Talent agencies are described as taking a percentage of what their clients earn. That is still true and no longer the main story of how the biggest ones are financed.
The commission model has a hard ceiling
An agency's traditional income is a fixed share of client earnings, capped in some states and constrained by union rules on what an agent may charge.
Growth under that model requires either more clients or better-paid ones, and both are slow. The revenue also disappears the moment a client leaves.
Because the ceiling is structural, agencies looking to grow faster than their clients' incomes had to find revenue that was not a commission at all.
Packaging replaced commission on some projects
When an agency supplies several key elements of a television project, it can be compensated by the production rather than by the individual clients.
That fee is negotiated against the show's budget and can include a share of profits, which decouples agency income from what any one client is paid.
Writers objected that this made the agency a counterparty to the production rather than purely a representative, and the practice was curtailed after a prolonged industry dispute.
Ownership of production created a direct conflict
Some agencies expanded into affiliated production companies that finance and make content. An agency that produces is on both sides of a hiring conversation.
The commercial logic is obvious: production captures the upside of a hit, while representation captures only a slice of one participant's fee.
The governance answer has been separation of entities and disclosure, but the underlying tension does not dissolve. It is managed rather than eliminated.
Sport, brands and live events diversified the base
Major agencies now hold sports representation, event ownership, brand consulting and licensing businesses that earn from rights and sponsorship rather than from talent fees.
These operations are less exposed to any single entertainment cycle. A slow year for scripted television does not necessarily affect an owned sporting property.
They also required outside capital. Private equity investment funded the expansion and brought expectations about margins and eventual exit that a partnership never faced.
Managers occupy the space agents vacated
Managers are regulated differently, may produce without the same restrictions and typically take a share alongside the agent's commission.
As agencies grew institutional, managers absorbed much of the day-to-day career work, which is why established performers commonly retain both plus a lawyer.
The stack means a working actor pays several percentages before taxes. That total is a significant reason mid-level performers now pursue ownership stakes rather than higher fees.