Following are excerpts from the book “Powerhouse: The Untold Story of Hollywood’s Creative Artists Agency,” by James Andrew Miller, to be published on Aug. 9 by Custom House, an imprint of William Morrow.
Creative Artists Agency, dominant for decades in the entertainment business, stepped into the sports world in 2006 with the creation of CAA Sports.
Many competitors regarded, and still regard, that foray as a disaster, a loss leader, or both. Even inside CAA there was debate about whether the agency’s move onto the playing fields of the world reflected strategic genius or hubristic disaster.
But both CAA and TPG, the private-equity firm that owns more than half the company see CAA Sports as a new classic among growth stories, pointing to prosperous property sales with the New York Yankees, the San Francisco 49ers and FC Barcelona; to talent and athlete marketing hits like Cristiano Ronaldo, J.J. Watt, and Dwyane Wade; and to such media advisory successes as the PGA, the Chicago Cubs and Riot Games, among many others.
— HOWIE NUCHOW, co-head of CAA Sports: We had tremendous growth again this past year. Whoever says we're not succeeding is either naive, stupid or doesn't mind lying. It's only one of the three.
In 2015, for the first time in CAA’s history, sports was the agency’s top revenue producer — surpassing TV and film — bringing in more than $215 million.
In other words, the revenue baton has been passed, and with it, perhaps the very identity of CAA itself.
— RICHARD LOVETT, president of CAA:In 1997, I called Bryan [Lourd] from New York and said, "We have got to be in the sports business." Bryan said: "That might be true, but we've got lots of work to do back here. Get back to LA We've got to stay focused on what we're doing." Which was exactly right at the time. We needed to enter sports not only at the right time but at the right level. As time went on, we did have an important insight as a consequence of specific conversations with IMG over many years. After Mark's [McCormick] death, we formed a version of a joint venture with them. In a short period of time, we learned that we were much more aggressive in our work. We certainly realized if they are the best in the business, and we are more aggressive at what we do, we believe we can compete and succeed.
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NUCHOW: Richard knew the landscape was shifting. He said, "This company has to diversify."
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— MICHAEL LEVINE, co-head of CAA Sports:We knew that the money was big in transactions having to do with teams. We knew that the money being spent by the networks for media rights was growing rapidly. And we knew the sponsorship business real well, and that there was a lot of money and margin there. The DNA of the company is to represent talent, and that was going to be no different in CAA Sports. We did some evaluatory work for the International Olympic Committee, which is really the crown jewel of TV rights. It was pretty heady, investment-banker-like, McKinsey-consulting-type analysis that we did. That wasn't like just, "You got this much, and now you should get this much." It was an evaluation of the entire media rights landscape and why the Olympics had such a prominent place in that landscape.
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— DAVID O'CONNOR, a former partner at CAA:That was more of a prestige thing. I can't even remember what we got paid on that. But you know, the Dodgers paid us $12 million to $14 million; the Rangers paid us the same amount of money. The baseball deals were big ones.
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— JOHN SKIPPER, president of ESPN:It has always puzzled me slightly when major sports organizations believe they need a third party to advise them how to sell their media rights.
After advising the International Olympic Committee on media-rights deals for the 2012 London Games and the 2014 Sochi Games, CAA Sports moved on to a fully American icon. The New York Yankees became the department’s first large institutional client when, in October 2007, it reached a stadium sponsorship deal for the new Yankee Stadium that would open in April 2009. In total, CAA sold more than $700 million in sponsorships for the Yankees. Sponsorship partners included AT&T, Delta and Pepsi.
NUCHOW:It was the biggest piece of inventory available. Before we were in Randy Levine's office, Randy basically stood up and said, "Guys, if I give this to you, we completely put you on the map. So how are you going to make this work?" And we're all kind of like just, "Put us on the map? Are you serious?" It's basically the definition of the map. Because it was the biggest thing that was going to show. It was something that was going to be outside of athlete rep.
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— RANDY LEVINE, president of the Yankees: We knew those guys, particularly Mike from when he was with the Mets. They're good guys. But you know, we have our own sales force, and they're terrific. We did the deal with them because we knew them, it didn't matter that they were at CAA. At the end of the day they assisted and were helpful, but do they deserve credit for it? No, our guys and our team deserve the credit. That's not taking anything away from those guys, it's just the facts about what happened. ...
Back in 2010, LeBron James had asked his agent Leon Rose and CAA to hire young Rich Paul, whom James had met in Cleveland while Paul was a teenager. For James, the move was reminiscent of what he had done years before with his childhood friend Maverick Carter. James, who was only 20, gave Carter, 23, the keys to managing his empire. By most accounts, Paul was no charity hire but rather a solid professional, and Rose was happy to bring him into the fold.
The CAA consultant William Wesley, flamboyantly known as World Wide Wes, was a close friend of Rose’s and heavily involved in the recruitment of athletes as a consultant for CAA. All might have been well, but Wesley and Paul operated on different circuits.
Tension continued to build between them to the point where Rose decided the ticking bomb must be defused. In London at the 2012 Olympics, Rose had Wes and Paul join him for a lunch and a frank discussion designed to clear the air, with Rose later telling colleagues he felt better about the situation.
And so he did — until the night of Sept. 12, less than one month later, when it was abruptly announced that Paul was leaving CAA. Rose, shocked and hurt, had come to think of Paul not just as a protégé but as a friend and thus didn’t see why Paul failed to give him warning — or even tell him personally that he’d decided to leave.
The bigger surprise would come just 24 hours later, when LeBron James sent notice that he, too, was leaving the agency — and would join Paul’s new firm, Klutch Sports, to be based in Cleveland.
The move confirmed a shift in James’s business strategy since joining the Heat. In 2011, he’d struck a deal with Fenway Sports Group (FSG), led by the Red Sox owner John Henry and chairman Tom Werner, to partner with his own sports marketing firm LRMR Branding & Marketing and oversee the firm’s global marketing opportunities and commercial interests.
James also received a minority stake in Liverpool, the soccer club owned by FSG. According to The Wall Street Journal, it was the first time that a professional athlete at his peak had invested in a team that in terms of prominence and prestige ranked among the most elite and formidable in the world.
— LEBRON JAMES, NBA athlete: CAA and their team were amazing partners. I really appreciated everything Leon and the people at CAA did for me while I was there. Leaving CAA wasn't personal and had nothing to do with them. It didn't matter who was representing me, but when Rich was ready to start his own business, that's where I was going. First, I believe in Rich and know he is the best agent for me. He understands me, my challenges, and wants what's best for me. If Rich was in the game now and we had never met as kids, he would still be my agent. More important, I went with Rich because I am very serious about building my community. When I was 20 years old, I fired my agent and turned the business over to a few guys I grew up with. I didn't do that so I could have my crew around. Nobody convinced me to put them on payroll. I did it because I wanted to build my community. I wanted my team to show young athletes that you can build businesses. And they earned it. That if your team works as hard off the court as you do on the court, great things can happen. A young black kid from Cleveland without a college degree can be as good, or even better, at being an agent as the guy who got his law degree from Harvard. But Rich worked for it. There was never a handout, and he's never rested. He grinded at CAA to learn the business. I watched him grind for years. And when he was ready to make the jump, I was 100 percent behind him.
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— LEON ROSE, CAA agent:I helped bring Rich into the agency and supported him in his growth. LeBron decided to be loyal to his friend when Rich decided to do his own thing, and I understood that. But in the end, I'm proud of the work CAA was able to do for LeBron, and help put him in a position to achieve his ultimate goal of winning his first championship.
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— MICHAEL LEVINE: We had very close relationships with Rich. Rich was someone we spent a lot of time with and always believed would be a great agent. We cared a lot about him. We understood that a young agent, to have the chance to go represent the biggest superstar in the world out on his own, was something special for him to do. We got it. My biggest issue with Rich at that moment was how he told us he was leaving and how the particulars were handled. I felt he owed Leon and us collectively a little more compassion and respect than what we ended up getting. I shared that with him directly, and he seemed to understand my perspective and felt bad. I could tell, and after I explained that to him, he got it. It all happened so quickly, and he was in a difficult situation.
One year after the parting of LeBron James and CAA, Maverick Carter approached the agency on behalf of his client to see if there was any interest in handling James for television and movie opportunities — everything not covered by his NBA contract or endorsement deals. The deal would be exclusively about getting James into show business.
CAA said no. James signed with WME the next day.
CAA Sports made an initial foray into European soccer in 2009 when it became involved with international athlete and property representation, along with corporate consulting and media rights, but the big move occurred on Oct. 1, 2012, when CAA Eleven, a Swiss-based subsidiary of CAA, was awarded the contract over dozens of other companies to sell broadcast rights for the latest cycle of UEFA’s national team competitions — the 2016 UEFA European Championship Qualifiers, along with the 2016 UEFA European Championship, and the European qualifiers for the 2018 FIFA World Cup.
The UEFA deal garnered much attention. Previously, the organization had only sold off rights to matches individually. Now, for the first time ever, they centralized the media and the sponsorship rights to hundreds of matches. Those broadcast rights could be extraordinarily lucrative given the sport’s global footprint. A match between Germany and France isn’t just sold in those two countries but to territories around the world, and if you wanted to show that game in Argentina, South Africa, Japan, or even the United States, then your network and your money were headed to CAA. The deal called for CAA to take the risk on overhead, in exchange for a range of commissions (roughly between 3 and 5 percent) based on revenue performance. Recently, the agency was given even more inventory to sell, and CAA’s commissions from the deal are already in the tens of millions.
O'CONNOR: Charlie Stillitano and I got us into the soccer business. We started out advising two big clubs on marketing and sponsorship advisory work: FC Barcelona and Chelsea football club. Those were relationships that I developed. We started an event that is now the International Champions Cup, which is touring European soccer teams in the offseason in the summer. But really what it did is it got our feet wet in the international soccer business and got us relationships with all sorts of people. That led to one of the biggest successes of the company something that I was spearheading and intimately involved with, which was when we created CAA Eleven. CAA Eleven is a separate company but it is majority owned and controlled by CAA, and CAA gets a lion's share of the revenues. We won the competition to manage all of the sponsorship, advising, and media rights around all of the national team play for Europe as governed by UEFA. So it's the Euros, Euro qualifying and World Cup qualifying for Europe; it's Russia, it's Eastern Europe, it's Western Europe; all of the big federations like England, France, Italy, Spain, Russia, Germany are governed by UEFA. And we won the competition to manage all those rights over IMG, Sport 5 and other incumbents in the international sports advisory space. We were the dark horse and came from way behind to win.
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NUCHOW: Ronaldinho at the time was the biggest soccer star in the world. Vino [Levine] and I were going to Brazil in an attempt to sign him. I had never even been out of the country on business before, so the entire pursuit seemed like it would be a lot of fun. I had just spent a bit of time with Doc [David O'Connor] before this and thought he was a great guy and it would be important to have him involved with us. To attempt to get him to join Vino and me on this trip I kept emailing him pictures of salsa and samba shoes, and said: "You've got to come to Brazil with us. It'll be fun." And Doc said: "Great. I'm in. Let's go."
We wound up going to Ronaldinho’s house, where he was having a birthday party for his sister. So we’re arriving at this massive house in Brazil, and there’s security all along the driveway outside. Doc was dancing with the mother at the party, and we didn’t talk a stitch of business for a long while that night. We just met family members and many folks who were important to Ronaldinho and his family. At some point late into the early morning we shook hands on a deal that would allow us to sell some sponsorship for Ronaldinho. We wound up doing a very big deal for him.
His portfolio was not as big as we had thought. He had a big Nike deal, but there weren’t many global deals beneath that, which was surprising to us for one of the most marketable guys on the globe. But because of Vino, Danforth and our staff, we knew we could deliver a deal that would outsize the other deals he had beneath Nike. And that’s exactly how it worked out. We got him a global deal, and that was an important next step for us into the world of international soccer. We learned a lot about the soccer world through this experience with Ronaldinho and his brother.
On June 30, 2015, David O’Connor was announced as president-chief executive of the Madison Square Garden Co. leaving CAA the following month to begin his new position.
O'CONNOR: I was thinking about the next act, but I always thought it wouldn't play out for several more years. I wasn't looking for anything, but this opportunity was really special. Jim [Dolan] and I had a handshake on a deal somewhere around the eighth or tenth of June, and I was very stressed out about confidentiality and secrecy with all of this because I really wanted to tell my partners before they heard anything. I was getting increasingly paranoid about it, and increasingly uncomfortable around the office, pretending I was all in, when in fact I had one foot out the door. So I had my assistant call and set a meeting with Bryan, Richard and Kevin [Huvane], and as I was leaving my office to go to that meeting, The New York Post called my assistant looking for comment. Someone had leaked it. I got to them before the news came out. In the meeting, I told them: "I've been offered a job, and I'm going to take it. It's in many respects a dream job for me, and I think it's the right time for all of us, as you guys well know." I didn't know how it was going to go. It could have been ugly, but it was incredible. They were happy and very supportive. They could have held me to my contract, but that was in nobody's best interest, so it all worked out.
In his new deal with MSG, O’Connor was awarded $40 million in stock grants to compensate for the equity in CAA that he’d left behind, vesting in just three years. His deal at MSG also came with a five-year contract, and if he serves all five, his total compensation will be around $115 million, with only a portion of that tied to stock performance.
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