Power Business Managers 2015: TPG's Bill McGlashan Talks CAA Ownership, China Backers
The managing partner of TPG Growth discussed Chinese capital and founding a studio for tech companies at The Hollywood Reporter's fifth annual breakfast.
One of Hollywood's most under-the-radar yet influential dealmakers on Wednesday revealed the strategy behind his company's investments in Creative Artists Agency and the STX Entertainment studio.
Bill McGlashan, managing partner of TPG Growth, which owns a majority stake in CAA and launched STX with film executive Robert Simonds, said at The Hollywood Reporter’s annual Power Business Managers breakfast that the talent agency and studio can provide a gateway into several profitable businesses, many of which are shifting in an increasingly digital media landscape.
“We [are interested in] the derivative opportunities around an agency," McGlashan said during a keynote Q&A moderated by THR executive editor Matthew Belloni. "In a world where the engagement model has rapidly changed, where it’s all about social media and brand opportunities, where Jessica Alba earns big from the Honest Company and where Dr. Dre and Jimmy Iovine make more from Beats than they ever made from music, CAA sits in a very strategic place."
McGlashan declined to comment on rumors the agency would go public, and when Belloni inquired whether TPG, which controls $75 billion in assets and counts Uber and Airbnb among its investments, would keep CAA for a short term or long term, McGlashan only replied, “That’s a very good question."
McGlashan said he is not concerned with any client or personnel churn at CAA, though he noted the agency is “fundamentally a people business." He added, "Part of our underwriting is whether there was fundamental value to the firm. We don't think there's a lot of risk of people spinning out of CAA in a way that would matter."
McGlashan made the comments at THR's fifth annual gathering of the entertainment industry's top business managers at Wolfgang Puck's Cut restaurant in Beverly Hills. The event was sponsored by City National Bank, Delta Air Lines, Beverly Hills BMW, CAPS Payroll Services and Battaglia.
TPG's other main Hollywood play is STX, which Simonds, who attended the event, founded in partnership with the private equity firm and other investors. STX is starting to release films, including Joel Edgerton’s hit thriller The Gift and the upcoming The Secret in Their Eyes (with Julia Roberts and Nicole Kidman). The studio recently made a deal for 18 films with China's Huayi Brothers, prompting a comment from McGlashan about industry concerns over investments from China.
"One of the reasons they seem fickle is there have been a lot of grand announcements about Chinese investors that didn't happen and a lot of people announcing without the deals done and before they had real substantive investment," McGlahsan said. "There's been very little Chinese capital here."
In designing STX, McGlashan added, he and Simonds incorporated one piece of business wisdom from Silicon Valley. They pushed against contracts with fixed compensation (“Where the bonus is fixed, what's the point of a bonus?") that bind executives for set terms.
"We have a very different model at STX. We have people who are invested in the company who want to create wealth for the company," he said. "Wealth is created by building a business and having a share of the product. That's something Silicon Valley knows well. It's absolutely foreign to this community."
He pointed to STX's recent hire of Kathy Savitt, former CMO of Yahoo, as evidence of the studio's plan to produce content for digital distribution, and the importance of Hollywood content creators in that plan.
"Silicon Valley is not good at storytelling," said McGlashan. "They're not good at partnering with production companies in a way that makes business sense, which is precisely why we reached out to Kathy. We said, 'Let's be a studio for Silicon Valley. Let's be here and there.' "