Creative Artists Agency LLC

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Creative Artists Agency LLC

9830 Wilshire Blvd.
Beverly Hills, California 90212
U.S.A.
Telephone: (310) 288-4545
Fax: (310) 288-4800
Web site: http://www.caa.com

Private Company
Incorporated: 1995
Employees: 400
Sales: $200 million (1999 est.)
NAIC: 71141 Agents and Managers for Artists; 711410 Literary Agents; 71132 Promoters of Performing Arts; 51224 Sound Recording Studios; 54189 Other Services Related to Advertising

As the entertainments industry’s leading literary and talent agency from the mid-1970s through the mid 1990s, Creative Artists Agency LLC (CAA) represented the majority of top actors, writers, directors, producers, and performing artists in Hollywood. In the early 1990s, CAA expanded its business activities to include consulting relationships with several major U.S. and international corporations, among them Coca-Cola, for whom the agency developed a successful advertising campaign. It also brokered several entertainment mega-deals, such as the purchase of MCA by Matsushita and then Seagram, and the purchase of Columbia Pictures by Sony. CAA has divisions that oversee activities in film, television, music, new technology, and mergers and acquisitions. It has represented such well-known individuals as Meryl Streep, Tom Cruise, Dustin Hoffman, Barbra Streisand, Aaron Spelling, and David Kelley. The agency’s revenues and assets are subject to considerable speculation.

Terrific Growth the First Four Years

Creative Artists Agency was founded in 1975 by five dissident talent agents employed by the William Morris Agency, the most powerful firm in “the business” at the time. Fed up with Morris’s relatively low pay and slow pace of advancement, Michael Ovitz, Ron Meyer, William Haber, Michael Rosenfeld, and Rowland Perkins met over dinner one night after they discovered that they all had in mind creating an agency of their own. As Ovitz reminisced in a 1989 New York Times article, “We all sang the same tune, and we came out of that dinner with a clear understanding of how we were going to do it.” However, before they could obtain adequate financing for their new venture, they were fired.

By early 1975, Creative Artists Agency was in business, with a $100,000 line of credit and a $21,000 bank loan, in a small rented office outfitted with card tables and folding chairs. The five agents had only two cars among them, and their wives took turns as agency receptionist. Within about a week, according to one industry insider, they had sold their first three packages, a game show called “Rhyme and Reason,” the “Rich Little Show,” and the “Jackson Five Show.”

At first, CAA’s founders planned to form a medium-sized, full-service agency—one that was as unlike Morris as possible in approach and feel. Ovitz, who shortly assumed de facto leadership of the agency, described the company’s corporate culture as a blend of Eastern philosophy and team sports. “I liken myself to the guy running down the court with four other players and throwing the ball to the open guy,” he once said. Theirs was a relaxed partnership based on teamwork, with proceeds shared equally. Clients enjoyed the services of a number of agents because at CAA information was pooled. There were no nameplates on doors, no formal titles, no individual agent client lists. Work practices followed the company’s two “commandments”: Be a team player and return phone calls promptly. There was an endless stream of meetings and talk. Because of this, others sometimes referred to CAA agents as the “Moon-ies” of the business, famous for “walking in lock-step,” according to the authors of Hit and Run, the bestseller Hollywood insider account by Griffin and Masters.

Four years later, CAA, still largely a television agency, was no longer a medium-sized company. It was the third largest agency in Hollywood, where it occupied a suite of offices in Century City. Competitive and hard-working, its agents carried off many former International Creative Management (ICM) clients, following a turnover in management there. CAA also aggressively recruited other agencies’ clients throughout the 1980s, paving the way, many later insisted, for the cutthroat atmosphere that would characterize Hollywood in the 1990s. CAA also gained ground by cutting, from ten to six percent, the price of television’s packaged deals, whereby an agent supplied not only the talent, but filled all the necessary positions for producing a program and earned a share of syndication fees.

An Emerging Power in the Movie Business in the Late 1980s

With its stable full of actors and about $90 million in annual bookings in the late 1980s, the agency, led by Ovitz, decided to get into movies. Its timing again was propitious, and its approach to the business inventive: CAA used its growing leverage to apply packaging to the movies. Its letterhead, which presented it as a “literary and talent agency,” reminded all that CAA represented a large number of screenwriters as well as actors and directors. It was not only in a position to broker deals, but to supply material. Although the agency did not, like ICM and Morris, have an office in Manhattan, the center of the publishing industry, it was closely associated with Morton Janklow, a connection that later led to its involvement in the television miniseries format.

CAA’s use of packaging changed the face of movie-making, making CAA increasingly powerful in the process. By 1989, CAA had built its own three-story building at the corner of Little Santa Monica and Wilshire Boulevards in Beverly Hills. The $25 million, 75,000-square-foot building, draped in honeyed travertine marble, tinted glass, and crisp white steel, was a paean to classical modernism. Designed by I.M. Pei and filled with works of commissioned art, it had a mural by Roy Lichtenstein in the lobby. According to Pei in a 1989 Los Angeles Times article, the building was designed to encourage “the relaxed interaction that characterizes this agency, where around 200 creative people, engaged in the collective enterprise of making movies and television, can casually gather here, or cross overhead bridges that link the two halves of the building.”

By 1988, the agency pulled in revenues of an estimated $65 million and represented 146 directors, 134 actors, and 288 writers. By 1992, CAA’s approximately 75 agents read scripts, suggested parts, and placed actors, writers, and directors in more than 100 titles a year. It was now in a position to control the studios, to the resentment of many studio heads, who did not like the way CAA made deals, insisting that along with desirable projects, they also had to take “the dogs.” Instead of the ten percent agents typically made on a contract, CAA insisted upon on a share in the product. Some, including David Geffen, blamed CAA in the press for throwing Hollywood’s economy out of whack. Representing most of the major talent in the industry, CAA reputedly drove up salaries, and thus, the cost of making movies.

By the early 1990s, only three of the original five founders remained as owners—Ovitz, Meyer, and Haber. To the world, they were equal partners, but, in fact, Ovitz held a 55 percent share of the company in recognition of his having greater clout in the business. Meyer and Haber each held 22.5 percent shares. With Ovitz at the helm, CAA was now regarded as one of the most powerful presences in the industry, feared as well as respected by agents and talent alike. CAA’s corporate culture was likened to everything from a Maoist camp to a fashionable frat house for its monolithic, secretive way of doing business. It expected its people to stay with the company, and both agents and talent reported being reluctant to leave CAA for fear that Ovitz and associates would hurt their future job prospects. Ovitz himself had become an industry icon, his face a familiar one in paparazzi photos.

Yet despite the fact that he repeatedly refused to be interviewed, rarely allowed himself to be quoted, and insisted that photographers sign an agreement not to sell pictures of him without his approval, much of Ovitz’s private lifestyle and modus vivendi became public knowledge. He collected art, was exceptionally disciplined, always wore a tie, even after he arrived home in the evening to his wife—his former UCLA sweetheart—and their three children. He spoke in hushed tones, the better to command attention. In college, he had abandoned his pre-med studies after being introduced to “the business” during a stint as a summer tour guide at Universal Studios. Ovitz had joined the Morris Agency fresh out of college as a mail-room clerk in 1969 and had risen rapidly to specialize in representing television talent, despite a temporary leave to go to law school.

Key Dates:

1975:: Michael Ovitz, Ron Meyer, Bill Haber, Rowland Perkins, and Michael Rosenfeld found Creative Artists Agency, Inc. (CAA).
1989:: CAA commissions and erects a building designed by I.M. Pei; Ovitz brokers Sony Corporation’s acquisition of Columbia Pictures Entertainment.
1990:: Ovitz brokers Matsushita Electric Industrial Co.’s acquisition of MCA.
1991:: CAA joins forces with The Coca-Cola Company as its worldwide media and communications partner.
1993:: CAA teams up with Nike to create a global sports entertainment business; Credit Lyonnais hires CAA to help manage its entertainment portfolio.
1995:: Ovitz brokers the sale of MCA to Seagram; Meyer and Ovitz leave CAA; Richard Lovett becomes the new president of CAA.
1996:: CAA teams up with the Smithsonian to increase recognition and awareness of the museum; CAA creates a new multimedia facility in its headquarters with Intel.
1997:: CAA partners with Joyce Ketay Agency in New York.
1999:: CAA invests in Shephardson Stern and Kaminsky, a communications consulting and advertising company.

Ovitz started his day with an hour of aikido, followed by a working breakfast, a round of phone calls at the office, lunch at a Hollywood hangout, meetings back at the office, and a working dinner. During meetings, he frequently scribbled notes to himself. In the office, he used a headphone so that no one else could listen in to the conversation. The man, whose extreme sense of responsibility led him to abhor criticism, nonetheless was noted for a temper which he let fly at CAA’s Monday and Wednesday staff meetings.

Mega-Deal Brokering in the Early 1990s

During the 1990s, Ovitz’s focus expanded beyond that of Hollywood, and he carved out relationships with major New York financial figures, a move attributed in part to hard financial times in the industry, but also to his endless restlessness. After an early misstep with Archer Communications, whose QSound technology never became an industry standard, Ovitz helped negotiate Sony Corporation’s $3.4 billion acquisition of Columbia Pictures Entertainment in 1989. A second blockbuster deal followed in 1990; with Ovitz as advisor to Matsushita Electric Industrial Co., the Japanese firm successfully courted and conquered MCA, owner of Universal Studios, in a $6.6 billion buyout. This deal earned CAA anywhere from $8 million to $40 million and garnered Ovitz the title of “Mike the Manipulator” in Spy magazine.

Another deal in 1990 gained CAA a ten percent interest in Mercantile National Bank, which then proceeded to lose more than half its value by 1992. In 1991, in a venture of a different sort, CAA joined forces with The Coca-Cola Company as its worldwide media and communications consultant in an effort to develop global strategies for marketing, promotion, and new technologies for the soft drink manufacturer and American icon. In 1993, CAA produced two series of commercials for Coke. Solidifying its move to Madison Avenue, CAA also teamed up with Nike in 1993 to create a global sports entertainment business, a series of events starring top athletes in live or made-for-TV specials to be broadcast by satellite. In 1995, CAA took on creative responsibility for Coke’s Nestea brands.

The rest of the entertainment world watched in some awe as Ovitz expanded the reach and definition of the agency business. But in late March 1993, the industry cried “conflict of interest” when CAA announced that it had been hired by Crédit Lyonnais to help manage its deeply troubled $3.1 billion entertainment portfolio, which included management of its Metro-Gold wyn-Mayer studio. Observers feared that CAA would be able to use its access to the ledgers of Credit Lyonnais’s film companies to examine the deals made by rivals. CAA, for its part, insisted that it was advising Credit Lyonnais in matters of entertainment investing. The dispute ended in a compromise with the Hollywood unions.

By now, CAA divided its agents into two camps: traditional agents, who oversaw the careers of CAA’s 1,000 stars, and specialists, whose expertise in investment banking and advertising made CAA into a one-stop shop for digital media. Founders Ron Meyer, in charge of CAA’s film franchise, and William Haber, whose focus was on television, headed up the traditional staff, while Ray Kurtzman took on the responsibilities of CAA’s chief lawyer, and Sandy Climan oversaw corporate finance. Robert Kavner, AT&T’s vice-president for multimedia products and services, joined the staff to oversee new media work. CAA’s first endeavor in this area was a late 1994 joint venture with three regional Bells to develop the programming and technology to allow consumers to receive video by telephone. Others in marketing and technology assisted Ovitz in brokering deals and creating new ventures, such as the 1994 association with N.S. Bienstock, which represented broadcast journalists, to blend entertainment and news, possibly launching talk shows and nonfiction projects.

The End of the Triumvirate: 1995

In 1995, Ovitz again brokered the sale of MCA, this time for $5.7 billion to Seagram Co., which offered Ovitz close to $250 million to become president of the entertainment conglomerate. When Ovitz, represented by Meyer, pushed for a better deal, Seagram turned around and offered the position to Meyer, who accepted it. Meyer moved to MCA in July 1995. Within a month, Ovitz, too, had accepted a position elsewhere, assuming the duties of Disney’s number two chief executive under Michael Eisner, a longtime friend. Ovitz joined Disney’s board and ran all three operating divisions of the company—its movie studio, theme parks, and consumer products/retail business, as well as television network owner Capital Cities/ABC, which Disney had just purchased.

The departure of both Meyer and Ovitz raised hope in the industry and fears in-house that CAA would lose talent to competitors. A transitional management group, representing CAA agents and management, appointed a four-person team with Richard Lovett as the new president; Lee Gabler, Rick Nicita, and Jack Rapke, all former department heads, became co-chairmen. The group also formed Creative Artists Agency LLC, whose employee shareholders, CAA’s former staff, would buy out Ovitz, Meyer, and Haber over time using earned income.

W & S Properties, a partnership of CAA’s principals, Ovitz, Meyer, and Haber, retained ownership of the building by I.M. Pei. The management team, which made decisions by committee, devised a four-point strategy for keeping competitors at bay during its transitional year: Make sure the 100-plus agents remain committed to the new CAA; re-sign longtime clients whose primary relationship was with Ovitz or Meyer; sign up new clients; and put together new movies.

Ovitz, Meyer, and Haber’s departure led inevitably to an exodus of some of CAA’s top-marquee names. CAA’s television group was weakened that year, according to one network executive quoted in the Los Angeles Times, when two of its top agents left soon after Ovitz joined Disney. Another three agents left to join the upstart Endeavor agency in 1996. “The balance of power is now shifting, opening the door for United Talent and Endeavor, and helping to build up the more established agencies like William Morris and ICM,” said one industry observer in the wake of the changes, expressing the resentment many felt at CAA for its packaging prices and aggressive recruitment techniques.

Others lamented the turmoil that overtook Hollywood, describing the agency business as a free-for-all, its atmosphere more cutthroat than ever. Press reports quoted agents who admitted to spending 60 percent of their time chasing other agents’ clients in the days following the shake-up at CAA. “There’s no more center of gravity around which everyone else in the business orbits,” said one top business lawyer, quoted in the New York Times in May 1996. The diminishing profit margins, rising costs, the glut of movies, and flat attendance at theaters of the mid-1990s created a growing sense of distress and confusion in the movie business. Without CAA to lead the way, no one knew which way to turn.

Ovitz’s departure also led to the termination of some of CAA’s contracts. The Baby Bells terminated the interactive programming venture, TELE-TV, but retained CAA’s Kavner and Griffiths as consultants. The CAA team of three that had been handling Coca-Cola Classic left to form an in-house ad agency for Coke in which they and Walt Disney would have minority stakes.

However, it was not long before new contracts came rolling in. In 1996, the Smithsonian and CAA forged a relationship on the occasion of the museum’s 150th anniversary to increase the public’s recognition and awareness of the Smithsonian through film, television, music, news media, and merchandising. Also in 1996, CAA joined with Intel Corporation to create a new multimedia facility in CAA’s headquarters, an educational tool designed to teach CAA clients about new entertainment possibilities based on high-performance multimedia PCs. The lab was equipped with technology to enable users to create, distribute, and present digital entertainment.

In May 1997, CAA formed a partnership with the Joyce Ketay Agency in New York, which represented writers, directors, composers, choreographers, and designers, to offer CAA clients the chance to work with New York-based theater agents. In 1999, Shephardson Stern and Kaminsky, one of the fastest-growing communications consulting and advertising companies, formed a partnership with CAA to help corporate clients use popular culture and entertainment to differentiate brands.

From 1998 onward, the upheaval in the agency business intensified. Many artists, valuing their independence, began to reject the agency system, opting instead for representation by lawyers or personal managers. Seizing the opportunity, Ovitz, whose tenure at Disney had ended in December 1996 after only about 16 months, formed Artists Management Group (AMG) in 1999, in direct competition with CAA. CAA, which considered AMG a threat, refused to do business with Ovitz’s group, forcing clients, in effect, to choose between the two. Some resisted, and left to rejoin Ovitz. Meyer personally voiced his support of CAA.

Still a force to be reckoned with in Hollywood, CAA was a very different place five years after Meyer and Ovitz’s departure. No longer espousing the team approach, its agents now took on clients individually. Still powerful, with the largest stable of top talent in the business, it was yet unclear how it would fare in the years ahead. In 2000, Omnicom Group, one of the big three agency holding companies, seeking to expand its entertainment assets, targeted CAA for possible acquisition; however, no specific plans were made.