As H'w'd tightens belts, agency opts for living large
Back in the days when he was still a talent rep, the fabled Lew Wasserman set forth a firm mandate for his agency: He demanded continued growth whether Hollywood was having good times or bad. MGM could shrink, but MCA had to expand.
Generations later, Creative Artists Agency seems to be emulating the Wasserman blueprint. The big congloms may be doing some belt tightening at the moment, but CAA is bent on an expansion kick, one that is stirring criticism from rivals and questions from industry leaders.
Some are openly asking: Is bigger really better in the agency business?
CAA has been cherry-picking rival agencies for deal makers and their clients. It has added a sports division, including hockey agents who joined the staff a few weeks ago. Recently, the agency also opened an office in Beijing. And later this year or early next year, it’s expected to move into eight floors of a futuristic 12-story glass and matte steel tower in Century City, double the space of its current offices.
CAA faces particular competition in TV, where rivals William Morris, Endeavor, UTA and ICM annually do battle for lucrative packages. ICM recently merged with Broder Webb Chervin and Silberman, a boutique agency with a strength in repping TV writers. That led to the departure of ICM’s TV head Nancy Josephson, who quickly joined Endeavor.
But at a time when other tenpercenters are talking about consolidating through mergers, CAA — cash- and client-rich, with rumored revenues between $250 million and $300 million — has used its coin to fund a remarkable expansion spree.
The agency declined to discuss plans, but that is typical in the post-Michael Ovitz era. While he attempted to project an Art of War mystique on agenting, current partners Richard Lovett, Bryan Lourd, Kevin Huvane, David O’Connor, Rick Nicita, Lee Gabler and Rob Light insist on a much more modest, non-intimidating public face — as much as is possible given the high-profile nature of their roster and their sheer size.
Agents such as UTA’s Jason Heyman, Martin Lesak and Dan Aloni, WMA’s Todd Feldman, Endeavor’s Spencer Baumgarten and ICM’s Bart Walker and Chris Andrews have joined the company, with some rumored to have gotten multimillion-dollar, five-year pacts. They brought with them clients such as Will Ferrell, Tom Shadyac, Todd Phillips, Marc Forster and Gore Verbinski.
While ICM bought Broder Webb Chervin Silbermann, and Endeavor and UTA briefly contemplated joining forces, merger has been about the only move CAA hasn’t done. After all, with it comes inherent headaches of meshing different cultures.
CAA’s moves have prompted fear in some quarters, as well as a skeptical response.
Stung by poaching, rivals point out that if the agency gets too big, clients inevitably will complain that they are competing with others to see the best projects. Studios will be wary that the agency has too much leverage over talent, running up talent costs.
“Talent agencies can only get so big before they are self-defeating,” says the CEO of one entertainment company. “CAA’s moves are about symbolism. They are saying to the industry, ‘My dick is bigger than yours.’ ”
And some wonder if what may seem like a bold, forward-thinking strategy is ignoring the storm clouds. A lust for growth comes as the rest of the industry is slashing staff, reining in salaries and bracing for a possible Writers Guild strike next year.
Given that the threat of a strike forced agencies to cut back in 2001, who’s to say CAA would be immune this time around?
Those familiar with the CAA strategy say the expansion looks past small cyclical shifts and is an attempt to position the company as far as a decade into the future.
In China, for example, the office has signed 25 stars, filmmakers or production companies, and is positioned to be a presence when the Olympics comes to Beijing in 2008. The endgame, though, is CAA’s gambit that despite current bureaucratic restrictions, the country will blossom into a productive marketplace.
Whether in Hollywood or China, the abiding philosophy at the agency is this: The only way talent can gain leverage in this era of global conglomerates is by mobilizing as much critical mass as possible.
“Talent strength brings economic power,” says one CAA agent. Whatever changes may occur in delivery systems, the thinking goes, talent will still be at a premium.
There is no disputing that entertainers will continue to be indispensable. The more of them CAA has, the more clout it will retain, no matter how those entertainers sell their wares.
“CAA seems to be doing exactly what they should be doing, and that’s leaning in aggressively,” says attorney Kevin Morris, whose firm is also moving into the 2000 Avenue of the Stars complex in Century City. “Right now it does feel like the curtain is going down on one era and everyone is placing their bets on where to be in the new one.”
The move to the Century City office tower will give CAA enough space to house a rapidly growing staff, and will be a symbolic break from the past. Founders Ovitz, Ron Meyer and Bill Haber still own the Beverly Hills building, and the agency has paid rent to them. Its new lease won’t come cheap, at an estimated at $1 million a month, although insiders say that is less per square foot than the current lease. Agency is spending in the eight-figure range to build the 220,000 square feet of space.
CAA’s partners, however, long ago paid off the founders for the cost of the company, and have ever since looked for new areas of growth, in such areas as corporate clients, film finance and, most recently, sports.
When it absorbed SFX’s football division co-managers Ben Dogra and Jim Steiner last month, CAA became the biggest gridiron dealmaker. In another deal, CAA purportedly paid as much as $30 million over six years to hire IMG football gurus Tom Condon and Ken Kremer. CAA denies it paid that much.
Some competitors don’t see why CAA made football its beachhead, and question how it will make money. There are no guaranteed contracts and 2% commissions are commonplace. In choosing sports where athletes wear cleats or skates, CAA can’t rely on lucrative shoe deals. That is why some believe that CAA next will get into basketball, tennis and golf.
Insiders say CAA has long been sold on the sports business, and that this infiltration was nine years in the making.
Over that time, CAA brass developed a strong relationship with IMG founder and sports marketing pioneer Mark McCormack. When he died, and IMG chief exec Peter Johnson was ousted, it triggered “key man” clauses that made free agents of Condon, Kremer and baseball’s Casey Close. CAA pounced.
IMG hockey heads Pat Brisson and J.P. Barry followed. IMG didn’t try hard to stop them, and detractors of CAA’s strategy say it’s because the on-field contracts game doesn’t turn enough profit. There may be some truth to that: McCormack used his client core to build lucrative televised sports events. CAA, by contrast, can’t own programming.
Insiders say CAA was equally opportunistic and selective in poaching rival dealmakers. Lagging behind UTA in comedy, CAA closed the gap by luring UTA partners Heyman and Lesak, who brought in Ferrell, and UTA partner Aloni, who brought directors like Shadyac, David Dobkin and Dean Parisot.
But the persistent agent and client pillaging has left rivals to wonder when the sheer weight of CAA’s client roster will cause it to buckle. A continuing contraction of film and TV production could create employment problems for second-tier talents. And studio attempts to scale back first dollar gross deals will impact big stars.
Then again, detractors have for years predicted trouble at the agency. If there are cracks at the agency, they are hardly visible.
“A strike would mess us all up and CAA would probably have layoffs like everyone else,” says a rival agent. “But if any agency has enough passive revenue from TV and film gross deals to sustain hard times, it would be CAA.”