The film industry is in disarray. MGM is undergoing restructuring, Overture and Miramax are on the block, the studios are on the run during a tough summer, and too many agents are chasing too few deals as talent turns to television.
When Nikki Finke breathlessly asked if the fact that CAA's no-longer-young Turks are looking to sell a minority stake in their agency meant that they want to leave the agency business altogether, that raised many questions.
Thus, CAA managing partner Bryan Lourd confirmed Tuesday that Kohlberg Kravis & Roberts are in talks to buy a minority stake in the talent agency (he was speaking at The Financial Times' The Business of Luxury Summit), and admitted that even Hollywood's top agency has to be willing to reinvent the wheel. "We've all got to throw away our playbook and start over." He declared that while CAA may sell a minority stake, the partners will "never turn over control. It is the passion, the family we all chose, along with our other dysfunctional ones at home."
If in fact the CAA partners--who seek investment money --a reported $250-million--to build the burgeoning CAA Sports (clients paying 3 % upfront commissions include LeBron James, Derek Jeter, Peyton Manning, David Beckham and Cristiano Ronaldo) -- were to cash out of the agency, that would be a seismic industry event. (Long-dominant CAA's clients include Tom Cruise, Tom Hanks, Anthony Hopkins, Hilary Swank, Reese Witherspoon, Oliver Stone, Jim Carrey, Steven Spielberg, Brad Pitt, Meryl Streep, George Clooney, Sandra Bullock, Oprah Winfrey, Julia Roberts, Kate Winslet, Will Ferrell, Keanu Reeves, Mike Nichols, Cameron Diaz and David Letterman.) "There's no question they are the MCA of our time," says one rival agent.
It would level the playing field at a time when the agencies are challenged by a shrinking entertainment industry, slashed talent fees and less work all around. ICM already gave up a majority share to equity investor Rizvi Traverse in 2005. The shark in waiting? WME's Ari Emanuel. WME is buttressed by its 50 % share of all the old William Morris receivables (from Elvis, Clint and Marilyn to Roseanne and the Cosby Show), and doesn't have to share its new business with the old owners. Still, the surviving agencies could be a third of their current size in a few years.
Assuming the CAA partners do move on someday, who's waiting in the wings to take over? Senior agents Fred Spector and Bob Bookman aren't heading toward taking on more management duties. And being a star talent agent (like, say, Todd Feldman, Dan Aloni, Hylda Queally, Beth Swofford or Chris Andrews) doesn't mean you can manage and administer a huge agency. That's another set of skills, which president Richard Lovett and partners Lourd, Kevin Huvane and Doc O'Connor (now all heading toward 50) have wielded impressively. The four took over running the agency in August 1995 after Ron Meyer and Mike Ovitz left, along with now-departed managing partners Rick Nicita, Lee Gabler, Bill Haber and Jack Rapke. (Another Turk, Jay Maloney, left the agency to battle drug addiction and later committed suicide.)
Are they suffering burnout? While Lovett shepherds the likes of Will Smith, Nic Cage, Vince Vaughn and Shia LaBeouf, Lourd and Huvane take the lead on many star clients who are repped by a CAA team--but that also means they don't always empower younger agents (CAA argues agents gain experience this way). (Angelina Jolie is one star who walked away from this approach.) Most people believe that Lovett will stick around, while Lourd has always harbored aspirations outside the agency. UPDATE: The other speculation is that CAA could use this KKR infusion to fund film and television production, given that agency/guild agreements ran out years ago. (That's true of SAG, but not AFTRA.) WME owns a chunk of film-funder Media Rights Capital. If Hollywood isn't going to fund production, the argument goes, then the agencies will. CAA however indicates that the agency has no intention whatsoever of pursuing such a scenario.
So the likelihood that CAA's operating partners are going anywhere is slim. If KKR bought into the agency with them gone, what would it be worth? The likelihood is that the investors will demand that the principal players stay on for a period of time. "You don't buy into a service business and then wave good-bye to the people who run it," says one ex-CAA partner. "When the dust settles those guys will still be there."