulting from his behaviours whilst at Elite, not a pretty image for an industry under siege.

Due to the scale of the award, Elite Model Management New York, with reported assets of only $4.5 million and $7 million in liabilities, filed for bankruptcy in February and is now up for sale. However, according to the class-action papers presented to the court, the models could still go after the assets of Elite’s founder John Casablanca who sold his stake for several millions in 1999, in addition to funds the models allege were diverted to Switzerland. All of this leaves Christian Larpin, Elite’s shareholder and sole director in a dire situation. The lawsuits have taken the gloss off the entire modeling industry and shown up some unseemly blemishes in the sunlight. As Elite’s economic plight has forced it legally to fight on alone, lawyers for the models are now alleging that Gérald Marie and Elite New York have hidden and diverted assets through a maze of subsidiaries, franchises and Swiss bank accounts in order to evade taxes and damages. Elite is alleged to have been a pivotal player in the price-fixing conspiracy for over 20 years. These are charges that Larpin strenuously denies.

Indeed allegations of financial misdeeds at Elite abound, according to court depositions. A former chief financial administrator at Elite, Ms. D'Angelico, claimed that when Elite booked a U.S.-based model on a European job, even for an American client, the revenue was routinely sent to Switzerland "to keep income off Elite New York's financial records", and to evade taxes in the U.S. and elsewhere. Ms. D'Angelico suggested that Elite routinely accepted illegal payments from agencies that booked models for union TV and film work. For Elite’s existing models however, the sky would appear somewhat brighter, as potential suitors appear to be queuing to buy Elite. The rumoured list includes none other than Donald J. Trump, Dominic Alvarez, and the Catwalk Acquisition Co., which has so far provided financing to keep Elite New York running. The asking price for Elite’s contracts start at around $3 million, but are expected to go much higher, and who ever buys Elite will not be held responsible for its debts or any potential damages accruing. A further $3.5 million will be needed to join Elite's global network, a sum which affords rights to Elite’s brand name for the purposes of merchandising and also rights to its prestigious Model Look contests. The creditors however are enraged at this prospect, as this fee would be siphoned off directly into Elite's Swiss parent Company.

Glamour elite under siege

Unfortunately for the agencies, the legal assault upon the higher caste of world modeling has followed a deluge of successful litigation against the shadow world of modeling and talent agencies, and their partners in crime, the so-called photo-mills. Whilst these behaviours and alleged ‘scams’ might have been passed off as the vices of the seedy underworld of modeling, recent events have rather suggested otherwise. What makes the timing still worse is that the ruling against the industry has occurred in the wake of the public crusade against corporate crime which began in earnest after the collapses of Enron and World.com. Whilst a few supermodels may earn over a million a year and mix comfortably with film stars and royalty, many models allege that behind the glamorous facade of the industry lurks a shady world where young women are bullied into working ‘sweat shop’ hours, often ending up with huge debts and out of work. Whilst many of the established models are able to use their star leverage to negotiate less extravagant commissions, young and aspiring models often found that in excess of forty percent of the fee formally charged for their services was creamed off their earnings.

Elite Model Management had been the industry leader for a generation, reaching the height of its powers in the late 1980’s when leading "supermodels" were in such demand that Linda Evangelista famously remarked that she "would not get out of bed for less than $10,000". The pendulum however appears to have swung, according to fashion observers in London, with Elite and some of the other large agencies becoming increasingly unfashionable. Many leading models now seem to prefer smaller "boutique" agencies which have fewer than twenty models on their books, allowing a more personable and elitist culture to flourish.

Expensive starting schools

It seems reasonable to argue that if something is worth doing, then it is worth doing well. As an extension of this argument, any well rewarded and competitive profession such as modeling must require skills, and these in turn may reasonably be improved upon by training and through preparatory education. This is perhaps the rationale behind a wealth of modeling schools and colleges which have sprung up to tap the burgeoning market of schools for aspiring models whose parents or bank managers are willing to foot the bill. Indeed a trainee model is required to pay between $1,000 and $2,000 for a course which the former President and Founder of Elite Model Management John Casablanca believes invaluable for any aspiring model. However this branch of education has recently been attacked as angry parents and students fall short of their expectations. As though John Casablanca had not run into enough trouble, his own lucrative network of modeling school franchises established throughout America, have now come under fire.

Such modeling schools are the first experience of many young models as they start out in their young careers. As with all experience-based vocations, the value and usefulness of such schooling is questioned. Opinions vary, but Monique Pillard holds strong views on the subject, “If a model comes off the street into Elite and we think she has potential, she doesn't need to pay for classes. Somewhere down the line, she may take runway classes, which she doesn't pay for. We absolutely bear the [full cost] burden. If a girl has talent and [the] potential to become a model, of course, we help. It's a scam for a [would be] model paying $1,000 or $2,000!”

The trouble only begins here. The John Casablanca Centers are well known to claim that they are affiliated with Elite, some salesmen even suggesting that young models who attend a John Casablanca’s modeling school are even preferred by the prestigious Elite Model Management. This of course is a ‘pressure’ sales tactic, designed to influence young models and their parents into making a heavy investment. Some of these modeling schools are criticised for in effect being little more than ‘finishing schools’. Many young models have complained that they do not want to part with thousands of dollars to be taught social skills and manners, regardless of how important they may be in the modeling world. One young student remarked that her “so-called modeling classes turned out to be 'etiquette' classes." The crux of the matter is that John Casablanca’s modeling schools are alleged to have falsely marketed these etiquette lessons as ‘modeling classes’. His schools are also suggested to violate industry standards which recommend that new models should “avoid paying for professional photography”, and also should “avoid buying 'comp' cards until they get agency representation”, good advice known to have been published by none other than Mr. Casablanca himself.

Another well known institution, the Barbizon Modeling School, refers young models to the International Modeling and Talent Association Convention ("IMTA Convention"). One young model Alley Wagner, who attended classes at a Barbizon national modeling school and agency franchise, was taken to an open call for the scout company International Modeling and Talent Association (IMTA), which duly selected Alley to attend a convention. As she was unwilling to wait several months longer for a more local convention, she paid $4,000 to fly to Los Angeles to meet with agents there. A week later, she was called by an agency who said they wanted her in Italy within a week. Her parents duly paid $600 to rent their daughter an apartment, and an additional $500 to upgrade her portfolio, whilst her friends and family gathered together to fund her flight to Italy. After spending about four weeks in Milan and attending over sixty open calls, Alley was offered only one contract for a hair show that would recover only some $400. Financial loss was added to bitter personal disappointment for this young model and her family.

Many young models find the competition in the industry daunting, and discover that they have to risk their parents’ savings or substantial debt just to get a roll of the dice. Clearly Alley is not alone. Another former Barbizon graduate described how she had spent thousands of dollars and received no work in return. After finishing her Barbizon program in Toronto, she attended an IMTA showcase convention from which she obtained only a single audition and no work. A father of another disappointed Barbizon graduate claimed that “Modeling schools are notorious for preying on the dreams of young women and others who want so badly to be the virtually impossible ideal on magazine covers. No matter that most of them don't fit the rigid mould of fashion model and never will; their money spends the same.” Others might argue that in any profession an education is no guarantee of entry into that profession or of subsequent success within it. However many risk everything to pay for dream which is, at best, a long shot.

Tales of the Tape: Insider views of modeling schools

However, not all the models who graduate from these schools have tales of disappointment to tell. One model recounts how she had begged her parents to pay for ‘over priced’ runway and makeup classes at a nearby modeling school. They had eventually capitulated after receiving the school's sales pitch, and to her surprise she did get modeling work through the contacts of a school agent. A year after working in Tokyo she found work with a reputable agency in Milan, and in between she reported making good money through catalogue and runway work. However this model claimed that her work didn’t originate because the school's instructors had taught her make up or runway skills well, but rather because she was the ‘right fit at the right time’.

Another controversial industry figure, Ms. Helene Goldnadel of International Creative Artists (ICA), maintains that her company selectively screens all potential models for her program. "Our fashion course teaches the few people who do qualify how to walk on the runway and handle themselves in front of a still camera. It also allows kids to become less shy. They learn about hair, makeup, nails, etc. A lot of parents are told their teenager does not qualify for fashion, but they have the kids take the course as part of a whole program," Ms. Goldnadel firmly states, "I do let people know during a presentation that modeling classes are not really needed to become a model. You definitely get what you pay for. If you pay very little for a course, you may not get additional support beyond general acting studies. Individual coaching per audition may not be included in that price. [You] should write about Juilliard, or NYU, because they charge $200,000 for four years and more, and not every one with such credentials on their resume gets work. ICA students on our VIP programs, taking an unlimited amount of classes pay less than $25 a class." In reply to criticism that ‘The fair price for modeling classes is nothing’, Ms Goldnadel replies, “Our fashion course goes beyond fashion in terms of self-affirmation, developing the ability to use ones sensitivity towards expression so [that] one has sensitivity as a tool verses. And also [we teach] nutrition, proper dieting, hair, nails, make-up etc... Finally our fashion course is always offered as part of a bigger program." Perhaps in a city as expensive as New York, no one can afford to offer their professional time for free.

A glimpse into the Crystal Ball

As one anonymous industry insider claims, “A dirty little secret of the modeling industry is that on any given job it is almost always possible to get qualified, professional models for less than "the going rate"… That is always true, but more so in times of economic distress when there isn't enough work to go around.” Clearly even the strongest of cartels is not immune to the pressures of supply and demand of the free market.

Perhaps the modeling industry, like all others, ought to face exposure to free market forces. However, it is in the best interest of the modeling agencies, as exposed by recent litigation, to maintain a large pool of qualified models, and a capable agency system which can co-operate within a cartel to maintain inflated prices and control the supply of models to maximise revenues in line with demand. At any given moment the clients of modeling agencies are asked to pay more than the free market price as an insurance premium against future uncertainty within the industry, though more worldly clients may often successfully try to obtain a more competitive ‘free market’ price. The collapse of Elite, and the resulting damage to the reputations and bank balances of the industry's leaders by the wave front of litigation (doubtless there will be more to come), has been added to the post-9/11 downturn in New York’s fashion, advertising and modeling industries. Some agencies have coped with this by simply delaying payment, or by even not paying their models at all. Although there was a partial recovery from the industry-wide downturn in the rates clients were willing to pay models after 9/11, recent events have led to an increase in the number of clients insisting on models fees greatly below the "market price", and with the collapse of the cartel, there are cash-starved agencies willing to supply them at knock-down prices.

That voracious monster, the free market, has finally been unleashed upon the model industry. Modeling is no longer a closed shop of prima donnas who may rest easily on inflated prices. The Internet has given aspiring models from outside the high rise offices of Manhattan a glossy shop window with relatively few overheads. The knock-on effects of the landmark lawsuit filed against Elite, Ford and Wilhelmina and collaborators will have further repercussions if the law firmly concludes that they function ‘merely as employment agencies’, an event which may still come to pass from the ongoing litigation against Elite. With the trend towards ever lower fees and commissions, many of the New York agencies maintaining sky high office overheads will inevitably fold, and the pendulum will swing still further towards smaller ‘boutique’ agencies, Internet-based operators and independents skilled in new media marketing.

However there remains a significant chance that the legislature will pass an amendment to the current law which limits commission payments, providing an exemption for New York’s model industry if it is regarded as a sacred cow. One model has forecast though that “within a year or two there will be no more than about three fashion agencies, and one or two commercial print agencies in the whole city [of New York] - and that the pool of available models will decline drastically”. Here though Icqurimage would disagree, for where there is a heavy demand there is always a willing supply. All affluent cities attract beauty and its attendant market of models, fashion and erotica. No city is as tough and resilient as New York – ask any New Yorker and they will tell you that they will always bounce back stronger than before. With the promised urban regeneration under way, and the growth of the glamour magazine and Internet industries, New York’s fashion industry may well emerge fitter and stronger than it was before. Whilst the highly paid super stars of tomorrow are more likely to be glamour or ‘adult’ models than fashion models, beauty remains the most highly prized of all assets. Thus the beauty industry will always float on the disposable income of a City, and no city has more disposable income than New York. What is perhaps agreed is that the large agencies will go the way of the dinosaurs, leaving only their smaller cousins as a relic of their passing. Meanwhile Internet innovators and free marketeers will all too happily fill the void.