EVERY SPOKEN WORD
85 min read · 17,399 words- 0:00 – 1:34
Bill Murray cold open + setting up the CAA story with Michael Ovitz
- DRDavid Rosenthal
I was watching you with Bill Murray at the 92nd Street Y. [laughing]
- SPSpeaker
How great is Bill, right?
- DRDavid Rosenthal
He's, like, the worst interviewer ever, but he's hilarious. He's Bill Murray. [chuckles] We'll let you talk more than Bill did.
- SPSpeaker
Who got the truth? [upbeat music] Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down, say it straight. Another story on the way. Who got the truth?
- BGBen Gilbert
Welcome to season nine, episode eight, the season finale of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I'm the co-founder and managing director of Seattle-based Pioneer Square Labs, and our venture fund, PSL Ventures.
- DRDavid Rosenthal
And I'm David Rosenthal, and I'm an angel investor based in San Francisco.
- BGBen Gilbert
And we are your hosts. He was the most powerful man in Hollywood for two decades. He is responsible for movies and TV shows you love, like Late Night with David Letterman, Jurassic Park, Back to the Future, Rain Man, Goodfellas, and literally hundreds of others.
- DRDavid Rosenthal
Rain Man!
- BGBen Gilbert
We are here today with Michael Ovitz to tell the story of Creative Artists Agency, CAA, the legendary talent agency he founded in 1975 that changed the power structure in Hollywood forever, and not just Hollywood. As many of you probably know from our earlier episode this season, Michael and CAA inspired none other than Marc Andreessen and Ben Horowitz to similarly change the power structure of Silicon Valley.
- 1:34 – 4:49
Sponsor interlude (Pilot) + founder advice on team, focus, and real customer pain
- DRDavid Rosenthal
Boy, did he ever! Ugh, what a great way to end the season. I am so pumped. Before we dive in, for the last time in season nine, w- I would like to welcome our presenting sponsor, Pilot.com. Pilot is the backbone of the modern financial stack for startups. They themselves, as you know, are backed by all-star investors like Sequoia, Index, Bezos Expeditions, and Stripe, and they are truly the gold standard for startup bookkeeping. Now over to our conversation with Pilot co-founders Waseem Daher and Jessica McKellar. So as we come to the end of the season, let's turn to Pilot as a company itself. Not only do you serve startups, but obviously you've been an incredibly successful one, having raised over $150 million from Sequoia, Index, Bezos Expeditions, and Stripe. So I'm curious, what advice would you have for all the founders listening who are earlier in their journey or maybe haven't even started a company yet but are thinking about starting one someday in the future?
- SPSpeaker
Real talk, thing number one is you need to pick a problem or pick a market where you can actually build a company that can make money. But leaving that aside, I can say this from having worked with Waseem and our co-founder, Jeff, for nearly 15 years at this point, Pilot is our third company. We've been through two acquisitions together. Having a founding team that works well together, that is values-aligned, really does make a difference for maximizing the chance of having a successful business, and it's such a precious thing that we found each other, and I know at least I'm never gonna let go of them.
- SPSpeaker
In addition to the team being really important, I think it's critical that you really remain focused, which is your company has one job, which is to make a product or service that your customers wanna give you money for. In other words, you have to be laser-focused on solving a real hair-on-fire need for your customer base, and anything that you're doing that is not in service of solving that hair-on-fire problem is, frankly, time you're wasting.
- DRDavid Rosenthal
Well, I can't think of any better note to end our time together this season on, nor, frankly, any better [chuckles] pitch for why all startups should be using Pilot for all their bookkeeping and tax and CFO needs. Thanks so much to both of you for joining us for this whole season.
- SPSpeaker
Thanks for having us.
- DRDavid Rosenthal
You can learn more about Pilot and whether they can help your company eliminate the pain of tax prep and bookkeeping by going to pilot.com/acquired. And thanks to Waseem and Jessica, all Acquired listeners, if you use that link, you will get 20% off your first six months of service. Thank you, Waseem, Jessica, and all of Pilot.
- BGBen Gilbert
No kidding. And, uh, listeners, before we dive in, many of you already know this, a ton of you have already subscribed, but the LP Show is now publicly available in all podcast players for free. So only the, uh, first two weeks of, of brand-new episodes are, uh, are in the private feed. Everything else, you can go search Acquired LP Show in the podcast player of your choice and get all those episodes. Now, without further ado, our conversation with Michael Ovitz.
- 4:49 – 21:05
Jurassic Park as the ultimate CAA package: from lunch conversation to Spielberg commitment
- DRDavid Rosenthal
Michael, welcome to Acquired.
- SPSpeaker
Thank you very much.
- DRDavid Rosenthal
It is so great to have you here with us. Uh, so we're thinking today, of course, this being Acquired, we're gonna start all the way back, way before your time, tell the history of the Golden Age of Hollywood, New Hollywood, and then leading into you and CAA, of course. But, uh, uh, like any good, uh, any good creative story here, uh, creative artists, we're gonna steal from your book [chuckles] and we're gonna start in medias res, uh, and then rewind, just to set the stage for what's to come.
- SPSpeaker
Just don't ask me any hard questions.
- BGBen Gilbert
Deal. Maybe.
- DRDavid Rosenthal
Well, I think you'll enjoy telling this story. Um, can you tell us the Jurassic Park story?
- SPSpeaker
[laughing] You must be like me and like dinosaurs.
- DRDavid Rosenthal
[laughing] Well, that was, that was the key to all of it, right? Was that, like, everybody likes dinosaurs.
- SPSpeaker
I think that was... That's accurate. That's what got that movie made, basically.
- BGBen Gilbert
So you had a pre-existing relationship with, with Michael Crichton, but he hadn't produced any new material in a while. Is that right?
- SPSpeaker
So Michael w- was a client of mine from starting when, uh, in the late '70s.
- SPSpeaker
... and we developed an extraordinarily close personal relationship that went way beyond our professional relationship. And I literally talked to him every day of the week, and I did that not because he was a client, partially because he was a friend, but mostly because he was one of the smartest and most interesting people.
- DRDavid Rosenthal
He was really like a Leonardo da Vinci type, right?
- SPSpeaker
He was amazing. Here's a guy who was a medical doctor, screenwriter, director, travel writer, um, short story writer, novelist, and just was probably the greatest guest to ever have at a dinner party, because he could talk about anything with an extraordinary depth of knowledge. And it's fascinating to me, because later we'll talk about another friend of mine who I love putting together, and that's Marc Andreessen. Um, the two of those guys probably suck９０% of the brainpower that God gave away in their birth years. [chuckles] Um, they're just, like, extraordinary. But Michael ran into a very tough patch, really tough patch, and a lot of writers and creative people, and you've probably heard the expression, "writer's block," you know, they occasionally just... it doesn't flow. Artists have it as well. I have a friend who's a phenomenal painter, and she just couldn't get it together for six months. She couldn't-- It just wasn't coming out. And I think that Michael was in a position where he was going on a couple of years, and he just wasn't happy with what was coming to him, and I used to z- have lunch with him once a week. And what happened is that I would push him constantly at the lunches to try to see if I could ignite a small spark. And at one of the lunches, when things seemed the bleakest, he said to me, "What do you think of three people, age younger and maybe one a little older person, stranded in an amusement park off the coast of South America, and the core of the amusement park are prehistoric animals?" And I looked at him and I said: "Wow! My young son likes dinosaurs, I like dinosaurs, and my dad likes dinosaurs. This is really an extraordinarily interesting idea." And we then talked for almost three hours about paleontology, about, is it possible you could breed these type of beings in the twentieth century? Could it be made real? Is it possible with, in those days, with the kind of technical know-how that was available in the '90s to do it? And we came to the conclusion that it was worth him sitting down and trying to write it. 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." And he sent it over, and I remember sitting down around six o'clock in the evening, six thirty, I had something to eat. I had left the office early, and I just started reading typewritten manuscript pages, and I didn't finish until around three in the morning. And I called him at seven AM, and I said, "This is the best thing you've written in ten years." And I said, "I just couldn't stop turning the pages." Just as an aside, one of the great tests of whether something works or not is how quick you turn the page. And you know from readings, just recreationally, if you turn the page, you like the book, and I just devoured this book. And I said to him, I said, "Look, at... This is brilliant. It'll make an amazing book. It'll make an amazing movie." And I said, "There's only one guy in my mind that can make this movie. There are not two guys or three guys or four guys. There's one guy, and if we don't get him, I would be worried about what this movie looked like." And he said, "Who?" And I said, "Steven."
- DRDavid Rosenthal
And, of course, that one guy-
- SPSpeaker
Yeah, he's the one guy, and in that-- in our world, there are certain people that have single names. There's Madonna, there's Cher, you know, and there's Steven. [chuckles]
- DRDavid Rosenthal
Of course, Steven Spielberg, who was the one, also the one guy in Hollywood at that point, the one director who is not your client, right?
- SPSpeaker
He was not my client, and I wanted him to be a client very badly. So my brain started to work on overtime, and basically, I said: "Michael, I'm gonna call Steven."... So at 9:00 AM, I called Steven, we talked, and I said, "I've got something I wanna send you, and I know you don't read at night, so I'm gonna call your wife, Kate Capshaw, and I'm gonna ask her permission for you to disappear tonight and read."
- DRDavid Rosenthal
This is like a classic agent trick, right, is to call somebody's spouse.
- SPSpeaker
I had no choice. [laughing]
- DRDavid Rosenthal
[laughing]
- SPSpeaker
Because I had to create a sense of urgency around this, but also I didn't wanna oversell, and I didn't wanna undersell. So he agreed. He said, "Call her." I did. She agreed. Sent him the book. He said, "How much time do I have?" I said, "You've got today and tomorrow." And lo and behold, the next morning, at 7:30 in the morning, my phone rang, and it was Steven. He said, "This just knocked my socks off." He said, "I, I couldn't believe this book." He said, "I'm making this movie."
- BGBen Gilbert
And what year was this?
- SPSpeaker
So this was about a year before the movie was made.
- DRDavid Rosenthal
'91, '92?
- BGBen Gilbert
It's very unusual to begin this level of sort of pre-production on a movie even before the book is published. I mean, this is on the first version of the manuscript, right?
- SPSpeaker
Yeah, this is, uh, highly unusual. What's even more unusual is I asked Steven to commit to the movie, subject to a budget, and we had no distributor and no financing. And, you know, Steven was the most sought-after director in the business. And to his credit, he said okay, and I called his producer, Kathy Kennedy, who, oddly, her husband, Frank Marshall, was my college roommate.
- DRDavid Rosenthal
Whoa! No way.
- SPSpeaker
So I had a little credibility there.
- DRDavid Rosenthal
And Kathy runs Lucasfilm now, right?
- 21:05 – 33:25
From flat fees to participations: old Hollywood economics, Lew Wasserman, and the studio system analogy
- DRDavid Rosenthal
You know, back when all these folks were under contract... And really, I mean, r- reading about old Hollywood and, and learning how the old studio system worked, to me, it's, it's, it's like a, it's like a sports league. I- it's like- uh, that feels like the right analogy, right? Like, there were five teams, the major studios, and then a couple independents, couple major minors. They were all a sports team that had the owners back in New York and had the GM and the manager, those were the studio bosses, and then all the actors, directors, writers, they were like players. They were like, you know, LeBron James. They might be, you know, paid well... Well, that's a bad example because the players make so much more money now, but-
- BGBen Gilbert
Like an NFL player in the '70s.
- DRDavid Rosenthal
Yeah, they, they played for the team, and that was it, right? And, like, if they didn't go out and play, they would get suspended, [chuckles] right?
- SPSpeaker
I think that you could safely compare the studio system to today's NFL.
- DRDavid Rosenthal
Hmm.
- SPSpeaker
And they had people that made a lot of money, Ben. They did. They had people... They had artists that were getting, in their time, substantial sums of money. You know, the Douglas Fairbanks, the Mary Pickfords. Then if you moved into the next era, the contract players, the Clark Gables, the Jimmy Stewarts, you know, all of the, the Sirius, the Cary Grants, you know, they were paid, in those days, money that was unthinkable.
- BGBen Gilbert
And it was typically, like, e- even for the folks where it was a large amount, it was committed upfront, right? They didn't get a share of the proceeds until... Who was the first to really get a gross proceeds deal?
- SPSpeaker
Well, the first is the famous story of the movie Winchester '73, where Lou went into the studio and suggested a lesser front money payment for a piece of the back end. Prior to that, artists were paid what's called flats, which is a flat fee, and they didn't get, uh, a basic participation, and I think that what he did is he changed the entire fabric of the business.
- DRDavid Rosenthal
And so that was Jimmy Stewart in Winchester '73, and, and Lou was his agent, right?
- SPSpeaker
Yes, was his agent. Which is funny because then Lou went to the other side, and if you go all the way up to Jurassic Park, you know, he got stuck with participations. I had a similar issue with Lou.... and Sid over Back to the Future.
- BGBen Gilbert
Where they were running the studio, and by this point in history, you know, Lew's original trick of, "Hey, let's get Jimmy Stewart, you know, uh, cut in on the back end. He's a partner in this movie. He's gonna participate from the upside," you would, you know, take what he did, and, and what CAA really did was, you know, multiply that over, and over, and over again, such that the talent was really participating in the upside. So then by the time you bring Jurassic and you bring, uh, uh, Back to the Future to Lew, when he's a studio head at Universal, uh, that's gotta be kind of a wild, full turn of events to, to, you know, um, you know, uh, really get the better of that deal.
- SPSpeaker
Well, it was interesting. One of the things I said to Lew when, um, our director, Bob Zemeckis, who's a brilliant director, was going back for Back to the Future II and III, and I wanted a larger participation for him. My opening line to Lew was, "You caused this problem." [laughing]
- DRDavid Rosenthal
[laughing]
- SPSpeaker
It didn't go over very well, by the way.
- BGBen Gilbert
I bet. [laughing]
- DRDavid Rosenthal
So what... Tell us more about w- uh, who was Lew? 'Cause the, from the outsider's perspective, like, here, here's how I sort of see things, is like Lew was an agent. He was, he was like Anakin Skywalker, right? Like, he was, like, fighting for the artists to get way more of the upside, but then he went to the dark side, and he stopped being an agent, and he, and MCA, his, his agency, bought Universal, and all of a sudden, he's on the other side of the table as a studio boss, now, now from your perspective, trying to stiff the artists. How did this happen?
- SPSpeaker
He made a decision... First, he bought the pre-1948 Paramount library [clears throat] for Universal, and he made a decision, basically, that it was better economics on the other side of the deal. Why take 10% when you can have 90?
- DRDavid Rosenthal
Hmm. Ah.
- SPSpeaker
First, he bought Revue Television, then he bought Universal. For a period, by the way, David, Lew was still an agent while he owned Revue Television.
- DRDavid Rosenthal
Oh, my goodness.
- SPSpeaker
So he had the ultimate monopoly.
- DRDavid Rosenthal
He's on both sides of the transaction.
- SPSpeaker
Yeah. You know, I've always felt, and I still do, I'm really interested in dealing with conflicted people because if you have a conflict, in essence, you want it to work out on both sides. So a lot of times, I'll go to someone with a heavy conflict to this day to work out a problem.
- DRDavid Rosenthal
So is my characterization maybe not fully accurate, then? That, uh, i- I'm, I'm thinking of Lew and MCA as sort of opening up a seam for artists, but then closing it again, but maybe that's not totally accurate. Uh, is... Uh, how, uh, how would you characterize L- Lew then, and, and what he did with Universal?
- SPSpeaker
I don't think that, uh... They gave participations out. They didn't stop it. They negotiated hard and tough on their side, no different than we did on our side. But they were sympathetic, too. They didn't just say: "Look, we're not doing this. We're reversing it all." And frankly, as CAA gained momentum in the l- '80s and early '90s, they didn't have a lot of choice because of the 50 top grossing directors in the n- for example, in '90, CAA represented, like, 45 of them, so it was impossible. You couldn't say no. I remember when we signed Mike Nichols, may he rest in peace, a great director, I'll never forget a call he made to me. He was getting two and a half million to direct, and when he became a client of ours, and he- we went to make a deal for him, I called him up, and I got him five million. And he said: "I don't understand. That's not my price." And I said: "Well, it is in the context of being a CAA client," because five million was what the top directors made at that point in time. So I said: "Mike, you're a top director." I said: "If you want, I'm happy to take two and a half of it and donate it to charity." Uh, at the time, I was raising money for the UCLA Hospital. We were gonna rebuild it. So I said: "I'll be very happy to take that two and a half million for the hospital," and he said: "I'd love to do that, but I'm very pleased to have the full amount."
- DRDavid Rosenthal
[laughing] Did he make a donation to the hospital at least to-
- SPSpeaker
He did.
- DRDavid Rosenthal
He-
- SPSpeaker
He made a small donation.
- DRDavid Rosenthal
[laughing]
- 33:25 – 38:48
CAA’s core innovation: never sell anything ‘naked’—control the script, stars, director, and terms
- BGBen Gilbert
Where did that insight come from? Because I know in the sort of pre-CAA studio world, you know, the talent agencies would represent the talent, and then the studios would do development, where the, the studios, you know, they would buy the script, and they would attach a director, and they would turn it into a film, and then they would go cast the, the actors. How did you sort of get the idea of, "Oh, we could do that"?
- SPSpeaker
Well, the idea was pretty simple, frankly, in that when we started in '74, we didn't have any clients, so all we had were relationships. So all we could do is put elements together and try to attach ourselves and hang on to a bucking bronco. And by doing that, and if we could hang on, it developed that as we took clients in, we'd surround them with elements because it became very clear to us that the clients were the creative force, and they were the ones that were gonna dictate what was going to happen. It was kind of the same reason that I encouraged everyone at the agency to read a lot of magazines. Now, you can't think of magazines today the way we did, 'cause in the '70s, '80s, '90s, and early 2000, magazines were a vital part of the culture of the country.
- DRDavid Rosenthal
They were the internet.
- SPSpeaker
Yeah, it was, it w- it's correct. Pre-internet, my thesis was that art directors of magazines and editors were always six months ahead. They had to be, because it took three months to get a magazine out and a month to let it sit on a newsstand, so they had to think six months in advance. So I urged everyone at the agency to read... We had a list of a hundred titles that they needed to look through every month. I subscribed to two hundred magazines, and I didn't read them all, but I would sit and thumb through them while I was on the phone. So, you know, I would read things like Golf Digest, MotorTrend, Automobile, Car and Driver. I had to r- w- why did I read those? Well, I'll tell you why. When I met Paul Newman, I actually had something to talk to him about because Paul Newman loved cars. Now, could I talk for days? No, but I had enough to get through an hour.... So whatever we read, current events, you know, we read [chuckles] women's magazines like McCall's and Redbook and Vogue and Marie Claire. Why did we look at these? Wanted to see what fashion looked like. If you wanna talk to an actress, you gotta have some insight into look and feel and what people are thinking. It doesn't mean it was always right, but it gave us a firm overview of editorial process by people whose job it was, was to predict the future.
- SPSpeaker
You're in the business of being able to relate to people and quickly build strong, trusted relationships.
- SPSpeaker
And also get a sense of where culture is going. You know, we got the account to do all the advertising for Coca-Cola because we were really culture mavens. We really had a sense of what the audiences wanted to see. And before we did this, there was this kind of unwritten rule that only buyers could do that, you know, studio executives, network executives. And my thesis was, I had a partner named Bill Haber, who was head of our television department.
- SPSpeaker
He was one of your founding partners, right?
- SPSpeaker
Yeah. Bill Haber could read a screenplay, a teleplay, and give as good a notes as any executive at any television company. As a matter of fact, I could probably make an argument he could probably do it better. He was really good at it. We put together Shogun as a miniseries. Everyone said Bill and I were crazy, that we'd lost our minds. Who cares about the Far East? And how do you make a TV series about a, a bunch of Asians and one, an Anglo? Well, it was our point of view from everything we were reading, that Asia was becoming a very hot commodity in the '70s and '80s. People were really interested in what was going on, the rise of electronics and electronic companies like Sony and Matsushita, Panasonic, National. S- these were major players
- 38:48 – 53:52
Culture as competitive advantage: magazines as the ‘internet’ and the leap into Coca-Cola advertising
- SPSpeaker
in our business, developing hardware for all of the software that our clients were creating. And those are the kinds of things we would think about. But moving back to Coca-Cola, we weren't in the ad business, but we had a sense of what people wanted to watch. So I was at a Allen & Company conference, and Herb Allen was the... on the board of Coca-Cola, and of course, the CEO and president of Coke were at the conference, and we were having a coffee out on Herb's porch, and the- both guys said to me: "We're getting hurt by Pepsi-Cola." And bear in mind, in the '80s and '90s, there was a book written called The Cola Wars, where these guys were fighting like cats and dogs for mar- for market share.
- SPSpeaker
We talked about all this on our Berkshire series. This is, of course, Roberto Goizueta and Don Keough that you were talking with, right?
- SPSpeaker
Yeah. So I said to Don Keough and Roberto Goizueta: "Look, I think you guys are making a mistake with your advertising." And they said: "Why?" And I said: "Well, you're doing six or seven commercials a year." I said: "How do you run the same commercial on Seinfeld that you run on daytime and that you run on, you know, late night?" I said: "They're all different demographics. What are you doing?" They said: "Wow, that's interesting." Said: "Could you come to Atlanta with some of your people?" I said: "Yeah, if you send a plane for us." [laughing]
- SPSpeaker
[laughing] And Coca-Cola, historically, is one of the most sought-after advertising accounts in America. I mean, McCann Erickson, you know, had this account, had it on lock for decades and decades and decades. They sell a pure commodity product that's differentiated by brand. They pour a ton of money into brand advertising.
- SPSpeaker
Yeah, they were running a business that spent five to six hundred million a year on advertising worldwide. So I gathered 12... 10 of our agents, and I took them from different demographics and different departments. I had men, I had women, I had music agents, film agents, TV agents. I had a personal appearance agent, I had a book agent, and a- they did send the airplane. [chuckles] And we flew to Atlanta, and they brought in all 12 of their worldwide geographic division heads. They got them all there for an all-day meeting.
- SPSpeaker
What did your staff think when you told them, like: "Hey, we're gonna go [chuckles] do an ad pitch to Coca-Cola?"
- SPSpeaker
Well, I'll tell you what they thought. Most of them thought I'd taken leave of my senses.
- SPSpeaker
[chuckles]
- SPSpeaker
Well, how could we be in the advertising business? And a couple of them looked at me and said: "Wow, we can do this. Um, why can't we do it?" But my point of view, 80% of the business- of our company thought there was something wrong with me, that I probably had, eh, food poisoning or something that went to my head, 'cause it just didn't seem to equate to them.... but to me it did, because what do we do? We read material and try to tell a client like Michael Crichton and Steven Spielberg, "Do you make a movie about dinosaurs? Can we recommend that?" To Dustin Hoffman, "Can you make a movie-- We think you should make a movie about an autistic guy, and Tom Cruise should be your brother."
- DRDavid Rosenthal
Right.
- SPSpeaker
You know?
- DRDavid Rosenthal
Or dress in drag and [chuckles] -
- SPSpeaker
Yeah.
- DRDavid Rosenthal
Yeah.
- SPSpeaker
Um, we took the same positions that a buyer took. There's no- no one owns creative thought or opinion. Look, you two guys look at something on TV tonight, you have an opinion about it. When you're right more than you're wrong, that opinion's a trusted opinion, and we were right more than we were wrong, collectively as a group. So we flew to Atlanta. We sat, we looked at every single commercial they had ever done. We listened to the complaints of the department heads geographically, and I said to them, "Give us 90 days, and we'll be back to you." And I knew it would take us two weeks, 'cause I already had the idea that I thought was gonna work. But I never like to overpromise and under-deliver. I like to under-promise and over-deliver. So about two weeks later, I called Don Keough. I said, "We're coming back to Atlanta, and we're gonna pitch our idea." He said, "You said you needed three months." I said, "Well, we kind of accelerated it. We got so excited, and we drank a lot of Coca-Cola." [laughing]
- DRDavid Rosenthal
[laughing] Oh, you're good.
- SPSpeaker
Which cr- cracked him up. So we flew in three weeks to the day after we met the first time, and we pitched a simple idea. We said, "Look, for the same money you're spending, we're gonna do 30 to 40 commercials a year. They're all gonna be for different demographics. It'll cost you the same as your seven commercials. We're gonna do a mascot for you."
- DRDavid Rosenthal
The polar bears.
- SPSpeaker
"Which turned out to be the polar bears, still running 25 years later. We are going to run your commercials like a relay race, so first of the year, we're gonna do hopefulness. February, we're gonna go into Valentine's Day and love. Easter, family, summer, refreshment, fall, back to school, Thanksgiving, family again, Christmas, polar bears." And they said, "How do we know that's gonna work?" And I said, "You don't," 'cause we didn't. They didn't. We just said, "We believe it. Let us try one flight of commercials." And they said, "How many do you wanna do?" I said, "40."
- DRDavid Rosenthal
[laughing]
- SPSpeaker
And they said, "You're crazy, but if you wanna do 40 for the seven, the budget for seven, you got it." So they asked us... Then they called back and backtracked, 'cause McCann had been their agency for 40 years, and they said, "Will you come do what's called a shootout?" And I... A shootout is where you come in, and all the ad agencies pitch to the executives. And I said, "We will do a shootout if Don and Roberto attend, the CFO, Doug Ivester, attends, 'cause he is the keeper of the money, your head of marketing, Peter Sealey, attends, and three or four of your other key executives attend, and we'll do it." And they said okay, and they set the date. It was set, I'll never forget this, for 11 o'clock on a weekday, and I flew our f- team of five people in. The night before, we checked out the room we were gonna do it in, we rehearsed what we were gonna pitch, and we went for a very nice dinner. I bought everybody new Armani clothes, and we got up the next morning, n- never forget this, we went to the gym, we had a nice breakfast, and we walked in at a quarter to 11 and sat down, and we looked the part.
- DRDavid Rosenthal
One would say it's a show of strength.
- SPSpeaker
And at five to 11, the McCann people, there were 35 of them-
- DRDavid Rosenthal
[laughing]
- SPSpeaker
- drifted in, having just gotten off a 6:00 a.m. flight from New York, and I'll tell you, they looked like they were all in a blender. They kinda looked like live smoothies. They were wrinkled and ratty and all screwed up, and nice people, too, but whoever said to them to fly in the morning made a critical error. Anyways, they flipped a coin, and they said they won, and we were hopeful that they would say what we thought they would, which is they'd go second.
- DRDavid Rosenthal
[chuckles]
- SPSpeaker
'Cause we wanted to go first and blow their doors off.
- DRDavid Rosenthal
Of course.
- SPSpeaker
And we did. They w- said they won, and they said, "We'll go second." And I said, "Great, we'll go first." And we went in, and we presented 35 ideas, and we acted them all out, and each one ran 30 seconds. And we did it crisp and clean, with music, with expression, with enthusiasm. I started it. A guy who just passed away named Len Fink and Shelley Hockran, who worked with us, went in and helped us. Len, I remember, did a commercial about a dog, and he barked like a dog. He got on the ground.
- DRDavid Rosenthal
[chuckles]
- 53:52 – 1:02:18
How CAA was born: leaving William Morris after a philosophical break about ambition and taste
- BGBen Gilbert
That's wild. I mean, so, uh, y- y- we're talking about this point in history where you had already become this big, successful agency, you were already representing these people, and you're, you know, branching out into things like, uh, trying to take on Coke's advertising. Can we hear the entrepreneurial story from you of how CAA came to be in the first place? 'Cause you really started with nothing, like, zero.
- SPSpeaker
Yeah, I mean, it, it, it's actually pretty simple. Um, I'll, I'll try to give you the highlights. We were... A group of us, there were probably fifteen young agents at William Morris, maybe twenty, all in our twenties.... and I was the assistant to the president at the time. Bill Haber ran the TV talent department. Ron Meyer was a first-class talent agent. Roland was a, and Mike Rosenfeld were TV packaging agents. And basically, we noticed a disagreement philosophically with where they were taking the business. And crazy as it sounds, CAA was born out of a bad staff meeting at William Morris, where the guy I worked for, who was head of the television department, his name was Sam Weisbord, announced with great pride and passion that he had signed Ann Miller, which will mean nothing to you two young guys, but she was a '50s song and dance queen and a Broadway star. And we said in a staff meeting, we all sat in the back. We weren't allowed to sit at the table because we weren't senior enough. And one of us got up and said: "Look, Ann Miller is a talented lady, but we should be signing Bob Redford, and Paul Newman, and Dustin Hoffman, and Sean Connery, and Sidney Poitier, and we should be signing those people, not Ann Miller. This is William Morris. We've been around since 1898. We're on the wrong track." Well, the older guys went ballistic, and the-- you then saw a division at William Morris that never healed. And then they made a cardinal tactical error. The head of the training department that trained all of us was the former roommate of the president, Sam Weisbord. His name was Phil Weltman, and he was a tough ex-Marine drill sergeant, and he trained everybody. And bottom line, they fired him. And he called us down, and he was almost in tears. This was a guy that used to get up on the top of his desk, screaming at us at the top of his lungs. This was before people were woke. [chuckles]
- DRDavid Rosenthal
[chuckles]
- SPSpeaker
You know, this was like we were trained the old-fashioned way.
- DRDavid Rosenthal
[chuckles]
- SPSpeaker
And we felt... My God, we were embarrassed. We were-- We- it was debilitating to watch this. This guy was destroyed. That was the beginning of the end. We started talking, all of us, narrowed it down to five people that we wanted to be in business together, and we made a decision to leave and set up our own business and do it our way. That's it. No, no, no more, no less complicated than that.
- BGBen Gilbert
All right, listeners, for our second sponsor of this episode, and the last time this season, you've been hearing about them all season, it's PitchBook, the leading financial data provider for venture capital, private equity, and M&A. We, uh... It's been an awesome season with PitchBook. I've probably run, I don't know, a couple thousand queries, uh, while, uh, while they've been the sponsor of the show. We're super grateful to, um, have had their support, not just, you know, to sponsor the show and to, um, give listeners access. I think y- you've-- many of you have taken advantage of the, the free trial they've been offering. Uh, but also, they've been sending us awesome data to help us prepare for episodes, which, uh, anything that makes it so David and I don't have to spend all hundred hours researching is, uh, is much [chuckles] appreciated. I think you probably know by now, but PitchBook pulls back the curtain and shows the real story behind private companies. I think that's what we do, but I guess it's what PitchBook does, too.
- DRDavid Rosenthal
It's, it's like Acquired, but in software.
- BGBen Gilbert
It's like Acquired, but in software. There you go, and more tabular, 'cause, you know, da- data tables don't read well on air, graphs, et cetera. Anyway, our huge thanks to PitchBook for everything that they've done for us this season. Uh, it's an awesome product. Obviously, I use it all the time. To learn more, you can visit pitchbook.com/acquired, or click the link in the show notes.
- DRDavid Rosenthal
To my mind, looking from the outside at, at you all in the beginning of CAA and then everything it would become, no doubt, a absolutely essential and, and probably the primary ingredient was just your, uh... all of your collectively, and you personally, just your, like, raw ambition, [chuckles] uh, certainly, and, uh, you know, lots has been written about that. I'm, I'm wondering, though, too, is it also fair to say that your background-- because most, if not all of you, came from television, was that kind of a secret weapon? Because packaging was more common in television, A, a- and, and B, television was still relatively new. I'm imagining most of the old people at, at WMA and, and then also in, you know, the studio business just weren't tuned in to this new world, right?
- SPSpeaker
No, actually, it's a good question, but let me correct something. William Morris was the top television packaging agency, and we all knew how to package television, 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-actor. And actors are cast in television prior to the '80s, when fading movie stars were brought into television. But the thing about William Morris is they bifurcated TV and movies at a time when they were starting to come together, and that was a thesis that we didn't agree with, so that helped us leave. But it was a different business at the time, and William Morris wanted to keep them separate, and we were asking the head of William Morris's picture department and television department to run joint meetings.... because people could work in both areas, and they refused to do it. That was another nail in their coffin. So when we started, we made a conscious decision to be TV only, because by SAG rules, they had to pay every Thursday, and we started our business on a hundred thousand dollars. And we never went into debt beyond that, paid that debt off in six months, and never carried ten cents of debt, ever. And the reason we didn't is our TV clients got paid every Thursday, so we took our commission. But in nineteen seventy-eight, we made a decision that we needed to be in the movie business, and the only way we could do that was to dedicate agents to the movie business. So we made a decision that I would start the movie business in seventy-nine, and the rest of the guys would stay in television, but that Mike Rosenfeld, who was in the movie division at William Morris with me, would start a movie division at CAA.
- BGBen Gilbert
That's a great insight because it, y- you could cash flow the business if your customers, your clients, were getting paid every week. But it's pretty hard to run a business when you have no-- you haven't raised any money if you're waiting one to three years for film projects to come together and then get paid on the back end after, um, after it gets made.
- SPSpeaker
Correct.
- BGBen Gilbert
Can I ask, what, what was it like to get your first big star, and what's the story of, of CAA sort of actually building a, a, a sort of reputable, enviable talent roster?
- 1:02:18 – 1:07:59
Landing the first mega-stars: signing the tax lawyer, then Sean Connery—and momentum compounding
- SPSpeaker
So there was a lawyer in Century City named Gary Hendler, and we moved into Century City very early on, and I noticed his name on the placard in the lobby. Did a little homework and discovered that he quietly had a tax practice, and he represented every major movie star in the business. So I decided to sign him as a client.
- BGBen Gilbert
You signed the lawyer? A tax account-
- SPSpeaker
Yep
- BGBen Gilbert
... a tax lawyer? [chuckles]
- SPSpeaker
Yep. He was gonna be my client. So I went up, knocked on his door, introduced myself, learned everything that I could about him, and then proceeded to become close friends with him, and he delivered Sean Connery to me.
- BGBen Gilbert
Wow, amazing.
- SPSpeaker
And I will never forget talking to Sean, nineteen seventy-nine. I grew up on Bond. I, I remember a call being set. I didn't have a clue what to say to him, and I was struggling for words, but I should have got an Academy Award for Best Actor-
- BGBen Gilbert
[chuckles]
- SPSpeaker
- for that call, 'cause I actually sounded like I knew what I was talking about, but I didn't. But I learned, I learned on the job.
- BGBen Gilbert
I'm sure Sean's not a dumb guy, and he'd been in the business forever. Then why, w- w- why'd he go with you? Like, whoa, i- there must have been some rational reason for doing that.
- SPSpeaker
He went with us for only one reason: Gary Hendler told him we were young, aggressive, hot, and had good taste. And Gary Hendler proved to be right. [chuckles] We did an amazing job for Connery. He had come off three really low-grossing, not-so-good movies, and we turned his career upside down. But after him, Dustin Hoffman signed with us, and it just one after the other. I will tell you a funny story that I think is kind of apocryphal. There was a literary agency, top literary agency, named Adams, Ray and Rosenberg. They had about four hundred of the greatest writers in television. Few feature writers, but mostly TV. And Rick Ray was best friends with Mike Rosenfeld, one of our partners, and Mike was desperate to merge with them, and I said: "I'm happy to entertain it." So we had this meeting with the th- three Adams, Ray, Rosenberg partners, Sam Adams, Rick Ray, and w- um, I think his name, uh, Rosenberg was, uh... forgot his first name, nice guy, and the five of us, and we sat in a little conference room in our crummy little Beverly Hills office, which, by the way, was raided by SAG because the people th- that we leased it from were running a house of ill repute out of it. [laughing]
- BGBen Gilbert
[chuckles]
- SPSpeaker
And the Screen Actors Guild was gonna yank our license. Little did we know.
- BGBen Gilbert
Whoa!
- SPSpeaker
So we got out of that mess, and we were sitting in the conference room, and I will never forget this. Rosenberg said... I think his name was Lee Rosenberg. He said, "You know, we're gonna have the best television agency in history because we're never gonna sign Robert Redford or Dustin Hoffman or any of these people." And this was before we signed Sean Connery. And Ron Meyer and I looked at each other, and Mike Rosenfeld, and we looked at them, and I said, "Well, that's not true. We're gonna sign all those people."
- BGBen Gilbert
Yeah.
- SPSpeaker
A- and they said: "You're nuts. You're not gonna sign any of them." So I said: "Well, we plan on signing every single one of them, 'cause we want a monopoly on talent to give us leverage to turn the paradigm around against the distributors." And they said: "That'll never happen." I said: "Thank you, meeting's over. We're never gonna merge." And about six months later, we signed Connery, and then every week-... we signed a famous movie star after that.
- SPSpeaker
And didn't you take out an ad in Variety announcing it?
- SPSpeaker
Yeah. Thanks for reminding me, Ben. We took out these giant red ads in Variety every Friday, and the Hollywood Reporter on Monday, and it said, "CAA is pleased to announce the worldwide representation of Robert Redford, Sean Connery, Dustin Hoffman, Sidney Poitier," and we just went on and on. And every time we ran an ad, I ripped one out of the Reporter, I mean, the Variety, folded it up, and mailed it to Adams, Ray and Rosenberg. [laughing]
- SPSpeaker
[laughing]
- SPSpeaker
And it got to be a stale joke after a couple of years.
- SPSpeaker
Well, this feels like a huge principle of yours and CAA, which was really strength leads to strength. It seems like you were always looking around and identifying, what's the new way that we've become more valuable, and how do we leverage that into the next thing? Can you talk about some of like, that, and some of the other ways that you just by, uh, sheer force of will or by counter-positioning against other agencies, how you were able to be different than everyone else around you and win?
- 1:07:59 – 1:20:22
The CAA operating system: team-based representation, internal comms, and extreme responsiveness
- SPSpeaker
Well, we were different for one solid, basic reason, which is that we basically worked as a team. So if the two of you were clients of ours, you didn't have one agent. What we resented at William Morris is that one agent coveted one client, and you couldn't go anywhere with that because human nature is such that eventually there's a relationship problem. There just is. The longer you're around someone, the more there's a relationship problem. So we went ahead and put teams on people. We had some clients that burned through three, four, five agents, but they never left us. As a matter of fact, in a twenty-five-year period, I think we lost under six- five or six clients. We never lost clients 'cause we had teams of people on them that they could relate to. So we would have a... For an actor, no actor ever had a literary agent. We'd have a literary agent on an actor. Well, why would we do that? Well, it would be stupid not to. Why wouldn't we? What does an actor do? All they do is read scripts to see what they wanna do. What does a literary agent do? All they do is read scripts to see what actors roles are available. So we were in a state of shock that actors didn't have literary agents. When we looked into it, we were saying: "Wow, are we, are we stupid, or is everyone else stupid?"
- SPSpeaker
I mean, obviously, you all were young, and aggressive, and willing to think differently, but w- why was the competition so weak?
- SPSpeaker
I d- I, I don't think they were weak. I think they were very comfortable in the old shoes. They liked the one-on-one. They coveted representation. Their meal ticket was their individual clients. At CAA, your meal ticket was how well the whole company did. If the company did-- if the company didn't do well as a group, every individual suffered.
- SPSpeaker
Was there an element... I, I know this was the case at WMA, m- but maybe at all the agencies, of a holdover from old Hollywood, where, where New York owned these... Like, who owned these, uh, your competitors? Uh, like, um, like you, like you said, you know, when CAA did well, y'all did well. Like, it was a partnership. How were economics structured at other agencies?
- SPSpeaker
They just made what they called market deals. So if you wanted to hire an agent, you'd try to pay them whatever they asked. That was a market deal. And we did just the opposite. We paid very small front money and said, "At the end of the year, if we do great, we're gonna overpay you. We're gonna pay you more than you can get elsewhere." You know, we had a agent who was co-head of our movie department get offered a job by Jeff Berg at ICM, who was a very good agent, and Jeff invited him to a meeting, and the guy came in to see me, and he said: "Should I- What should I do? I'm just gonna turn it down." I said: "Absolutely not. Go take the meeting." Now, I had two things in my head when I told him that: one, I wanted to know what they were gonna be doing and what their thought process was going forward, and I, I knew that he'd get that out of them, but two, I knew they'd under-offer him, and I wanted him to see what he could get elsewhere. Now, I didn't tell that to him. So he went and took the meeting, and they were having a jolly time, and until it came to comp, and I had instructed our guy to ask for what he'd get paid. So the answer came: "We'll pay-- I'm gonna pay you more than I'm making."
- SPSpeaker
So the question is, what are you making? [chuckles]
- SPSpeaker
And so Jeff said: "I'm gonna pay you, like, you know, a million a year or something." And the guy who took the meeting looked at him and said: "That's very generous, but I'd have to be taking a seventy-five percent-
- SPSpeaker
[laughing]
- SPSpeaker
-pay cut to do that." And that's worked for me at th- every level. One, it was good for my guy to hear what he was worth at a competitor. Two, I love the competitor knowing that a guy way beneath his station-... is making four times what he's making. And three, it created a, a loyalty factor for me.
- SPSpeaker
And why were you able to just make so much at CAA, and, and frankly, just overpay to keep people there? Like, what was it structurally about CAA, where you were able to just run this incredible cash flowing business?
- SPSpeaker
Well, first of all, we were accused constantly of taking cut commissions, and finally, people realized we couldn't be paying what we're paying to people if we were cutting commissions. Secondly, we had a monopoly on the high-end TV and film business, so we were minting money, and we just paid it out to our executives, you know, period.
- SPSpeaker
And as you're talking about all this, it- it's-- o- of course, a team-oriented approach makes more sense than this individual lone wolf thing, but there are trade-offs involved in every decision, and the trade-off involved in, you know, showing up to every meeting with five people and having a, a network of people surrounding every client, is that you need just way more communication and way more structure and way more systems. What are some of the examples of the things that you put in place to actually make this work? 'Cause I'm imagining you probably talked to, like, fifty people a day for fifteen years.
- SPSpeaker
Well, you're off by about a factor of five. [laughing] So an average agent at our place would run two hundred to two hundred and fifty phone calls a day.
- SPSpeaker
[chuckles]
- SPSpeaker
Remember, some were, some were fifteen or twenty seconds. So you gotta bifurcate this into pre-internet and post-internet. So pre-email, we had a system that we developed that was fail-safe. One, return all internal clients first. Two, you don't go home at night without returning every call. And three, we had a, what's called a buck slip system, which was everyone had buck slips, which were these pieces of kinda heavy paper that had your name on it, and you'd write a note to an associate. And I would say, "Ben spoke to Scorsese, recommended Goodfellas."
- SPSpeaker
[laughing]
- SPSpeaker
"Call me if questions." That would get sent from my office to that person's office, to your office in real time. It was our form of email. Then he had to answer me that he had read it, so he'd strike it out and answer it, send it right back to me. So when Scorsese called him, which he did, he'd say: "Fantastic, Marty, I heard that Michael talked to you about Goodfellas. Couldn't be happier about the decision." And then Marty goes: "Wow, these guys are on their business!"
- SPSpeaker
Is there an archive of all these somewhere? Like...
- SPSpeaker
Nah, they're all-
- SPSpeaker
Ah.
- SPSpeaker
You know, they're all trashed. Um, oddly, we locked up our trash every night, just so you know, 'cause we found someone going through our trash. Um, and that was a way... That was really-- scared me to death, if you wanna know the truth.
- SPSpeaker
This adds some color as to why the mail room was so important. When people say, "I started in the mail room at CAA," I mean, you were an essential part of the fabric of the, the system.
- SPSpeaker
Oh, the mail room at our place was a fast track to a career, if you could make it through the mail room and the way we handed down clients. So if you guys were agents with us, and if we signed a giant star, we brought you in as part of the team, and if you were good, you made your own relationship.
- SPSpeaker
Well, that's the benefit of the team approach, too, right? Is you could go out and sign, I don't know, X, Y, Z, let's say Scorsese, uh, but then you could bring Ben and me in, and then that probably let you go sign a lot more Scorceses, right?
- SPSpeaker
Well, David, time was m- our enemy, so I needed a way to loosen myself up. So how would I do that? Well, I'd have people behind me working with clients that I signed. So, you know, I, I r- we signed Hoffman, Pacino, and De Niro, which had never been done in history.
- SPSpeaker
And they're known as leading men at the time, right? They were sort of competing... They, they were competing leading men.
- SPSpeaker
Well, my thesis was they weren't competing if they were with us. I said to Dustin Hoffman: "Help me get De Niro." He said: "Why?" I said: " 'Cause wouldn't you rather I told you what he's doing- [laughing]
- SPSpeaker
[chuckles]
- SPSpeaker
- than me not knowing?" He said: "Wow, that makes sense." So we got De Niro, you know, and then when I got both of them, I said to both of them: "I wanna sign Al." And, of course, they looked at me, "What are you, crazy? You got the two of us." And I said, "No, I'm not. You can work with each other, and on top of it, we'll all know everything, and you're not really competing. You're not really competing, 'cause at the end of the day, Ben, the director makes the decision. The agent doesn't make a decision." But we packaged De Niro and Pacino with Michael Mann, called it Heat.
- SPSpeaker
Yeah. Well, that's what I was gonna say, uh, that you, you, you build all this up, and then that just lets you make the pie bigger for everybody by packaging.
- 1:20:22 – 1:35:24
CAA becomes an investment bank: Japanese capital, Sony/Columbia, and Matsushita buying Universal
- BGBen Gilbert
Michael, can you take us toward the last few years of your time at CAA? You know, we talked about this period where, you know, you're signing your first clients. You g- went on to become, you know, to represent forty-five of the top fifty in Hollywood. Talked about, you know, your foray into advertising with Coca-Cola. There's sort of two little pieces of this chapter remaining. O- one is you kind of getting into investment banking, and maybe I should pull kind of there. You definitely turned CAA into an investment bank, and I think you were the top grossing investment banker in the world, the year that you did your first deal. And then the second, I wanna talk about, um, when you explored Universal and potentially becoming a studio head yourself.
- SPSpeaker
So the first question is, was a natural evolution of what we were doing. The studios were in trouble financially, and it became very clear to me that they were gonna need financing, and traditional financing wasn't gonna work. Universal was under siege. People were taking stock positions, corporate raiders out of New York. Columbia was in trouble. MGM was in trouble. Warner's, believe it or not, was in trouble. So I was very friendly with a brilliant guy named Herbert Allen, and Herb was an investment banker. Taught me a lot about the business. We used to spend a ton of time together. And I got this idea that we could bring financing to save our marketplace because, frankly, if any of those companies went out of business, so did we. I couldn't afford for Universal or Columbia or MGM or Warner's to shut down or to reduce the scope of their budgets.
- BGBen Gilbert
CAA couldn't put up a hundred million dollar budget for a movie. You needed a studio to finance it.
- SPSpeaker
Well, it's worse than that, Ben. We weren't allowed to produce.
- BGBen Gilbert
Ah.
- SPSpeaker
We weren't allowed to produce. I had a, I had a white paper written by, uh, the most prominent entertainment lawyer in the business at the time, Frank Rothman, who's passed away, great guy, and, uh, he wrote a ten-page opinion that we couldn't produce. Because I wanted to go into that business with our directors and create a director's company, but we didn't wanna take on the guilds. Plus, the Writers Guild and Directors Guild were run by CAA clients.
- DRDavid Rosenthal
Right. You'd be pissing off your, your clients.
- SPSpeaker
And we were settling strikes. Bill Haber and I settled one of the writers' strikes in the '80s. We, we couldn't afford that.
- DRDavid Rosenthal
So back to the studios being in financial trouble, like, literally, you have the reverse problem of Lew Wasserman back in the day of you need- [chuckles] but you now have the buy- the power on the sell side. You need fragmented buyers to-
- SPSpeaker
I needed people that are buyers with money, David, period. And so I started, uh, building relationships in Japan. First relationship I built was with a division of Matsushita Electric, and I hoped that I would be good enough in the meeting that the division would recommend to Matsushita that they meet with me. But before I got to that, I was representing people that were involved with Sony, and I got involved in the sale of CBS Records to Sony and built a relationship with Norio Ohga, who was the number two at Sony, who ultimately introduced me to Akio Morita, and I became Morita's and Ohga's consultant. We sold... We consulted on the sale of CBS Records, and then Mr. Morita came to see me and wanted to buy- get into owning content because he was upset that Betamax, which was a superior technology to VHS, was losing to VHS.... So he wanted to own a studio, so I started calling different entities that I thought made sense and brought Morita into meetings. And the first entity I called was Kirk Kerkorian, who owned MGM. And I had a meeting at my home one morning, late morning, pre-lunch, with Akio Morita, Kirk Kerkorian, and myself to discuss selling MGM to Sony. And Mr. Morita was a very clever guy, and we were a great team. He came with a box, and he stuck it in the middle of the table, and Kirk couldn't get his eye off that box. And halfway into the meeting, Morita opened the box, and he pulled it out, and it was a tiny little video camera, which was a prototype for a videotape recorder camera. And Kirk was blown away by the fact that when Morita would take video of us in the room with natural light and play it back through our TV set, [laughing] Kirk went nuts.
- SPSpeaker
It's the equivalent of Steve Jobs putting an iPhone on the table in 2005.
- SPSpeaker
So Morita just kept talking, and then Kirk said: "How do you wanna-- how would you pay for this?" And, uh, Morita said, "You know, we would finance it through Sony, and we have the cash," and et cetera, et cetera. And then, as the meeting ended, I could see that Kirk was lusting after this camera.
- SPSpeaker
[laughing]
- SPSpeaker
Morita packed it up, put it under his arm, and left.
- SPSpeaker
Power move.
- SPSpeaker
And that was how we ended the meeting. Subsequently, I couldn't get traction with Kirk, so Herb and I started working on Columbia, which Coca-Cola owned, and the rest is history. We worked the deal, and through a long process, arranged to sell Columbia and TriStar to Sony.
- SPSpeaker
And that became Sony Pictures Entertainment?
- SPSpeaker
Yes, and Herb and I did that deal with no one else, just the two of us, and it became a template that he and I then did over and over again.
- SPSpeaker
What do the economics look like when you arrange a deal of that magnitude?
- SPSpeaker
What do they look like?
- SPSpeaker
Do you agree upfront to a fee? Do you say, "Hey, let's figure it out later"? Do you agree to a fixed price?
- SPSpeaker
So I did something in those days that cannot be done today, and let's bear in mind, guys, this is 35 years ago. I worked my tail off to understand Japanese culture, and I read everything that was published. I studied the language, I studied the culture, I studied the art, I studied how they treated people. I read everything under the sun that wasn't tacked down. There was a Japanese-American bookstore in Rock Center. I was their biggest customer.
- SPSpeaker
[laughing] I love it.
- SPSpeaker
And I took a shot at something which paid off for me in multiples. So all of the banks, excluding Allen & Company and me, asked for a fee letter up front. We asked for nothing. We said: "Look, if we do a good job, you can pay us an obscene sum of money. If we do a bad job, pay us our expenses, and we're all good."
- SPSpeaker
Y- you didn't specify what the obscene sum of, sum of money was?
- SPSpeaker
No, I remember in a meeting at Matsushita in Hawaii, they said: "What fee do you want?" I said: "If I'm not successful, I just want my expenses. If I'm successful, I want you to load up a Brinks truck and back it up to my h- house." [laughing]
- SPSpeaker
[laughing]
- SPSpeaker
They, they got the picture.
- SPSpeaker
[laughing]
- SPSpeaker
By saying that, David, we're saying: "Look, we wanna exceed all fees ever paid"-
- 1:35:24 – 1:54:25
The end of Ovitz’s agent era: selling CAA to the next generation and the Disney misfit
- BGBen Gilbert
Well, Michael, as we come up toward the end of your tenure here at CAA, can you talk us through the generational transfer and, and the sale of the business to the next generation, the Young Turks, and then your time at Disney after that? How did that all come to be?
- SPSpeaker
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.
- BGBen Gilbert
First for Lew, right, at, at Universal.
- SPSpeaker
It was my first job-
- BGBen Gilbert
[chuckles]
- SPSpeaker
... tour guide at Universal Studios.
- DRDavid Rosenthal
[chuckles]
- SPSpeaker
And I just didn't wanna be in service anymore. Wanted to try to run a public company for five years, and then, frankly, thought about going into public service, not private service. And I was very friendly with Michael Eisner. He was one of my closest friends. He had a heart attack and a quadruple bypass. Two of the board members started talking to me, and I spent a year talking to them on and off, on and off, and then Ron Meyer blew up. He just lost it. Um, he just couldn't be in service anymore. He just... He was over 50. He had hit a point where he just couldn't talk to clients, you know. I, I, I will never forget this: He had a conversation on a Sunday that probably lasted six or seven hours with one of his clients, it was Sylvester Stallone, and he finished the conversation and tried to have a rest of his Sunday, and Sly called back and wanted to start the conversation all over again.
- DRDavid Rosenthal
Oh! Oh.
- SPSpeaker
And that's not unus- That's a little unusual, but not completely unusual. [chuckles]
- DRDavid Rosenthal
That's within the realms of reality for an agent.
- SPSpeaker
Yeah, in the entertainment business, it is. Yeah.... Look, actors are gypsies. They have no one to talk to except their agent. So Ron just couldn't deal, and also, I had thought about going to MCA, and at the very last minute, they tried to change the deal, and it became clear to me that Edgar wasn't in charge, and I just... Too many signs as a deal maker said to me, "This isn't gonna work." Now, that was before Ron decided to quit, so I figured I'd stick it out another year. And then afterwards, Ron had already made up his mind to leave, and I should have realized he had two feet out the door. When he left, it just made me take the Disney conversation more seriously. The board members that were friendly with me, one of the board members owned a boat with me. We were really tight, and he said, "We want you to come over and create the culture here that you had at CAA." And Michael was sick. He wasn't supposed to work every day. I always like to say I am the greatest cure for heart disease. [laughing] Because when I came over, I was working seven days a week, fourteen hours a day, and he was supposed to work two days a week, and he started working harder and harder, and, uh, his doctor was telling him not to, and it just was very clear from the beginning, it just-- it wasn't gonna be a team effort. For whatever reason, I threatened him, which I shouldn't have, because I didn't want his job. I had a game plan for myself. I didn't wanna die at Disney. I didn't wanna die at CAA. I wanted to try different things with my life, like what I'm doing now. I love what I'm doing now, and all of the training I had as an agent has led me to a career in the digital world that's fantastic, because what am I doing? I'm packaging. I'm putting young founders together with money and distribution, and it's nothing different than I did for thirty-five years. It's all the same, except I'm doing it with smarter people, and I really enjoy it. But when I got to Disney, it was very clear there was a head-to-head conflict, and Michael undercut me every chance he could. And after a couple years, I just didn't wanna deal with it anymore, and it's was one of those things.
- BGBen Gilbert
All right, listeners, for our final sponsor of the whole season and the whole year, thank you so much to NordVPN. You know about them from all season. You know Tom's crazy, cool backstory. You know the story of how four friends got together in Lithuania and created this massive business with thousand-plus employees, fifteen million people using NordVPN. It's just a great bootstrapped founder story. You've probably seen them 'cause they, they do an unbelievable amount of, uh, of sponsorships of YouTube channels, so I bet you've seen them on, on your favorite, uh, YouTuber's page as well. I recently started using the product when I was in Lisbon, and, uh, I've, I've told this story in a couple episodes, but it was just awesome having a really reliable, great UX VPN to use. So if you're looking for a VPN, look no further than from your fellow Acquired community member, Tom Oakman, and the whole Nord company. You can visit nordvpn.com/acquired, or check out the link in the show notes.
- DRDavid Rosenthal
If the Universal job had worked out, if you had gone to Universal, do you think things would have played out differently? I mean, Universal is a very different company than Disney. Much more pure play, focused on, on content a- at the time, uh, than, than Disney was. Uh, would that have been, uh, better or different?
- SPSpeaker
You know, David, I'm gonna tell you two things that both conflict with each other, 'cause you asked a really smart question. 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, starting with buying Yahoo, buying CBS Records for two billion dollars, which is worth ten times, twenty times that right now. Buying a publishing company instead of throwing money at a crappy publishing company that they had. I had a chance to buy from Universal, um, Penguin Putnam, which is now the biggest publishing company in the world. I would have done that at MCA. The other part of me said I would have failed at MCA, too, because the Bronfman family would have never given me a free rein. And I'm just not... Frankly, I'm not a very good employee. [laughing]
- DRDavid Rosenthal
You and Lew Wasserman both.
- SPSpeaker
Yeah, I mean, I shared that with Lew. My critique of Lew goes for me. I'm a terrible employee. I like... I like to swing for the fence, and I like to have autonomy, and I don't like to answer to anybody. And I was too thick-headed to see that clearly, and only saw it in retrospect. But I did the same thing Lew did, and I should have been more self-actualized to understand that I'm not a follower. I'm just not good at it, and I have no problem admitting that now. But, you know, hindsight is twenty/twenty vision, and it's always easy to be a Monday morning quarterback. In the height of transitioning from CAA to Disney, I actually thought I made the right decision. I was going to a place where the board solicited me. I'd had a years-... worth of conversations. I had my best friend running it, who had a heart attack. To me, it was a no-brainer. Five years there, then I go into public service. W- I actually was on the Council of Foreign Relations and was really interested in working at the State Department in some way, shape, or form, and I had a whole game plan. But you know, the best plans of mice and men.
- BGBen Gilbert
And reflecting back on that, h- having one of the world's best deal makers, both in Hollywood and then proven in the corporate environment, that seems like a natural fit for the State Department.
- SPSpeaker
I felt really good about going into government service, I really did, and whether it was the State Department or something else, I would've felt really strong about doing that. But look, I made a game plan for myself, just like I used to make for my clients, and I made a mistake, and I didn't take into consideration certain things that I should've, but at the end of the day, it worked out fine. Um, I, I, I made a good settlement at Disney, made me comfortable. I took some time off, then went right back to work, and a guy named Marc Andreessen and, and, uh, his partner, Ben Horowitz, kinda saved my skin, you know? They gave me... They asked me to be on their board in '99. They gave me a roadmap-
- BGBen Gilbert
At Loudcloud, right?
- SPSpeaker
Yes, at Loudcloud. They gave me a roadmap to a new career, and they're two of my favorite human beings on the planet. They're smart as hell. They rival Crichton in intellect. They are loyal, they are smart, they are wise, and they are true, true friends. And they beat me up pretty good, which is hard to do, and they did it brilliantly and set a path for me that changed my life yet again. I had a third career. So you wanna talk about luckiest guy on the planet, you're talking to him. Um, I just... You know, I ended up... If you would've asked me in '97 if I was a lucky guy, I would tell you I was pretty stupid, but by '99, these two guys came to the rescue and showed me another way to use my skill set, which I do every day now, and weirdly, it's how I got to you guys. You got to me through m- mutuality of interest in the world of inter- the Internet, all, you know-
- BGBen Gilbert
Can we ask you what playbook from CAA you learned that you brought to technology? Like, what are some things that you're doing the same, or lessons you learned?
- SPSpeaker
You know, it's funny, I had this conversation with a founder yesterday, a young founder that I'm investing in. I do not do one thing different today than I did 30 years ago, not one thing. I talk to guys your age that are the talent, and I put them together with financing, so they're the buyer, and then I help them market, monetize, and strategize their product. It's the same thing I did. So if Dustin Hoffman says to me, "I've got this idea. I wanna play a woman in a dress who sees life as a man through a woman's eyes," and he's the motor, he's the talent, it's my job to surround him with more talent, get him money, help him market, strategize how to do it, and then monetize it so he makes some money doing it. I'm not doing anything different today. It's just the companies come out public, but they don't come out on a film.
- BGBen Gilbert
Hmm.
- SPSpeaker
No different. None. Zero.
- BGBen Gilbert
What could have made CAA an, an enduring franchise that became a gigantic force rather than sort of apexing as you exited?
- SPSpeaker
So, you know, it's funny, I had dinner with Ari a couple weeks ago, and we were... You know, he was a trainee at the agency, and one of the best we ever had, and I think he's done a fantastic job at building his business and diversifying it. I, I spent a lot of time, which very few people know, looking into how I could diversify CAA. Could I run it public? Could I sell it to private equity? Could I buy an ad agency? And I looked at buying J. Walter Thompson. I looked at bringing in private equity, and at the end of the day, I didn't know how to divide it up amongst the players. I couldn't figure out how to get it transitioned to a bigger entity. And Ari said, "Well, yeah, Michael, you could've bought an ad agency and blown the company up." But I said... I said, "Ari, this was 30 years ago. Economics were different. Public entities were different. Private equity was different. It just wasn't like it is today, and I couldn't figure out how to keep my core group and compensate them all, and I decided it was better to make a clean break and try to do it on my own in a different field." So how could it have been? Yeah, I could have bought J. Walter Thompson. I would've gone into debt. I wouldn't have known how to give options in what-... to so many people at the agency, 'cause how do you tell a group that's all for one, one for all, and we're splitting all the proceeds, and then go through what all these companies go through, is how do you give options out to everybody?
- BGBen Gilbert
Right. 'Cause it was you and your founding partners primarily that owned, you know, 90-plus percent of CAA.
- SPSpeaker
No, we owned 100%.
- BGBen Gilbert
Okay.
- 1:54:25 – 1:57:12
Third act in tech: Andreessen/Horowitz, ‘packaging’ startups, and closing reflections
- BGBen Gilbert
Ah, so fun! Listeners, thank you for joining us, uh, for the whole season, but my gosh, what a privilege to have Michael Ovitz on the show.
- DRDavid Rosenthal
God, just the perfect, perfect way to bookend the season. Michael was great. I was so... Gosh, so many Acquired, [chuckles] uh, themes we talked to there.
- BGBen Gilbert
David, you were, like, holding back from just, like, jumping in constantly and being like: "Oh, yeah, we talked about this and that and the Coke..." I mean, bringing the Coke thing full circle was awesome.
- DRDavid Rosenthal
I wish we could have made this, like, a, a five-hour episode. We'll just say we gotta get Michael back.
- BGBen Gilbert
For sure. Oh, we have to. We also have to do some kind of, like, Acquired bingo, where we, uh... There's an Allen & Company conference square, and we figure out how many episodes that's come up on. [chuckles]
- DRDavid Rosenthal
All right, here, here's the thing, though. When, when are we gonna do a live show at Sun Valley?
- BGBen Gilbert
It does feel like the... That is the- that's the cake topper.
- DRDavid Rosenthal
Is it gonna be 2022, or is it, or 2023? I think let's make it happen in 2022.
- BGBen Gilbert
All right, new goal.
- DRDavid Rosenthal
All right.
- BGBen Gilbert
Allen & Company, if you're listening, let's make it happen. Listeners, uh, we wanna wish you a happy holidays. We wanna say thank you for being with us this season. Thanks to the many, many tens of th- may- close to 100,000 who joined this year or maybe over 100,000 of you who joined this year. Um, thanks to all the new folks who signed up for the LP feed. Uh, LPs, of course, we love our LPs. They make the show possible. Um, you know, uh, we-- I'm saying this before the Zoom call, but I'm sure we'd had a great LP Zoom call for, uh, everyone who could join before we, we left for the holidays, and, uh, we'll be dropping some more fun, exclusive, LP-only content in the future. Uh, for now, if, if you wanna check out all 50-plus LP episodes that we've done, that back catalog is public, so go check it out. Search Acquired LP Show in any podcast player. You can join the Slack at acquired.fm/slack. You can get your dream job at acquired.fm/jobs. David, there's so many slashes.
- DRDavid Rosenthal
We're like the Creative Artists Agency-
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
-of tech podcasts.
- BGBen Gilbert
Start doing some packaging.
- DRDavid Rosenthal
Well, Michael would say we would probably be stepping on his territory, but package, package some startups in the Acquired community. It's happened. It happens in the Acquired Slack all the time.
- BGBen Gilbert
It totally has happened. People have met co-founders in the Slack. I know people have raised money in the Slack, too.
- DRDavid Rosenthal
100%.
- BGBen Gilbert
It's pretty cool. With that, listeners, thank you. Thanks to Pilot, PitchBook, and NordVPN. We'll see you next year.
- DRDavid Rosenthal
We will see you next year.
- SPSpeaker
Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Uh. [upbeat music]
Episode duration: 1:57:12
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