CAA (with Michael Ovitz)

I was watching you with Bill Murray at the 92nd Street Y.

How great is Bill? Right?

He's like the worst interviewer ever, but he's hilarious. He's Bill Murray. We'll let you talk more than Bill did.

Who got the truth? 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?

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.

And I'm David Rosenthal and I'm an angel investor based in San Francisco.

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.

Rain Man.

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.

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, 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?

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's 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 going to let go of them. 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 want to 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.

Well, I can't think of any better note to end our time together this season on nor frankly any better pitch for why I 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. Thanks for having us. 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 Waseeb 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.

No kidding. And 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 first two weeks of brand new episodes are in the private feed. Everything else you can go search acquiredlpshow in the podcast player of your choice and get all those episodes now. Without further ado, our conversation with Michael Ovitz.

Michael, welcome to Acquired.

Thank you very much.

It is so great to have you here with us. So we're thinking today of course, this being acquired, we're going to start all the way back, way before your time. Tell the history of the golden age of Hollywood, New Hollywood and then leading into Ewan, CIA of course. But like any good creative story here, creative artists, we're going to steal from your book and we're going to start in medias, rest and then rewind just to set the stage for what's to come.

Just don't ask me any hard questions.

Deal? Maybe.

Well, I think you'll enjoy telling this story. Can you tell us the Jurassic park story?

You must be like me and like dinosaurs.

Well, that was the key to all of it, right? Was that everybody likes dinosaurs.

I think that's accurate. That's what got that movie made, basically.

So you had a pre existing relationship with Michael Crichton, but he hadn't produced any new material in a while, is that right?

So Michael was a client of mine from starting in the late 70s. 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.

He was really like a Leonardo da Vinci type, right?

He was amazing. Here's a guy who was a medical doctor, screenwriter, director, travel writer, 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. The two of those guys probably suck 90% of the brain power that God gave away in their birth years. 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 years and he just wasn't happy with what was coming to him. And I used to 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 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 20th 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 6 o' clock in the evening, 6:30, 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 3 in the morning. And I called him at 7am and I said, this is the best thing you've written in 10 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, 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.

And of course that one guy.

Yeah, he's the one guy. And in our world, there are certain people that have single names. There's Madonna, there's Cherry, you know, and.

There'S Steven, 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?

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 going to call Stephen. So at 9am I called Stephen, we talked and I said, I've got something I want to send you. And I know you don't read at night, so I'm going to call your wife, Kate Capshaw, and I'm going to ask her permission for you to disappear tonight and read.

This is like a classic agent trick, right, is to call somebody's spouse.

I had no choice because I had to create a Sense of urgency around this, but also I didn't want to oversell and I didn't want to 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 Stephen. He said, this just knocked my socks off. He said, I couldn't believe this book. He said, I'm making this movie.

And what year was this?

So this was about a year before the movie was made.

91, 92.

It's very unusual to begin this level of pre production on a movie even before the book is published. I mean, this is on the first version of the manuscript, right?

Yeah, this is highly unusual. What's even more unusual is I asked Stephen to commit to the movie, subject to a budget and we had no distributor and no financing. And you know, Stephen 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.

Whoa. No way.

So I had a little credibility there.

And Kathy runs Lucasfilm now, right?

Or no credibility, David, depending on how you look at it. And I said, can we get a budget on this book? He said, sure. He said, but do you have a script? I said, no. So I sent him the book, sent her the book, they both read it, we did a rough budget and we picked up and Michael decided to write the script, subsequently brought in some help and basically I went to Universal, which was where Steven was housed, and I called the head of the company, Sid Sheinberg. And it was kind of a famous saying at the moment. But I said, sid, we got good news and bad news. He said, great. What's the good news? I said, we've got a Michael Crichton book. Michael Crichton screenplay. Steven Spielberg's committed to direct, Kathy Kennedy's going to produce. And I said, and it's about dinosaurs, which we all love. It's three people trapped in an amusement park gone awry, loaded with prehistoric animals.

And Sid of course is the number two to Lew Wasserman, who we're going to talk about in a minute.

So Sid says, okay, that sounds amazing. What's the bad news? I said, sid, the bad news is you don't own it. And we do.

Yes.

And I said, so Steven doesn't control it, which means your first look with him disappears. But Stephen wants to make the movie at Universal and he Said, how much time do I have? I said, 24 hours. And he asked what the deal was. I told him the deal, that we were going to be partners with Universal, dollar for dollar. And he got back to me about 12 hours later, said, we're in. So this was all done under the tutelage of CAA with Crichton and Spielberg and Kennedy and Frank Marshall, who helped us with the budget. And it was one of the premier packages we ever put together.

And we're going to talk a lot more about packages and everything you pioneered. But I mean this. In the old world, old, old Hollywood, all these people would have been under contract with the studio and just paid employees, paid labor. Jurassic park went on to gross a billion dollars.

So actually, if you add all of them together, it's much more than that.

Wow. And your team, the creative team and CAA kept 50% of that billion plus?

Well, the creative people had 50, which means we had 5.

Right, because you had 10%.

Yeah. Even though everyone chided us, saying we never took 10%. But they were all wrong.

So is my math right then, that Steven had about 50% of that and Michael had about 50% of that? So each of them ended up with a quarter billion dollars from this franchise?

Well, I don't know what they ended up with. They didn't have an equal split.

Okay.

Steven had more, because as a director, you command more. But they both did very well.

Wow.

And if, as David brought up, if this was done under the old studio system, all of them would have been under contract to a different studio, and the odds of loaning them out were nil. And then the odds of getting this made outside the system would have been almost impossible.

And before we dive into this old system that David's going to take us to here, I just want to point out how unusual it is for someone. I mean, you represented Michael, and for years he's sitting there with writer's block, and you're just getting lunch with him every week, coaxing him along, trying to figure out what that next big thing is, even though you know he's your client and you're spending all this time and attention. But the agency business model is to get 10% of what actors, directors, writers are creating. And if he's not creating anything, you're spending a ton of time with him as obviously client, friend, and as your belief in his future that sort of made this all possible.

Well, that's true, but there's a. I will say one thing about the agency business that is really not well. Known 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 agents that I dealt with at ca, the agents that I competed against, were vigorously and ferociously loyal to their clients. A lot of them were in the same position I was with Crichton. There is zero chance that I would have let that guy down. None. And I knew he was having a tough time, and it was my job to be there for him, period. Not a discussable issue, not a choice, not an option. I had to be there. And I will tell you, I tried some hokey things to get him stimulated. You know, I brought him other people's ideas. Sometimes I'd bring them an idea so bad to try to get a chuckle out of them where he'd look at it, say, what are you thinking? And I said, well, I'm thinking that maybe you'll think this is so bad that you could do something just a little bit better. And frankly, the agency, to their credit, went around telling everyone that Crichton was working on an original. And by the way, that was unequivocally untrue. He was working on nothing. I mean, he could barely get out of bed in the morning. He was really wiped out. He felt he had just spent all this creative currency. So my job was to just back him up and stimulate him into thinking that he could do it again, back.

When all these folks were under contract. And really, I mean, reading about old Hollywood and learning how the old studio system worked, to me it's like a sports league. That feels like the right analogy. Right. There were five teams, the major studios, then a couple independents, a 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 players. They were like LeBron James. They might be paid. Well, that's a bad example because the players make so much more money now.

But like an NFL player in the.

70S, yeah, they played for the team and that was it. Right. And like, if they didn't go out and play, they would get suspended. Right.

I think that you could safely compare the studio system to today's NFL. 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 serious. The Cary Grants, you know, they were paid in those days, money that was unthinkable.

And it was typically like, even for the folks where it was a large amount, it was committed up front. Right. They didn't get a share of the proceeds until. Who was the first to really get a gross proceeds deal?

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 a basic participation. And I think that what he did is he changed the entire fabric of the business.

And so that was Jimmy Stewart in Winchester 73. And Lou was his agent, right?

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.

Where they were running the studio. And by this point in history, you know, Lou's original trick of, hey, let's get Jimmy Stewart, you know, cut in on the back end. He's a partner in this movie. He's going to participate. From the upside, you would take what he did and what CAA really did was 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 Back to the Future to Lou, when he's a studio head at Universal, that's got to be kind of a wild full turn of events to really get the better of that deal.

Well, it was interesting. One of the things I said to Lou, when our director, Bob Zemeckis, who's a brilliant director, was going back for Back to the future 2 and 3, and I wanted a larger participation for him. My opening line to Lou was, you caused this problem. It didn't go over very well, I bet.

So tell us more about who was Lou? Because the. From the outsider's perspective, here's how I sort of see things. Lou was an agent. He was like Anakin Skywalker, right? He was 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 mca, 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?

He made a decision first. He bought the pre1948 Paramount Library 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? First he bought Review Television, then he bought Universal for a period. By the way, David, Lou was still an agent while he owned Review Television.

Oh, my goodness.

So he had the ultimate monopoly.

He's on both sides of the transaction.

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.

So is my characterization maybe not fully accurate then? I'm thinking of Lou and MCA as sort of opening up a seam for artists, but then closing it again. But maybe that's not totally accurate. How would you characterize Lou then and what he did with Universal?

I don't think that 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 CA gained momentum in the 80s and early 90s, they didn't have a lot of choice because of the 50 top grossing directors in the. For example, in 90, CA 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 5 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 CA client. Because 5 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. At the time, I was raising money for the UCLA hospital. We were going to rebuild it. So I said, I'd 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.

Did he make a donation to the hospital at least?

He did. He made a small donation. It was not two and a half million, but he was very generous. He was a great man and a great director.

All right, so let's go back to this era, sort of before you got into the business here. You mentioned lou bought this pre1948 catalog, which was a genius move because you could then run these films on television, which was rapidly sort of proliferating around the US and make all this money on owning the rights to this catalog that are playing. Meanwhile MCA buys Universal. So you have one company there that's both an agency and a studio. Well, Washington D.C. of course, doesn't like this. And they used the same word that you did, which was monopoly. So that gets the hammer comes down. And my understanding is MCA couldn't function as an agency anymore. Right. That MCA Universal turned into a pure studio.

Let me give you a sidebar rumor that most of us that were in the business would bet on as a fact. 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.

Why would he do that?

Well, it was really. If it's true, it makes a lot of sense because it's brilliant. Because what Lou didn't want was MCA to stay together as an agency and leverage him at Universal. So by breaking up mca, all that whole company went into a group of tiny agencies, none of which could give him a problem. Until we came along, we were his worst nightmare because we created MCA on steroids. And we would never sell any idea or client unpackaged or naked to a studio ever. Ever. So anything we did was prepackaged where we controlled all the elements and our clients controlled their own destiny.

By controlled all the elements you mean the script, the director, the stars?

Everything. Everything, yeah. It was in our clients best interest for us to go with a package to negotiate because the counterparty they had no choice so we could dictate terms. So frankly we legally set prices. Even though you're not supposed to price set, we basically did it because you.

Owned the scarce commodity which was the complete package and no one else had access to that. And then you would just go sell that one package.

That's right. So if you had Stripes or Ghostbusters or Gandhi or Twins or Kindergarten Cop or any of the 350 films that we packaged, Tootsie Rain man, go down a forever list, you had a choice. You'd buy the package or we sell it to somebody else. Because we viewed the studios as distribution entities, period. We didn't need them to tell our clients how to make the films. Now we did need them to distribute and market. They were great at that. So we basically never allowed anything. We never sold a single piece of material on its own, ever. It all came wrapped up with elements.

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 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 actors. How did you sort of get the idea of, oh, we could do that?

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 going to 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. Because in the 70s, 80s, 90s and early 2000, magazines were vital part of the culture of the country.

They were the Internet.

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 in a month to let it sit on their newsstand. So they had to think six months in advance. So I urged everyone at the agency to read. We had a list of 100 titles that they needed to look through every month. I subscribed to 200 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, Motor Trend, Automobile, Car and Driver. I had to. 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 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 want to talk to an actress, you got to 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 to predict the future.

You're in the business of being able to relate to people and quickly build strong, trusted relationships and also get a.

Sense of where culture is going. 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.

He was one of your founding partners, right?

Yeah. Bill Haber could read a screenplay, a teleplay and give as good a note 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 bunch of Asians and one in 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. These were major players 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 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 market share.

We talked about all this on our Berkshire series. This is, of course, Roberto Goizata and Don Keough that you were talking with, right?

Yeah. So I Said to Don Keough and Roberto Goizata, 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.

And Coca Cola historically is one of the most sought after advertising accounts in America. I mean, McCann Erickson had this account, had it unlocked 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.

Yeah, they were running a business that spent 5 to 600 million a year on advertising worldwide. So I gathered 12, 10 of our agents and I took them from different demographics, 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 they did send the airplane. 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.

What did your staff think when you told them, like, hey, we're going to go do an ad pitch to Coca Cola?

Well, I'll tell you what they thought. Most of them thought I'd taken leave of my senses. Well, how could we be in the advertising business? And a couple of them looked at me and said, wow, we can do this. Why can't we do it? But my point of view, 80% of our company thought there was something wrong with me, that I probably had food poisoning or something. That went to my head because 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.

Right. You know, or dress in drag.

Yeah, 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 is 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 because I already had the idea that I thought was going to work. But I never like to over promise 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 going to pitch your 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.

Oh, you're good.

Which cracked them 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 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. We're going to do a mascot for.

You, the Polar bears, 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 going to do hopefulness. February, we're going to 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 going to work? And I said, you don't. Because 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 want to do? I said, 40. And they said, you're crazy. But if you want to do 40 for the 7, the budget for 7, you got it. So they asked us. Then they called back and backtracked because McCann had been their agency for 40 years. And they said, will you come do what's called a shootout? And 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 because he is the keeper of the money. Your head of marketing, Peter Seeley, 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 team of five people in the night before, we checked out the room we were going to do it in. We rehearsed what we were going to pitch and we went for a very nice dinner. I bought everybody new Armani clothes. And we got up the next morning. 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.

One would say it's a show of strength.

And at 5 to 11, the. The McCann people there were 35 of them drifted in, having just gotten off a 6am flight from New York. And I'll tell you, they looked like they were all in a blender. They kind of 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 because we wanted to go first and blow their doors off, of course. And we did. They 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 Shelly Hockrun 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 and we had these guys and I will never forget, I was sitting next to Bill Haber, but next to me was John Dooner from McCann Erickson. And then a guy who had been friends with don Keough for 35 years. They were drinking buddies and Dooner wrote. This guy wrote Dooner a note and then notes. And I saw it by accident and it said, we're screwed. And sure enough, we finished. And then they came up. They were so bad that after seven or eight minutes of presentation, they sat down. We got awarded the account and of the 35 commercials we presented, they approved every single one.

Wow. And these commercials, am I understanding right that coming into this, you know, you didn't have big name actors wanting to do commercials, you didn't have movie caliber directors doing commercials. But one of your aces in the hole was not only are we going to come up with these great concepts, but we're going to go get our A list CAA talent to do this.

And we did. We got a lot of our top directors who were between movies to do the commercials. Paid them well.

They made money. You made money. Coke did great, right?

Everybody was happy. But more importantly, you know, it's funny, our competitors put out all this press. CA is going to use their clients to make commercials. How stupid. Blah, blah, blah. I'll never forget one of our clients, Dick Donner, who did Superman, called me up laughing. He said, I just read this article in Variety that we're all stupid for doing these. He said, I just cashed my check. He said, and I'm between movies. I couldn't be happier. I just want you to know that. So it's just that kind of, you know, we thought out of the box. Nobody else did. And when we did the commercials, I said to Roberto, I want you to premiere them like a movie, invite the press and run them all. Because 35, 30 second commercials is less than 20 minutes. And he ran them for the press. And the press we got was insane. We got the COVID of Time magazine, which was important at the time. We got a love letter in the New York Times. We got unbelievable press, except for the advertising journals.

Shocking.

Who said we were robber barons?

I'm shocked. Shocked.

Yeah, we were ruining the business.

Well, who's some of the talent that you brought in for this campaign?

Oh, God. We used everybody. And if we didn't use them online, they helped us in the background. But John Singleton did one. Dick Donner, Howard Zief. We used everybody and we edited everything. But here's the factoid that is fascinating. This is prior to people knowing the word or its meaning. Outsourcing. So we had McCann Erickson had 300 human beings working on the Koch account. We had six.

Wow.

And we edited everything. We just didn't make them. But we hired a company called Rhythm and Hues to do the animation. They weren't on our payroll, but they did a great job. Right.

Those polar bears didn't cost you, you know, it wasn't. They cost a lot less than Tom Cruise, let's put it that way.

The polar bears we did very reasonably. And we delivered 35 commercials for the cost of seven. One quick sidebar, then we'll move on. We sent the bills to the cfo, who was a friend of mine at the time, named Doug Ivester. And we sent a bill for a commercial called Timeline that we made on an Apple 2e computer in black and white. And it just showed the timeline of Coca Cola at various times in history. And we sent a bill I think for, as I recall, for like $35,000 for a 32nd spot. And that was probably more than it actually really cost on that computer. But so they sent us a check for three and a half million dollars. And I called up, I said, what is the three and a half million for? Is this a bonus? He says, no, we thought you made a mistake on the invoice. No one's ever done a commercial for us for anything less than 3.5 million. So we just, we didn't want you to run out of money because we were a little shop. And I said, Doug, I hate to tell you this, I'm not gonna cash the check, but it was 35 grand for the commercial. He said, I can't believe you did that. That's the kind of stuff we did.

That's wild. I mean, so 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 branching out into things like 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? Because you really started with nothing like zero.

Yeah, I mean, it's actually pretty simple. I'll try to give you the highlights. We were a group of us. There were probably 15 young agents at William Morris, maybe 20, all in our 20s. 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, California 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 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 Weisberg. 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. 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. This was like we were trained the old fashioned way and we felt, my God, we were embarrassed. 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 more, no less complicated than that.

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 and A. It's been an awesome season with Pitchbook. I've probably run, I don't know, a couple thousand queries while they've been the sponsor of the show. We're super grateful to have had their support not just to sponsor the show and to give listeners access. I think many of you have taken advantage of the free trial they've been offering, but also they've been sending us awesome data to help us prepare for episodes which anything that makes it so David and I don't have to spend all hundred hours researching is much 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.

It's like acquired, but in software.

It's like acquired, but in software. There you go. And more tabular because data tables don't read well on error graphs, etc. Anyway, our huge thanks to Pitchbook for everything that they've done for us this season. 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.

To my mind, looking from the outside at you all in the beginning of ca and then everything, it would become, no doubt an absolutely essential and probably the primary ingredient was just your all of your collectively and you Personally, just your raw ambition, certainly. And lots has been written about that. 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 and B, television was still relatively new. I'm imagining most of the old people at WMA and then also in the studio business just weren't tuned into this new world, right?

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 Picture Department and Television 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 $100,000. And we never went into debt beyond that. Paid that debt off in six months and never carried 10 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 1978, 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 79. 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.

That's a great insight. Because 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 1, 2, 3 years for film projects to come together and then get paid on the back end after it gets made.

Correct.

Could I ask what was it like to get your first big star and what's the story of caa. Sort of actually building a sort of reputable, enviable talent roster.

So there was a lawyer in Century City named Gary Handler. 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.

You signed the lawyer? A tax accountant? A tax lawyer, yep.

He was going to 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.

Wow.

Amazing.

And I will never forget Talking to Sean. 1979. I grew up on Bond. I remember a call being said. 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 for that call because I actually sounded like I knew what I was talking about, but I didn't. But I learned on the job.

I'm sure Sean's not a dumb guy, and he'd been in the business forever. Why'd he go with you? There must have been some rational reason for doing that.

He went with us for only one reason. Gary Hendler told him we were young, aggressive, hot, and had good taste. And Gary Himmler proved to be right. We did an amazing job for Connery. He had come off 3 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 400 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 three Adams, Ray Rosenberg partners. Sam Adams, Rick Ray, and I think his name Rosenberg was. 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 that we leased it from were running a house of ill repute out of it. And the Screen Actors Guild was gonna yank our license. Little did we know. Whoa. 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 going to have the best television agency in history because we're never going to 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 going to sign all those people.

Yeah.

And they said, you're nuts. You're not going to sign any of them. So I said, well, 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. And they said, that'll never happen. I said, thank you. Meeting's over. We're never going to merge. And about six months later, we signed Connery. And then every week we signed a famous movie star after that.

And didn't you take out an ad in Variety announcing it?

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 Adam Serayan Rosenberg. And it got to be a stale joke after a couple of years.

Well, this feels like a huge principle of yours in 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 that and some of the other ways that you Just by 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?

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. It 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 25 year period, I think we lost under six, five or six clients. We never lost clients because we had teams of people on them that they could relate to. So we would have. 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 want to 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 stupid or is everyone else stupid?

I mean, obviously you all were young and aggressive and willing to think differently. But why was the competition so weak?

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 ca, your meal ticket was how well the whole company did. If the company didn't do well as a group, every individual suffered.

Was there an element? I know this was the case at wma, but maybe at all the agencies of a holdover from old Hollywood where New York owned these, who owned your competitors? Like you said, when CAA did well, y' all did well. It was partnership. How were economics structured? At other agencies they just made what.

They called market deals. So if you wanted to hire an agent, you 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 going to overpay you, we're going to pay you more than you can get elsewhere. We had an 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 going to 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 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, I'm going to pay you more than I'm making.

So the question is, what are you making?

And so Jeff said, I'm going to pay it like 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 75% pay cut to do that. And that worked for me at 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 loyalty factor for me.

And why were you able to just make so much at CIA and frankly just overpay to keep people there. What was it structurally about CIA where you were able to just run this incredible cash flowing business?

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.

And as you're talking about all this, it's 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 showing up to every meeting with five people and having 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? Because I'm imagining you probably talked to like 50 people a day for 15 years.

Well, you're off by about a factor of five. So an average agent at our place would run 200 to 250 phone calls a day. Remember, some were 15 or 20 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 what's called a buck slip system, which was everyone had buck slips, which were these pieces of kind of 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 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 how Goodfellas couldn't be happier about the decision. And then Marty goes, wow, these guys are on their business.

Is there an archive of all these somewhere? Like.

Nah, they're all. You know, they're all trashed. Oddly. We locked up our trash every night, just so you know, because we found someone going through our trash. And that was a way that was really scared me to death, if you want to know the truth.

This adds some color as to why the mailroom was so important. When people say it started in the mailroom at caa, I mean, you were an essential part of the fabric of the system.

Oh, the mailroom at our place was a fast track to a career. If you could make it through the mailroom 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.

Well, that's the benefit of the team approach, too, right? Is you could go out and sign, I don't know, xyz, let's say Scorsese. But then you could bring Ben and me in, and then that probably let you go sign a lot more Scorsese. Right.

Well, David, Time was 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, we signed Hoffman, Pacino, and De Niro, which had never been done in history.

And they're known as leading men at the time. Right. They were sort of competing. They were competing leading men.

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, because wouldn't you rather I told you what he's doing 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 want to sign alone. 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 because 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.

Yeah, well, that's what I was gonna say. You, you, you build all this up and then that just lets you make the pie bigger for everybody by packaging.

Well, that would have never happened. Would have never happened. You know, in Untouchables I, they would have never gotten Costner and Connery in the same. And Andy Garcia in the same movie. They were all clients of ours, you know, and we wanted them to work together. We were a very family oriented business. We wanted our clients to work together. And it worked for us economically and it worked for them.

You took an aspect that people thought was a zero sum game and you made it a positive sum game. And it feels like what the industry was left with was the zero sumness was at, at the studios with the money, right? Like there was so much money, X amount of money budgeted for, for a movie slate for a given studio every year. Leave them holding the bag to figure that out and, and then you can control all the talent. Right?

Well, our, our job was to create product for our clients, period. We had people dedicated that had no clients that were only involved in creating product. That was their job. No agency did that. We also had 15 readers on staff.

Michael, can you take us toward the last few years of your time at caa? We talked about this period where you're signing your first clients. You went on to represent 45 of the top 50 in Hollywood. Talked about your foray into advertising with Coca Cola. There's two little pieces of this chapter remaining. 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 want to talk about when you explored Universal and potentially becoming a studio head yourself.

So the first question 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 going to need financing and traditional financing wasn't going to 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.

CAA couldn't put up a hundred million dollar budget for a movie. You needed a studio to finance it.

Well, it was worse than that, Ben. We weren't allowed to produce. Ah, we weren't allowed to produce. I had a white paper written by the most prominent entertainment lawyer in the business at the time, Frank Rothman, who's passed away. Great guy. And he wrote a 10 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 want to take on the guilds. Plus the Writers Guild and Directors Guild were run by CAA clients.

Right. You'd be pissing off your clients.

And we were settling strikes. Bill Haber and I settled one of the writers strikes in the 80s. We couldn't afford that.

So back to the studios being in financial trouble. Literally you have the reverse problem of Lou Wasserman back in the day of you now have the power on the sell side. You need fragmented buyers to.

I needed people that are buyers with money, David. Period. And so I started 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 Noria Oga, who was the number two at Sony, who ultimately introduced me to Akio Morita. And I became Morita's and Oga'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 Kirkorian, 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, Kirk went nuts.

It's the equivalent of Steve Jobs putting an iPhone on the table in 2005.

So Morita just kept talking, and then Kirk said, how do you want to. How would you pay for this? And Morita said, 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. Morita packed it up, put it under his arm, and left.

Power move.

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 coloned, and the rest is history. We worked the deal and through a long process, arranged to sell Columbia and Tristar to Sony.

And that became Sony Pictures Entertainment.

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.

What do the economics look like when you arrange a deal of that magnitude?

What do they look like?

Do you agree up front to a fee? Do you say, hey, let's figure it out later. Do you agree to a fixed price?

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.

I love it.

And I took a shot at something which paid off for me in multiples. So all of the banks, excluding Allen and 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.

You didn't specify what the obscene sum of money was.

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 house. They got the picture by saying that, David, we're saying, look, we want to exceed all fees ever paid.

Right?

But we never put a number on the table.

I love it.

You know, I never once had a discussion with any of them about money. And I was paid handsomely by everybody.

So, okay, we got to know, what does the Brinks truck end up looking like for the Sony deal and then for later, the Matsushita deal?

I don't remember exactly what I got paid on the Sony deal, but I got paid twice because I got paid for the record deal and then for the studio deal on the Matsushita deal. I don't remember if I discussed this in the book or not.

I think it is in the book. Yeah.

But they gave me $120 million 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 & Company.

And this is to buy Universal. Yeah, Or MCA Universal at the time.

Which they used 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.

And so Matsushita is the parent company of Panasonic. Is that right? The brand that Americans would know. And they ended up owning Universal for. Gosh. Was it 10 years before it sold to Vivendi and then later to. Or, I'm sorry, it was Seagram. Seagrams, then Vivendi, then NBC.

They had a very bad experience with Universal. So when I brought the CEO of Matsushita 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. And I said, I'm here for you. And a very apocryphal thing happened. When I brought these guys to the gate. I dropped them off. And Lou looked at me, shook their hands and turned his back on me and didn't invite me in. And that was the beginning of the end for him because he didn't understand them and they couldn't communicate with him. He didn't understand how to deal with them. And four or five years afterwards they called up and his contract was up. And he and Sid ran Universal like they didn't have owners, but they did. And they're smart guys, but they couldn't make the transition. And they didn't make the transition.

Well, 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 bucks a share and their stock was going down to 20.

Wow.

So it was a no brainer. A no brainer for private equity firm.

And when these situations come up, it's just got to be hard to go from entrepreneur, mogul, self employed, king of the world to being an employee. It just has to be an unbelievably hard transition.

I can't imagine how they did it. I was always shocked that they were going to do it, but I knew they didn't have any choice. But Matsushita didn't want to ruffle Lou's feathers because one thing the Japanese companies are always ultra sensitive to is politics. And Lou was still very connected politically. One of the guys on the MCA board was a guy named Bob Strauss who was head of the Democratic National Committee. They didn't want to mess around with this, so they called Herb and I up, said we'd like to sell the company. That was all they said. And the reason was they didn't want to try to negotiate with Lou. They just put up the company for sale. And Herb and I were working with Edgar Bronfman, frankly, on trying to take over Warner Brothers.

This was before the Warner Brothers and Time Inc. Merger.

This was before.

Got it.

And we had quietly accumulated 14% of the stock through Allen & Co. For the Bronfman family. And I met with Steve Ross three weeks before he passed away. He was one of the greatest guys in history of the business. And he gave me three hours of his time where I came to him and said that Seagram would put up 6 billion of cash with a standstill. And Steve assigned the deal to his deal maker. And then as he got sicker and passed away, it all fell apart.

Well, Michael, as we come up toward the end of your tenure here at caa, can you talk us through the generational transfer 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?

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.

First for Lou, right. At Universal.

It was my first job, tour guide at Universal Studios. And I just didn't want to 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. 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 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 stuff alone. And he finished the conversation, tried to have a rest of his Sunday. And Sly called back, wanted to start the conversation all over again. And that's not un. That's a little unusual, but not completely unusual.

That's within the realms of reality for an agent.

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 going to 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 ca. 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. Because when I came over, I was working seven days a week, 14 hours a day, and he was supposed to work two days a week. And he started working harder and harder and his doctor was telling him not to. And it just was very clear from the beginning. It just, 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. I had a game plan for myself. I didn't want to die at Disney. I didn't want to 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 nothing different than I did for 35 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 want to deal with it anymore. And it was one of those things.

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, 15 million people using NordVPN. It's just a great bootstrapped founder story. You've probably seen them because they do an unbelievable amount of sponsorships of YouTube channels. So I bet you've seen them on your favorite youtubers page as well. I recently started using the product when I was in Lisbon and I've told the 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.

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 content at the time than Disney was. Would that have been better or different.

You know, David, I'm going to tell you two things that both conflict with each other because he 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 $2 billion which is worth 10 times 20 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 Penguin Putnam, which is now the biggest publishing company in the world. I would have done that at mca. Those other part of me said I would have failed at MCA too because the Bronfman family would have never given me a free reign. And I'm just not, frankly, I'm not a very good employee.

You and Lou Wasserman both?

Yeah, I mean I shared that with Lou. My critique of Lou goes for me. I'm a terrible employee. 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 Lou 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 2020 vision and it's always easy to be a Monday morning quarterback. In the height of transitioning from CA 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 year's 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. 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.

And reflecting back on that, having one of the world's best dealmakers, both in Hollywood and then proven in the corporate environment seems like a natural fit for the State Department.

I felt really good about going into government service. I really did. And whether it was a State Department or something else, I would have 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 have. But at the end of the day, it worked out fine. 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 Mark Andreessen and his partner Ben Horowitz kind of saved my skin, you know, they asked me to be on their board in 99. They gave me a roadmap.

At Loud Cloud, right?

Yes, at Loud Cloud, 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 and 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 want to talk about luckiest guy on the planet, you're talking to him. I just, you know, I ended up. If you would ask 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 mutuality of interest in the world of the Internet. All you know.

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?

You know, it's funny. I had this conversation with a founder yesterday, 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 want to 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 film. No different. None. Zero.

What could have made CAA an enduring franchise that became a gigantic force rather than sort of apexing as you exited.

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 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 have 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 have gone into debt. I wouldn't have known how to give options in what to so many people at the agency. Because 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?

Right, because it was you and your founding partners Primarily that owned 90 plus percent of CIA.

No, we owned 100%.

Okay?

But there was no way to make everybody happy. And all I could see, frankly, was the agency disintegrating. And I like to think I made the right decision because unlike the decision Lou made, where MCA disintegrated, CA is still going strong today. They've done a great job in the core agency business. You know, they didn't expand it beyond that, but that's okay. That's their prerogative. But I think the guys have done a pretty good job. It's not what I would have done, but it doesn't matter. It's not my company. But I'm still take pride that 45 years later, still in business, good for them.

It's interesting that I Can't think of any other companies we've covered on this show in the 200 plus that you really were a true family business. It was a partnership, it was an llc.

Believe me, if I could have split up the business and made it bigger, I would have done it. But even if someone said to me, Ari said, well, you could have been the biggest investment banker as big as Goldman Sachs. And I reminded him I couldn't have been because A, I'd have to compete with them and B, they're in a fee driven business. And that was the business I was looking to get out of. And by the way, at that moment, I'll give you the kicker, which I've never said to anybody. The thought of being in the client service business to big corporate clients was, boy, that soured my stomach because I had had enough of service. The one thing about going to Disney that I will say was positive. Man, it's easier to be a buyer because just everyone's calling you. It's easier to be a buyer.

Yeah. And just so listeners have the context, because I think, Michael, you created a lot of value and captured a lot of value in other scenarios and at other points of CAA's life. You created a lot of value at the end and made a pretty sweetheart deal for the next generation that you sold the firm to. And at least my research found that you sold all of CAA to the next generation for 200 million, which of course they didn't have in cash and they were able to pay you with the profits over the next, I don't know, five or so years on an interest free loan that you effectively made them. And keep in mind, this is the business that has a enduring revenue stream of Jurassic park and all these other franchises that have recurring revenue associated with with it.

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. Frankly, I didn't care if I got paid immediately or five years down the road. It made no difference to me. It wasn't about that for me. I was very lucky. I made quite a bit of money as an agent. It wasn't a driving force for me and I knew I had the Disney thing lined up because that discussion, contrary to what people realize had been going on for a year, it wasn't fresh. So I knew I had that and I was going to get paid handsomely to go there because they had outlined a deal to me before. Frank Wells died. He tried to get me to come over. I was closer to Frank Wells than Michael Eisner was. Oh, wow. Frank Wells was part of a trifecta at Warner's. It was Frank Wells, John Kelly and Ted Ashley. So Wells and Eisner. Wells wanted me to come and be the third part of the trifecta because that worked for him for 20 years. So I knew what I was getting into and I knew money wasn't going to be a problem.

Well, Michael, that's it for our storytelling and our analysis sections. Thank you so much for being here with us today.

My pleasure. It was really great. I appreciate the time. I appreciate your homework and I appreciate just being a part of what you're doing. I like what you're doing. I'm glad to be a part of it.

Oh, thank you, Michael.

Thank you.

I'll be shortly sending David a contract with my fee.

Structure the brakes. Truck is en route. Yes.

All right, guys. Take care.

All right, Michael, thank you so much. All right, bye bye, bye bye.

Oh, so fun. Listeners, thank you for joining us for the whole season. But my gosh, what a privilege to have Michael Ovitz on the show.

God, just the perfect, perfect way to bookend the season. Michael was great. I mean, gosh, so many acquired thieves. We talked in there.

David, you were holding back from just jumping in constantly and being like, oh, yeah, we talked about this and that and the Coke. I mean, bringing the Coke thing circle was awesome.

I wish we could have made this like a five hour episode. We got to get Michael back for sure.

We have to. We also have to do some kind of like acquired bingo where there's an Allen & Co. Conference Square and we figure out how many episodes that's come up on.

All right, here's the thing, though. When are we going to do a live show at Sun Valley?

It does feel like that's the cake topper.

Is it going to be 2022 or 2023? I think let's make it happen in 2022.

All right, new goal. All right, Alan and company, if you're listening, let's make it Happen. Listeners, we want to wish you a happy holidays. We want to say thank you for being with us this season. Thanks to the many, many tens of maybe close to 100,000 who joined this year, or maybe over 100,000 of you who joined this year. Thanks to all the new folks who signed up for the LP feed. LPs. Of course, we love our LPs. They make the show possible. You know, I'm saying this before the Zoom call, but I'm sure we had a great LP Zoom Call for everyone who could join before we left for the holidays. And we'll be dropping some more fun exclusive LP only content in the future. For now, if you want to 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 Acquire FM Slack. You can get your dream job at Acquire FM Jobs. David, there's so many slashes.

You're like the creative artist agency of tech podcasts.

Start doing some packaging.

Well, Michael would say we would probably be stepping on his territory, but package some startups in the acquired community. It's happened. It happens in the acquired Slack all the time.

It totally has happened. People have met co founders in the Slack. I know people have raised money in the slack too.

100%.

It's pretty cool with that listeners, thank you. Thanks to Pilot, PitchBook and NordVPN. We'll see you next year.

We will see you next year.

Who got the truth? Is it you? Is it you?

Is it you?

Who got the truth now? It.