Four years in, CAA is still nurturing its field of green

In 2006, CAA’s Richard Lovett initiated what may be Hollywood’s biggest-ever gamble on sports by convincing his partners to launch an athletic division. The question, four years later, is: Has the sports bet paid off?

In that relatively short span of time, the agency is now considered the world’s foremost sports-representation firm in terms of talent volume, with some 650 clients. CAA Sports was named top athletic tenpercentery the past two years by Sports Business Journal. And the most recent measure of the influence it has amassed in the sports biz was seen in the hoopla surrounding the free-agency signings of LeBron James and two other star players that played out across the entire NBA.

Though the agency wouldn’t give specifics about its bottom line, a CAA spokesman said, “We are pleased with the success we have achieved for clients and the agency in sports. There is companywide excitement about our consistent growth and accomplishments in this area — and even still, we are only at the beginning.”

A Sports Business Journal tally ranked CAA tops in athlete salaries at $670 million for football, baseball, basketball and hockey. The next highest was Wasserman Media Group with $451 million. And these figures don’t include CAA’s other sports divisions, nor its other sports-related income. For example, it also negotiates sponsor partnerships for Madison Square Garden and Yankee Stadium. These venue deals have been lucrative — many pegged in the nine-figure range — including a long-term marketing pact between Coca-Cola and MSG.

Despite their scope and size, a lot of people in town still don’t understand the division. For example, CAA considers sports agenting a huge growth business on its own, and the central goal is not cross-pollination, such as landing its athletes major roles in films or TV shows, as some believe.

The division is run by Howie Nuchow and Mike Levine, with Peter Kenyon leading international operations. The client list includes basketball’s LeBron James, football’s Peyton and Eli Manning, baseball’s Derek Jeter and hockey’s Sidney Crosby. For the vast majority of its clients, CAA handles deals both on and off the field.

Not content to handle merely American icons, the agency is now making its biggest push internationally, where it reps such endorsement-friendly soccer stars as David Beckham and Cristiano Ronaldo.

The global push — encompassing everything from hockey scouts on the ground in rural Sweden to staffers trawling the Dominican Republic for the next Albert Pujols — requires enormous resources, including a staff of roughly 100, to keep generating prospects and paydays.

Rivals like to speculate how much CAA has paid to build that infrastructure. But CAA insiders maintain that the agency is in the game for the long haul, and that their investments in the business make sense give the scope of their ambition in sports.

In some ways, Hollywood and sports are the perfect mix: A deal is a deal, whether for an athlete or an actor, and sports stars have great potential to become brands at a time when that’s a major factor in showbiz (with everyone from Buzz Lightyear to Selena Gomez to Beyonce being positioned beyond their core identities).

On the other hand, sports agenting is a different world, says Hal Biagas of Wasserman Media Group, one of the top sports rep firms. “The more people you know at all levels, from high school to college to the professional teams, leagues and unions, the easier it is to make deals and to operate your business,” Biagas says. “The relationships make it all possible, and it’s very difficult to jump into an industry and instantly develop those relationships.”

Such an infrastructure, built in record time by CAA, doesn’t come cheap. An insider notes that when Jim Wiatt headed WMA, he mulled a full-fledged move into sports five years ago and offered $17 million to star football agent Tom Condon — now at CAA — to bring him and his All-Star roster into WMA. The agency ultimately opted against such a move “because after running the numbers, we realized we wouldn’t make money for eight years,” the insider explains.

There’s another difference: With film stars and directors, the standard 10% commissions can start to roll in quickly. But with athletes, the percentages are smaller — typically less than 5%, thanks to the power of players’ unions. Still, even 2%-3% times 650 athletes can translate to a tidy amount.

CAA mounted its sports division at a time when all of the Hollywood talent agencies were looking for new revenue streams as a hedge against stagnating paydays in film and TV. Last month, the New York Times’ DealBook blog reported that CAA was in talks with private equity firms to invest in its sports enterprise. While rival agencies began to speculate what that meant, others concluded it was a positive sign, indicating interest in the newish division. An agency rep simply tells Variety, “CAA is always open to opportunities to accelerate growth in a way that’s advantageous to our clients and the company.”

To date, the history of CAA Sports is a story of big bets, big hires and big money.

In order to entice more top talent to come aboard, an agency needs an existing A-list lineup.

“You must have quality, as athletes are highly competitive people, and they want to know they are surrounded by people that share those same qualities,” Biagas says.

For example, four years ago, CAA brought baseball’s Jeter and his star agent Casey Close into the agency. Close’s client roster also includes slugger Ryan Howard. NBA agent Leon Rose joined in 2007, and Henry Thomas also came on board.

Having a media darling like Jeter in the fold seems like a huge plus, even though his two biggest contracts — a 10-year, $189 million on-the-field deal that extends through this season and a $100 million Nike pact that ends in 2015 when Jeter will be in his early 40s — were inked before he signed with CAA.

As for 25-year-old phenom James, he recently decided to take his game to a sunnier side of the NBA by signing a lucrative contract with the Miami Heat. The speculation surrounding which team would land his services created a media circus, culminating in an hourlong announcement special that aired July 8 on ESPN.

James has no shortage of talent and charisma, but much of the interest in where the free agent landed this year was because it signaled a possible shift in the NBA power structure.

Aside from James, CAA reps Dwayne Wade and Chris Bosh, considered the top three free agents. The NBA teams couldn’t make their rosters until they knew where those three would land — which conferred significant power on CAA. In the end, the three all signed with the Miami Heat.

The decision to present James’ big news with such unusual fanfare through an exclusive pact with a single media outlet spurred an instant backlash against the star from fans and media.

Though James is repped by CAA, WME topper Ari Emanuel was credited with suggesting the idea for the special as he mingled courtside with members of James’ entourage and ESPN journo Jim Grey at a Los Angeles Lakers game. CAA insiders have let it be known that they had no involvement with the special. Emanuel is said to be OK with the result because the event managed to create a heretofore untapped moneymaking opportunity that raised $2.5 million for the Boys and Girls Club org.

Beyond the megastars, CAA Sports covers the spectrum, including tennis, NASCAR and virtually everything else. The agency handles one-third of the starting NFL quarterbacks playing on any given Sunday. It fielded eight players in this month’s Major League Baseball All-Star Game.

No other agency has jumped into the sports representation game on the scale of CAA, which reps its athletes on and off the field — with the exception of a few players like James, whose marketing deals are handled by a third-party company.

ICM is sticking to its four core areas — publishing, touring, film and TV. But with its branded entertainment division, ther
e is always the opportunity to open doors to athletes.

WME, UTA and ICM have refrained from launching sports divisions — even smaller-sized versions — though they each handle a handful of players. But those agencies only rep them off the field, for marketing and licensing pacts, endorsements, reality shows and the like.

Insiders at WME, UTA and ICM all cited a number of factors why they don’t want to get into the sports business in a bigger way: smaller commissions, salary caps and potential work stoppages in both the NFL and NBA’s 2011 season.

Those agencies are dabbling in what is still considered small potatoes compared with CAA’s approach.

The agency has built a sizable roster of athletes who can command both a large salary and generate numerous marketing opportunities. How it will continue to expand into the arena — and its ultimate playbook — will likely hinge on how effectively it sinks its roots in the pro sports realm.

“It’s a very relationship-centric profession and, just like dealing in show business, the more people you know at all levels the better off you will be,” says Biagas.

Filed Under:

Follow @Variety on Twitter for breaking news, reviews and more
Post A Comment 0