A new era of agency wars begins after UTA poaches 11 comedy sharks (not to mention Chris Pratt and Will Ferrell) and a confidential memo obtained by THR reveals how the rewards of being a top dog at CAA conflict with the economic culture for everyone else.
This story first appeared in the April 24 issue of The Hollywood Reporter magazine.
On the morning of March 31, Richard Lovett, newly arrived in Santa Fe, N.M., for a set visit, called his Creative Artists Agency partner Bryan Lourd, who was in New York dealing with a family illness. He had bad news: Five agents, whose clients include Chris Pratt, Will Ferrell and Melissa McCarthy, had just messengered their resignations and defected to United Talent Agency. None of them had informed Lovett or Lourd directly. "It was such a betrayal on a personal level," says one agency source.
That was the beginning of one of the most tempestuous weeks in both companies' histories, as UTA CEO Jeremy Zimmer jubilantly welcomed the new arrivals (whose numbers would climb to 11 agents within a week) during a companywide meeting, while CAA scrambled to keep clients and strategize how to fight back.
Over the next few days, Lourd, Lovett and fellow managing partners Kevin Huvane and David "Doc" O'Connor manned the phones and spoke constantly, with Lourd operating from New York and the others from CAA's Century City headquarters, known as the "death star" for its reputation as Hollywood's invincible fortress. That reputation — as well as CAA's client roster — now is under attack.
One top-level executive at TPG Capital, which in October raised its stake in CAA to 52 percent, emailed the partners to see if there was anything he could do but was told the situation was under control. Calls to clients and agents continued over the weekend, with CAA offering additional money to agents on the fence about leaving.
By April 6, the agency felt it had stanched the bloodletting. It had lost Pratt, his wife, Anna Faris, Ferrell, Ed Helms and Zach Galifianakis, among others, but comedy director Paul Feig called to say he was staying. On the fence was McCarthy, but CAA expects her to follow her agent Jason Heyman to UTA.
Heyman was a key member of the departing group, all longtime comedy agents, who also included Martin Lesak, Greg Cavic, Gregory McKnight and Nick Nuciforo. CAA's most pointed wrath is targeted at Lesak, whom the agency believes led the others to join him at UTA. (Both Lesak and Heyman moved from UTA to CAA a decade ago.) "Marty Lesak knew where he was headed," says one insider, "and he convinced a bunch of people who were not secure to follow him. Jason was and is loyal to him but was negotiating for an increase in salary." Lesak and UTA declined comment.
Friends of the departing agents say they had been disgruntled for some time and that the defections are symptomatic of a widespread resentment among staffers at CAA; former agents and other ex-employees complain that the agency's top partners "cashed out" with the TPG deal and have not invested in growing the agency to the degree that rival WME has done. WME recently grew exponentially with the purchase of IMG, following a private-equity infusion from Silver Lake.
In addition, the group and other staff have been grousing about a tightening of the financial reins, and CAA CFO Jeff Berry is said to have clamped down on agent spending, long a hallmark of CAA's allure.
Money was one factor, corporate culture another. "If you're not making enough money, and you're not part of the 'cool club,' you're going to get out of there," says one former CAA staffer. "The glue of that company is that it's a culture of fear. You're scared that you're going to get fired, and you're scared that they're going to cut your pay rate. Before you know it, you're working seven days a week and not reaping the benefits."
In 2010, TPG bought a 35 percent stake in CAA for $166 million, and in October it became the majority owner by investing an additional $75 million, according to a confidential memo signed by Berry in November and obtained by THR. That memo was used in regard to a $610 million loan the agency took out; the memo revealed that some $399 million of the money CAA has raised will go as "proceeds to members." Who those "members" are is unclear, but the agency's managing directors are among the beneficiaries.
The memo (which CAA declined to verify) indicates that the agency continues to be highly profitable. In fiscal 2014, "CAA generated $647 million in revenue and $121 million in Pro Forma adjusted EBITDA," it states. How much the UTA 11 contributed to that profit is unknown. One ally says the group generated about $35 million in annual commissions, but a top CAA source scoffs at that figure. "That is so far from the truth," he says. "It was less than a third of that."
Future income for UTA likely will be limited by the contracts already in place for sequels, especially in the case of Pratt's deal with Marvel Studios. But it's clear the agent realignment significantly bolsters UTA both financially and by reputation, changing what had been a two-agency race into a three-way battle for talent. It also positions UTA to pursue its own outside financing deal, though sources insist no pact is on the horizon. ICM Partners is also a major competitor for top clients, especially in the lucrative television space.
CAA responded quickly to the agents' exit, hiring litigator Anthony Oncidi and filing an April 2 lawsuit claiming two of the agents, Cavic and McKnight, "while still on CAA's payroll and while still accepting generous compensation and benefits from CAA," conspired with each other and with UTA to induce a "midnight raid" on a number of CAA employees. Arbitration proceedings were initiated against Heyman, Lesak and Nuciforo, who were under contracts that contained arbitration clauses. The agents are alleged to have planned the exodus for months.
Insiders at UTA say the agency will return fire and could introduce evidence showing CAA engaged in the type of agent-poaching for which it is suing UTA.
While UTA was celebrating, rival ICM Partners plucked two of its agents, Rob Prinz and Nikki Wheeler, who rep Jerry Seinfeld and Celine Dion, among others.
Rivals are gloating about the back-and-forth. "The real blow isn't revenue loss," says one agency chief. "It's a blow to perception. You're taking this machine that was always perceived as perfect and you're showing that it isn't."
Matthew Belloni contributed to this report.