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Tuesday, March 13, 2007

CAA Taking A Bath On Sports Division? - Buying Matt Leinart, Tom Condon, and IMG

Someone -- perhaps Leigh Steinberg -- is reading this with glee. But if Hollywood Reporter Nikki Finke's any indication,
Creative Artists Agency , the super-firm of talent agents started by Ron Meyer and Mike Ovitz in 1975, and recently the epicenter of Hollywood's move into athletic talent mining starting with players like Arizona Cardinals QB Matt Leinart, may be losing money in its sports division.

To understand, read this post from Nikki's blog:

If CAA agents this week are looking inconsolable, it's because they now have to give up flying first class. (Those conversations you're trying to overhear at lunch in Century City are the CAA tenpercenters kvetching about it.) So what happened? My sources tell me that CAA called a big all-agents meeting and read the riot act to its spendthrift tenpercenters. To cut expenses by a whopping 20%. To start flying just business class instead of first class. And to take to heart this warning: If you want to get paid, then get your clients jobs.

I hear the motion picture agents are the most upset about the new edicts because they live the high life more and so got hit harder. Look, I've been saying this for a while now: CAA can't keep spending like drunken sailors without having cash flow issues: buying a bevy of agents from other shops and wooing clients by the hundreds, and moving into swank new headquarters while still paying rent back at the I.M. Pei building, and starting a money pit of a sports division where most of the endorsement deal money will be heading back to IMG for years, etc. Now CAA is having the same woes every other agency in town has been having: for instance, William Morris last year asked its departments to slash spending by 20%. What's next? Richard Lovett on Avenue Of The Stars with a metal detector looking for loose change and lost jewelry?

If it's true that CAA's gotten into a deal where it's giving most of its' cash from sponsorship deals back to IMG, then it's officially taking a bath in its sports division. Everyone in the sports business knows its the sponsorship deals that drive the industry, and this is especially true for NFL agents, which are limited to 3 percent takes of an athlete's contract.

By contrast, CAA comes from the world of the 20 percent deal, where they can get as much as that for an actor or actress. So they're giving up 17 percent of a deal, plus a big chunk of endorsement money? Wow. All that plus the fact that CAA and the other Hollywood agencies aren't savvy enough in new media to promote their talents to such an extent they make up for this. One firm I will not name has an extensive website, but you can't find it on Google! (They need to use SBS-ON!)

At first, I thought CAA's foray into sports would restructure the industry and cause a shakeout of some of the small-time -- at least in behavior -- agents. But given the appearance of their business model, I remain skeptical. It's now logical to me why IMG would give up its NFL operation to CAA without the appearance of a fight; they're getting paid! Moreover, it seems everyone, from Leigh Steinberg to Matt Leinart's trainer Steve Clarkson of Air 7 (which has a better website now), to IMG, and Tom Condon (who was lured from IMG to CAA) has been paid by CAA just so it could leap -- head first -- into the sports business without a battle.

In other words, CAA really did create a money pit!

Let's give it five years, and then review. Unless CAA starts making a ton of sports movies with Matt Leinart and Paris Hilton as the stars, they may see the NFL and sports as a waste of money. It's not, really. It's just that they don't really understand what they've gotten themselves into.


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