CAA (with Michael Ovitz)

In the season finale of Acquired, hosts Ben Gilbert and David Rosenthal, along with guest Michael Ovitz, co-founder of Creative Artists Agency (CAA), delve into the transformative impact CAA had on Hollywood's power dynamics. Ovitz recounts the agency's inception, its innovative approach to talent representation, and his personal journey, including pivotal deals such as packaging Jurassic Park and selling Columbia Pictures to Sony. The episode also explores Ovitz's foray into investment banking, his near-move to Universal, and his tenure at Disney. Highlighting the importance of ambition, teamwork, and adaptability, Ovitz's narrative provides insights into the art of deal-making and the evolution of the entertainment industry.

• Speaker A had watched Speaker B's interview with Bill Murray at the 92nd Street Y.
• Bill Murray is characterized as a poor interviewer but hilarious.
• Speaker A assures Speaker B that they will let Speaker B talk more than Bill Murray did.

"He's like the worst interviewer ever, but he's hilarious."

The quote expresses Speaker A's opinion that Bill Murray may not be a good interviewer but is entertaining, highlighting the duality of his public persona.

• Season nine, episode eight of Acquired podcast is the season finale.
• Ben Gilbert introduces himself as the co-founder and managing director of Pioneer Square Labs and PSL Ventures.
• David Rosenthal introduces himself as an angel investor based in San Francisco.
• The hosts are set to discuss Michael Ovitz and the impact of Creative Artists Agency (CAA) on Hollywood and Silicon Valley.

"Welcome to season nine, episode eight, the season finale of Acquired, the podcast about great technology companies and the stories and playbooks behind them."

This quote is Ben Gilbert opening the podcast, setting the stage for the discussion about influential figures and companies in the technology and entertainment industries.

• Michael Ovitz founded CAA in 1975, revolutionizing Hollywood's power structure.
• CAA's influence extended beyond Hollywood, inspiring tech entrepreneurs like Mark Andreessen and Ben Horowitz.
• Michael Ovitz is credited with producing well-loved movies and TV shows.

"We are here today with Michael Ovitz to tell the story of creative artist agency CAA, the legendary talent agency he founded in 1975 that changed the power structure in Hollywood forever."

The quote highlights the central theme of the podcast episode: the story of Michael Ovitz and CAA's transformative impact on Hollywood's traditional power dynamics.

• Pilot is a company providing accounting, tax, and bookkeeping services for startups and growth companies.
• Pilot is now the largest startup-focused accounting firm in the US, backed by notable investors.
• The hosts discuss the importance of startups focusing on their core product and customers and outsourcing non-core activities like accounting.

"Pilot is the one team for all of your company's accounting, tax, and bookkeeping needs."

This quote explains the services offered by Pilot, emphasizing its role in supporting startups by managing their financial operations.

• Michael Ovitz shares the story behind the creation of the movie "Jurassic Park."
• Michael Crichton, a client of Michael Ovitz, had a close relationship with him and was experiencing writer's block.
• Ovitz encouraged Crichton to write "Jurassic Park," which became a bestseller and a blockbuster movie directed by Steven Spielberg.
• The process of making "Jurassic Park" was unconventional, with pre-production starting before the book was even published.

"And lo and behold, he sat down, and five months later, he called me up, he said, I'm sending you a draft of a book about what we talked about."

The quote recounts the moment when Michael Crichton completed the draft of "Jurassic Park," marking a turning point in his career and leading to the creation of a major film franchise.

• The old Hollywood studio system is compared to a sports league with major studios acting as teams.
• Actors, directors, and writers were under contract with studios and were not typically given a share of the profits.
• Jimmy Stewart's deal for "Winchester 73" marked a shift towards artists receiving a share of the proceeds.

"I think that you could safely compare the studio system to today's NFL."

The quote draws a parallel between the old Hollywood studio system and modern sports leagues, illustrating the contractual and economic dynamics of the entertainment industry.

• Lou Wasserman was an agent who transitioned to a studio head, changing the dynamics of artist compensation.
• Wasserman's negotiation tactics for Jimmy Stewart's participation in "Winchester 73" set a precedent for talent receiving a percentage of film profits.
• Michael Ovitz discusses the complexities of negotiating deals under the evolving studio system.

"Lou went into the studio and suggested a lesser front money payment for a piece of the back end."

This quote describes Lou Wasserman's innovative approach to artist compensation, which allowed talent to benefit from the success of their projects.

• CAA's approach to talent representation led to significant changes in how deals were structured.
• Michael Ovitz emphasizes the loyalty agents had to their clients, often going beyond financial interests.
• The agency model shifted from flat fees to talent participating in the financial success of their projects.

"Agents are depicted as money grubbing, as not loyal, aggressive, shortsighted sometimes. But, you know, the reality of it is, I don't know many agents like that."

The quote provides insight into the misconceptions about agents and the actual dedication they have to their clients' success and well-being.

• MCA Universal was forced to cease functioning as an agency due to anti-monopoly regulations.
• Lou, MCA's chief fundraiser, allegedly initiated the breakup to prevent MCA from leveraging against Universal.
• Post-breakup, MCA was divided into smaller agencies that posed no threat to Universal.

"Lou was the chief fundraiser for the Democratic Party in West LA. There are stories galore that Lou called one of the Kennedy brothers and suggested that MCA be broken up as a monopoly."

This quote suggests that the breakup of MCA was influenced by political connections and strategic business considerations.

• CAA was formed as a response to MCA's breakup and aimed to prevent studios from leveraging against them.
• CAA adopted a packaging strategy, controlling all elements of production and dictating terms to studios.
• They legally set prices by owning the complete package and offering it as a single entity to studios.

"We created MCA on steroids, and we would never sell any idea or client unpackaged or naked to a studio, ever."

This quote highlights CAA's strategy of packaging and controlling all elements of a project, ensuring their clients' autonomy and negotiating power.

• CAA's innovation was to package talent, directors, and scripts together, a departure from the traditional studio development process.
• The agency's early lack of clients led to a focus on building relationships and packaging elements for productions.
• CAA encouraged staff to be culturally informed, which helped in building relationships and understanding market trends.

"When we started in 74, we didn't have any clients, so all we had were relationships."

The quote emphasizes the initial strategy of CAA to compensate for the lack of clients by focusing on relationships and packaging, which later became their business model.

• CAA agents were encouraged to read extensively to stay ahead of cultural trends.
• Understanding culture and current events was crucial to relate to clients and build strong relationships.
• The agency's cultural insight led to significant accounts like Coca Cola's advertising.

"I urged everyone at the agency to read. We had a list of 100 titles that they needed to look through every month."

This quote underscores the importance CAA placed on cultural literacy to stay ahead of trends and maintain relevance in client conversations and business strategies.

• CAA's understanding of culture and demographics led to a revolutionary approach to Coca Cola's advertising.
• They proposed creating numerous commercials tailored to different demographics, using the same budget.
• CAA's pitch to Coca Cola included a detailed plan for year-round thematic advertising and the introduction of the polar bear mascot.

"We're going to do 30 to 40 commercials a year. They're all going to be for different demographics. It'll cost you the same as your seven commercials."

This quote captures CAA's innovative approach to advertising, offering a higher volume of targeted commercials without increasing the budget.

• CAA utilized top directors and actors for commercial production, elevating the quality and appeal.
• The agency's out-of-the-box thinking and efficient production led to a significant reduction in costs for clients.
• CAA's success with the Coca Cola campaign showcased their ability to deliver high-quality content at a fraction of the traditional cost.

"We delivered 35 commercials for the cost of seven."

This quote demonstrates CAA's efficiency and effectiveness in producing commercials, significantly reducing costs while maintaining quality.

• CAA was founded by a group of young agents from William Morris who disagreed with the company's direction.
• The founding of CAA was a response to a generational shift in talent representation and a desire to sign contemporary stars.
• The agency was born out of a desire to innovate and pursue a different philosophical approach to the business.

"Ca was born out of a bad staff meeting at William Morris, where the guy worked for, who was head of the television department. His name was Sam Weissboard, announced with great pride and passion that he had signed Anne Miller."

The quote explains the genesis of CAA as a reaction to the outdated business practices at William Morris, leading to the creation of a new agency with a modern approach.

• Statsig is introduced as a new sponsor for the podcast.
• The company offers a feature management and experimentation platform for product teams.
• Statsig helps companies like Notion, Brex, and OpenAI with product development and data-driven decision-making.

"Statsig is a feature management and experimentation platform that helps product teams ship faster, automate a b testing, and see the impact every feature is having on the core business metrics."

This quote describes the services provided by Statsig, emphasizing their role in enhancing product development processes for various companies.

• Television packaging was a familiar concept for the agents at William Morris, but film packaging differed significantly.
• The role of the producer is central in television, whereas in film, the director is key.
• William Morris Agency (WMA) separated TV and movie divisions during a time of industry convergence, which the agents disagreed with.
• WMA's refusal to hold joint TV and movie meetings contributed to the agents' decision to leave and start their own agency.
• The agents chose TV only initially due to SAG rules ensuring weekly payments, which facilitated cash flow for their new business.
• They transitioned into movies by dedicating agents specifically to the film business.

"But it's very different than packaging movies, because in television the producer is a key element, and in movies it's the director and the director." "William Morris wanted to keep them separate. And we were asking the head of William Morris picture department and television to run joint meetings because people could work in both areas and they refused to do it."

These quotes underline the differences between television and film packaging and the strategic misalignment with WMA, leading to the founding of a new agency with a different approach.

• Signing a tax lawyer with connections to major movie stars was a strategic move to acquire talent.
• The agency's first major star was Sean Connery, delivered by the lawyer Gary Hendler.
• The success with Connery led to signing other major stars like Dustin Hoffman.
• The agency used a team approach, which built strong relationships and retained clients.
• Leveraging the team approach, they created a monopoly on talent to gain leverage against distributors.
• They took out ads to publicly announce their representation of high-profile clients, reinforcing their market position.

"Gary Hendler told him we were young, aggressive, hot, and had good taste." "We plan on signing every single one of them because we want a monopoly on talent to give us leverage to turn the paradigm around against the distributors."

These quotes illustrate the strategy behind building a strong talent roster and the agency's aggressive approach to gaining leverage in the industry.

• CAA differentiated itself by implementing a team-based approach to client management.
• This approach helped avoid relationship problems that can arise from one-on-one agent-client pairings.
• The agency's success was tied to the collective performance, not individual client relationships.
• They compensated agents with a share of the company's overall success rather than market deals.
• The team approach allowed agents to sign more clients and share responsibilities, which freed up time for further growth.

"We were different for one solid, basic reason, which is that we basically worked as a team." "At CAA, your meal ticket was how well the whole company did."

These quotes emphasize the importance of the team-based approach in CAA's operational model and its impact on the agency's growth and stability.

• Agents at CAA handled an immense volume of calls daily, necessitating efficient communication systems.
• The pre-email era relied on a fail-safe system of returning calls and using "buck slips" for internal communication.
• The mailroom played a crucial role in the agency's operations, serving as a starting point for many careers.
• The agency's communication infrastructure was key to maintaining a coordinated team approach.

"An average agent at our place would run 200 to 250 phone calls a day." "We had what's called a buck slip system, which was... our form of email."

These quotes highlight the operational challenges of managing high call volumes and the innovative solutions CAA implemented to maintain effective communication.

• CAA ventured into investment banking as a response to financial troubles in the studio system.
• They leveraged relationships with Japanese companies to bring financing to Hollywood studios.
• The agency played a pivotal role in the sale of Columbia and Tristar to Sony, establishing Sony Pictures Entertainment.
• CAA's approach to fees was success-based, opting for potentially higher but riskier compensation over upfront fees.
• The agency's understanding of Japanese culture and business practices was instrumental in closing deals.

"I started building relationships in Japan... I worked my tail off to understand Japanese culture." "We said, look, if we do a good job, you can pay us an obscene sum of money."

These quotes demonstrate CAA's strategic pivot to investment banking and the cultural diligence that facilitated their success in international deal-making.

• Speaker B discusses the financial aspect of a studio deal involving Matsushita.
• They mention distributing $120 million to consultants, including lobbyists and PR firms.
• The acquisition was aimed at buying MCA Universal.
• Lou, an executive at MCA Universal, initially refused to sell to the Japanese but changed his mind after stock prices dropped significantly.

"And then for the studio deal on the Matsushta deal, they gave me $120,000,000 to pass out to all of the consultants. And I passed out money to everybody generously, because we had Washington lobbyists, we had PR people at Allen and company." "Yeah. Was to buy MCA Universal, which, by the way, I tried to buy for Sony, but Lou turned me down, said he'd never sell to the Japanese, but when his stock went from 65 to 20, he changed his tune."

The quotes highlight the financial dealings and the initial resistance to selling MCA Universal to a Japanese company, which later changed due to financial pressures.

• Matsushita's ownership of Universal lasted around ten years.
• Speaker B recounts a negative experience when bringing Matsushita's CEO to Universal, where Lou Wasserman, the executive at Universal, did not communicate well with the new owners.
• The cultural and communication gap led to the eventual departure of Lou from Universal.

"They had a very bad experience with universal. So when I brought the CEO of Matsushta to the universal lot after the deal was consummated, I had had lunch with Lou the day before, and I said to him, I said, lou, you are the greatest executive in our business, but once you sell this company, they're paying me to consult. And I want you to feel free to use me because I understand their mentality and their culture. And I said, with all due respect, you don't."

Speaker B explains the difficulties in bridging the cultural divide between Lou Wasserman and the new Japanese owners of Universal, which eventually led to Wasserman's exit.

• Lou Wasserman and Sid Sheinberg did not want to be owned by another entity.
• They feared losing control of the company, and the decision to sell was driven by the declining stock price and the intrinsic value of the Universal real estate.

"Clearly, I mean, having read about him and even going back to the Sony courtship, clearly, Lou and Sid didn't want to be owned." "They didn't want to be owned. They took the deal out of fear of losing the company. The value of the universal real estate was probably $18 a share, and their stock was going down to 20."

The quotes illustrate the reluctance of Lou Wasserman and Sid Sheinberg to be owned by another company and the financial pressures that led to the sale of Universal.

• Matsushita did not wish to upset Lou Wasserman due to his political connections.
• The Japanese company was sensitive to politics and opted to sell the company rather than negotiate with Lou.
• Speaker B and Herb were working with Edgar Bronfman on potentially taking over Warner Brothers.

"But Matsushta didn't want to ruffle lose feathers, because one thing the japanese companies are always ultra sensitive to is politics." "And Herb and I were working with Edgar Broffman, frankly, on trying to take over Warner Brothers."

These statements reveal the political considerations in business deals and the strategic moves by Speaker B and his associates in the entertainment industry.

• Michael Ovitz reflects on his decision to leave the agency business and join Disney.
• He discusses the challenges faced by Ron Meyer and himself in transitioning out of the agency world.
• Ovitz was brought to Disney to create a similar culture to what he had at CAA.

"So I was pretty much hitting the end of my useful life as an agent. I was about to turn 50. I'd been working since I'm 16 in the entertainment business." "And then Ron Meyer blew up. He just lost it. He just couldn't be in service anymore."

These quotes show Michael Ovitz's contemplation on his career change and the difficulties experienced by his colleague Ron Meyer, highlighting the personal toll of the agency business.

• Michael Ovitz faced a challenging environment at Disney, with Michael Eisner undermining him.
• Ovitz's ambition was not to stay at Disney indefinitely but to explore various career paths, including public service.

"And it just was very clear from the beginning it wasn't going to be a team effort. For whatever reason, I threatened him, which shouldn't have, because I didn't want his job."

This quote shows the internal conflict Michael Ovitz faced at Disney, suggesting a lack of cooperation and support from Michael Eisner.

• Crusoe is a clean compute cloud provider that partners with Nvidia.
• They focus on AI workloads and utilize wasted, stranded, or clean energy.
• The company's environmental focus and cost advantages are emphasized.

"So Crusoe, as listeners know by now, is a clean compute cloud provider specifically built for AI workloads."

This statement introduces Crusoe as an innovative company in the tech industry, combining AI and environmental sustainability.

• Michael Ovitz speculates on how his career might have differed had he gone to Universal instead of Disney.
• He mentions strategic initiatives he proposed at Disney, such as acquiring Yahoo and CBS records.
• Ovitz acknowledges his preference for autonomy over being an employee.

"Part of me thinks that I would have done an amazing job at building that business, because when I went to Disney, I put together seven initiatives that I wrote about in the book that would have made Disney a fortune."

This quote demonstrates Michael Ovitz's confidence in his strategic vision and his reflection on alternative career paths.

• Michael Ovitz applies the same principles from his time at CAA to his work in the digital world.
• He emphasizes the similarity in packaging talent with financing and distribution in both entertainment and tech startups.

"I do not do one thing different today than I did 30 years ago. Not one thing."

This quote underscores the transferability of Michael Ovitz's skills from the entertainment industry to the technology sector.

• Ovitz discusses the challenges he faced in expanding CAA and why he chose not to pursue certain opportunities.
• He sold CAA to the next generation for a deal that allowed the business to continue and thrive.

"I only cared about the business staying alive, and I felt that if I didn't do that, 20 people would peel off and do their own business, and I wanted the franchise to stay alive."

This quote highlights Michael Ovitz's priority in ensuring the longevity and success of CAA, even after his departure.