Talent Agencies at a Crossroads

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Hollywood's power agency tosses director Christopher Nolan's rep as its new CFO scrutinizes expenses in an age of lower star salaries: 'When the tide goes out, you see who's been swimming naked,' says one agent.

When top CAA agent Dan Aloni was called out of a staff meeting and abruptly fired Feb. 29, Hollywood was almost as shocked as the agent himself. Dismissing Aloni meant losing his loyal client, mega-grossing director Christopher Nolan, who promptly followed Aloni to rival WME.

The move by Hollywood's most powerful talent agency seemed so unlikely that many in the industry assumed some dramatic incident must have provoked it. But it appears CAA ended a nearly seven-year relationship with Aloni because it was fed up with his behavior.

Still, the short-term financial calculus likely favors the agency. CAA declines to comment, but sources say it still will collect commissions on Nolan's upcoming The Dark Knight Rises as well as the Superman reboot Man of Steel, which Nolan is producing. The agency will lose out on other future Nolan projects, but since CAA initially had brought Aloni in from UTA in 2005 with a big-bucks offer, it stands to reason that the agency was paying him several million dollars a year at this point. "They don't have to worry about collecting the fees on Batman and they're saving themselves what, $5 million a year?" one executive speculates. "That's a lot of money."

Saving money matters now, not just for the 1,000-employee CAA but for its competitors. Some industry observers have noted that on Feb. 9, CAA announced it had hired Jeff Berry, formerly of the cosmetics firm Physicians Formula Holdings, to serve as chief financial officer, overseeing finance and accounting and playing a role in strategic planning. Competitors have surmised that CAA hired Berry at the behest of private-equity firm TPG Capital, which bought a 35 percent stake in the agency in October 2010. As CAA's competitors at ICM have learned, private-equity investors can bring big changes when they buy into an agency.

In fact, TPG, in addition to helping establish a $500 million pledge fund with the agency, played a role in helping CAA search for a CFO -- though the agency was not averse to the idea of hiring one. And Berry's role may be significant as the agency is said to be in the midst of a top-down review of salaries and expenses. But even before Berry arrived, CAA had parted ways with several lower-level agents, though none at Aloni's level. Given Aloni's client list, it seems unlikely that the newly arrived Berry played a role in terminating him. Not only did the agency expect to cede Nolan to a competitor, but it risks losing other clients, including actor Jim Carrey and directors Jay Roach and Michel  Gondry.

The reality seems to be that CAA dropped Aloni primarily because constant conflicts had taken their toll. "He was so disliked and so toxic that he had to go," says a source with knowledge of the situation. Aloni did not respond to a request for comment, but it seems the top partners felt Aloni was undermining the agency's cohesion by belittling colleagues, attempting to keep them out of the loop, competing with them openly for clients and sometimes even trying to poach clients from within.

Sources say Aloni was particularly competitive with fellow agents Todd Feldman and Spencer Baumgarten, who represent such clients as Todd Phillips, Zack Snyder, Jon Favreau and Gore Verbinski. An executive who has dealings with Aloni says the agent wanted to expand his client list from major directors to include actors, adding, "Maybe he was a little too aggressive about that."

But if the Aloni drama was primarily about the agency's culture, CAA's scrutiny of costs goes deeper. As the business -- especially the movie business -- confronts the huge challenges associated with the digital revolution, agencies inevitably are having to make adjustments. Studios have laid off thousands of employees, and they are dialing back on major projects and driving much tougher bargains with talent. Few actors can demand big guaranteed fees anymore; instead, they are asked to defer compensation and share some of the risk of making large-budget movies.

As some clients find less work, their agents suffer because they are generating less revenue. So it follows that as the industry contracts, agencies are taking a much closer look at how they spend money, while at the same time investing in such lower-return but potential growth areas as branding and digital media. That's hardly a problem unique to CAA, but that agency's dominance in the movie business means it is potentially more exposed to the vagaries of that business. "When the tide goes out, you see who's been swimming naked," says one agent. "That's what's gone on. The tide has gone out."