‘This Is Our Life’s Work’: CAA’s Leaders on WGA Fight, Dealmaking Challenges and Succession Planning
Kevin Huvane, Richard Lovett and Bryan Lourd are mad as hell. Exasperated, frustrated and, by their own admission, a little beaten down after a nearly two-year battle with a most unexpected foe: the Writers Guild of America.
The three longtime leaders of CAA have had enough of being told by outsiders what they should and shouldn’t be doing to run Hollywood’s most powerful agency and what they can and can’t do to keep pace with the media giants that command the global entertainment business.
CAA’s ruling triumvirate got so fed up with the WGA impasse — which keeps the agency from representing writer clients — that they broke with their tradition of staying out of the press to speak out about what they see as existential threats facing the myriad artists they represent. CAA also took the rare step of making more than a dozen department heads and agency insiders available to comment on the state of the company and the industry at large.
Like its competitors, CAA faces plenty of danger to the health of its own business, which has been upended by a loss of client jobs due to the production turndown in film, television, live music and sporting events amid the COVID-19 pandemic.
In a wide-ranging interview last month in Lourd’s Holmby Hills backyard, the CAA leaders spoke candidly about the challenges they face, the tumultuous times they encountered when taking the agency reins in 1995 and how they see the future shaping up. And now that the three, who were part of the fivesome dubbed “the Young Turks” in the early 1990s, are beginning to gray at the temples — Huvane is 62; Lovett and Lourd are 60 — succession planning has become a new priority.
“We’re proud of our brotherhood, so to speak,” Huvane says. “We’ve been friends for 34 years.”
Although the conversation is dominated by weighty subjects, the veteran power brokers joke and spar playfully with one another, demonstrating a zaniness that belies their reputations for being quite ruthless in business.
The fact that they’ve been able to keep CAA on top in the quarter-century since agency founders Mike Ovitz, Ron Meyer and Bill Haber left the company in a six-week whirlwind of change is a feat that is hard to match.
“CAA’s business is going through a lot of changes, but they don’t panic. They’re straightforward,” Iger says. “We’ve had a long-term relationship that enables a candor where both sides can speak their mind and put on the table what’s important to them without creating rancor and being counterproductive.”
Imagine Entertainment chairman Brian Grazer says the strength of the partnership among the managing trio has been the glue that allowed the agency to prosper.
“They have globalized their company, and they’re in all forms of entertainment and media at the highest level,” says Grazer, a longtime client. “The trio have forged a system where each one operates on their own superpowers, and they integrate with one another. You can see the deep trust they have for each other.”
For sure, a film studio chief applauds the trio’s complementary skill sets: Lovett as the “ultimate micromanager” who makes clients feel protected; Lourd, a trend forecaster with a strong head for business; and Huvane, the fiercest and most loyal agent a client could ask for.
“There’s a ruthlessness to the agency, like all agencies, but they’ve got velvet gloves,” the executive adds.
But the velvet gloves have been worn down of late. The trio has had to contend not only with the WGA drama but with internal pressure over compensation and control issues from hard-charging agents who have left the fold in recent years in numbers that would have been unthinkable a decade ago. And as with every company in Hollywood, CAA’s leaders are grappling with big shifts in the traditional entertainment marketplace that threaten the long-term health of client revenue streams.
As successful leaders with the luxury of job security, the three say they feel an obligation to voice concerns as the business landscape is redrawn by the industry’s dive into direct-to-consumer distribution.
“The thing we feel really strongly about right now is understanding the importance of talent and what value is put on talent,” Lourd says. “It’s never been harder, and it’s never been more complicated, and the stakes have never been higher. It felt like it was the right time to talk about the importance of representatives, not just agents but managers and lawyers, and other agencies big and small.”
What most pains those at CAA is the lost time over the past 20 months without having agents on the case in their time-tested role of creating the market for any given project. “This should never have happened,” Lovett says of the WGA battle. “This could have been solved — all of it — without an interruption of these relationships. It is impossible to quantify today the number of lost opportunities for writers, given that our primary job is to create those very opportunities.”
Lovett, who is president of CAA, and managing partners Lourd and Huvane are sounding the alarm about turbulence in the market that has been exacerbated in their view by the industry fight that led to more than 7,000 writers firing their agents in April 2019. All major agencies but the two biggest, CAA and WME, have reached agreements with the WGA to resume representing writers, who are the lifeblood of the content business.
CAA and WME have waved the white flag, but both have been flummoxed over the past three months in trying to negotiate separately with the WGA on the divestiture terms required by the guild. The CAA leaders see the union’s focus on potential conflicts of interest stemming from agencies having ties to production companies as missing the forest for the trees. They worry that the lack of independent production entities — companies with every incentive to command the highest price for content — will eventually leave writers, directors, producers, actors and others in the creative community at the mercy of a handful of giant conglomerates.
“Here we are in an absolutely revolutionary moment, a transformational moment,” Lovett says. “One of the defining parts of our job is to identify the value of the story. The value of a client and what they do … and to understand how to make the right deal that supports that value,” Lovett says. “That’s a new art form.”
Lourd stresses that CAA’s goal in launching production banner WIIP in 2018 was to help make the marketplace more competitive for content creators. But the growth of agency-affiliated production entities at CAA, WME and UTA spurred the guild’s successful campaign to eliminate the long-standing practice of TV series packaging, independent film packaging and to limit agencies and their parent entities to no more than a 20% stake in production or distribution assets.
“The WGA picked the worst moment in history for their members to do this,” Lourd says. “The lack of curiosity or understanding from guild leaders especially in this moment when streamers have more leverage than any companies have had in the history of show business is beyond me. Beyond me.”
Lovett, Lourd and Huvane are clearly outraged at what they see as an assault on their profession launched by the guild. They and others in the agency community were accused of racketeering, and RICO charges were filed in litigation from the WGA. They also were jolted by the surreal phenomenon of seeing more than 1,000 writer clients walk away, some after decades of partnership. Just last week, CAA and WME filed another legal salvo against the WGA, asking a federal judge to intervene and force the guild to negotiate settlements. A hearing is scheduled for Dec. 18.
Lourd is equally incensed by the potential damage to the independent film marketplace, an area in which the guild also seeks to eliminate packaging fees despite that it did cave on agent fees on fundraising. CAA Media Finance brokers funding and sales for approximately 100 films per year. Backing movies with budgets ranging from $100,000 to $150 million, co-head Roeg Sutherland and his team scour the globe for financing to bankroll client projects outside the studio and streaming systems.
“If we see an opportunity to help the marketplace, we as a company are there to do it,” Sutherland says. “We try to create as much of a balanced ecosystem in the feature film business as possible.”
CAA, now majority owned by private equity giant TPG, at present has about 1,900 employees spread primarily among offices in Los Angeles, New York, Nashville, London and Beijing. It is a much bigger and more expansive operation than the agency that had a few hundred employees when the founders left in 1995.
As recounted in James Andrew Miller’s 2016 oral history “Powerhouse: The Untold Story of Hollywood’s Creative Artists Agency” Huvane, Lourd and Lovett were part of a group of eight agency insiders who fought their way into leadership positions after Meyer exited to run Universal Studios, Haber departed to lead the nonprofit org Save the Children and Ovitz decamped to Burbank for a short-lived run as president of Disney.
“I think they have done an extraordinary job,” Meyer tells Variety. “Within a two-month period of the three founders leaving the agency, it could have either fallen apart or grown. Not only did it not fall apart; they held it together and grew it into a bigger and more successful company than we had.”
There’s no love lost between the trio and Ovitz. Relations between the former power broker and his successors have been strained for years. Ovitz, for his part, in his 2018 book “Who Is Michael Ovitz?” cited Endeavor leaders Ari Emanuel and Patrick Whitesell as Hollywood’s top agency players.
Huvane recalls the uncertainty of feeling like anything was possible in those heady weeks in the summer and fall of 1995. “We were agents for the whole company in those six weeks,” he says. “There was a lot of fear about would we survive? A lot of people worried about their jobs and would we be able to handle it.”
At the outset, the collection of Young Turks included agents Jay Moloney and David O’Connor. Moloney, once one of CAA’s brightest stars and an Ovitz protégé, left the agency in 1996 after struggling with substance abuse. He died by suicide in 1999 at the age of 35. O’Connor remained a managing partner alongside Huvane, Lourd and Lovett until he exited in 2015 to become CEO of New York-based MSG.
As they consolidated power, the core trio also worked hard to reinforce the agency’s famous culture that prizes internal communication, collaboration and teamwork on behalf of clients above all else. It started with leading by example — and to this day Huvane, Lourd and Lovett are very active agents to formidable client rosters. All three are extremely influential behind-the-scenes players who are often called to serve as confidants and informal advisers to top industry executives.
“We were incredibly ambitious for ourselves and for the idea of what CAA was and could be,” Lourd says. “And we were very clear that we wanted to build a company that was the best service company in the world. We wanted it to be a company that could hold all of our interests for our whole careers, not just for a 10- or 20-year chapter.”
The question of how many more chapters the managing trio have in them has been discussed more frequently within the walls of CAA in recent years. The lack of movement at the top of the agency has been a source of agita for some who have left the fold and for some who remain. They believe it’s past time for the three to hand the reins to a new group of Young Turks.
There’s also been frustration and anguish over money issues. CAA is known for paying agents extremely high salaries to help instill loyalty. But as senior agents have pursued successful entrepreneurial ventures on behalf of clients, there have been a few who felt shortchanged in the compensation department when bonuses were handed out.
The large teams of agents that are assigned to big clients can mean that “there’s a lot of people with their hands out at the end of the year,” says a former CAA insider.
Moreover, the agency has been distributing more equity compensation to high performers in the past decade. The problem is, the equity is not a liquid asset unless CAA sells more of itself to TPG or other investors. The managing trio stresses that there have been four rounds of checks distributed to insiders since TPG first bought a portion of the agency in 2010. But sources say the equity awards are still opaque and have left some questioning how much they will be worth unless CAA goes through with a transformational sale.
One CAA veteran sees the pressure points within the agency as a microcosm of the economy. Although Huvane, Lourd and Lovett maintain that all day-to-day decisions are theirs, sources say the tighter controls on the purse strings are evident since TPG arrived on the scene. The trio of leaders earned eight-figure windfalls from TPG’s equity purchases in 2010 and 2014, which made the belt-tightening harder to take for some at the agency.
“The middle-class agents are getting squeezed down and they’re not happy about it,” says the CAA alum, adding that WME is dealing with a similar dynamic. “You can’t pay your superstars with big fat five-year deals and then still pay everyone else appropriately. … TPG has definitely put pressure on the guys.”
The managing trio strongly dispute that TPG exerts day-to-day pressure. Lourd makes no apologies for CAA’s process, which has been refined over the years. “We’re super proud of our track record,” Lourd says. “No service company has paid its people as well or monetized equity as many times as we have.”
An IPO for CAA seems highly unlikely, given the nature of the company and Endeavor’s rough reception from Wall Street last year. Despite perennial speculation to the contrary, those closest to the situation say TPG is pleased with its investment.
“When we find a great leadership team with a great industry position, we are in no hurry to go anywhere,” says Jim Coulter, co-CEO and founding partner of TPG. “It’s a long-term investment, [and] we are pleased with the path we see ahead.”
With an eye toward the future, CAA established a board of 12 senior leaders this year to guide the agency’s day-to-day operations. The goal is to prepare the next generation for the job of running CAA as a total business — something the trio had to learn the hard way.
“We cannot underestimate how little we knew about running a business,” Lourd admits. “It was a 10-year crash course,” Lovett adds.
The public aspect of the new board also gives CAA an opportunity to demonstrate its growing diversity. However, the agency’s ranks remain largely white. The status of women leaders at CAA has improved in recent years, as evidenced by the fact that seven of the 12 board members are female. Earlier this month, CAA hired former USC executive Sharoni Little to oversee its global inclusion strategy.
CAA also faced hard questions after the dawn of the #MeToo movement for not using its clout to protect clients from the threat of sexual assault at the hands of Harvey Weinstein. The agency came under fire because of its dominance of the movie star arena when Weinstein was at the peak of his powers as the head of Miramax in the 1990s.
“Every one of our colleagues past and present only has highest priority to protect clients. We were, as everyone was, horrified to learn of the evil of Harvey Weinstein,” Lovett acknowledges of the imprisoned mogul now convicted of sexual assault. “When it all became known, of course we asked ourselves could we have done more or known more. … Everybody always wishes that they could do more in the face of evil.”
Lovett points to the quick birth of the Time’s Up advocacy organization in the agency’s eighth-floor conference room as a sign of its commitment to addressing the scourge of workplace harassment.
“It’s a reflection of our commitment to be engaged in making things better where we can,” he says.
CAA has lost some of its aura of invincibility — clients and agents moving around to other shops is no longer unheard of — but not much of its market clout. Industry executives say the agency retains its pull and its prestige, in equal measure. And for the past 10 years or so, the agency’s rivalry with WME, led by CAA alums Emanuel and Whitesell, has become something of a sport that occasionally impedes the flow of business.
Top leaders at CAA say the agency’s lethal weapon in business is the same as it has been since its formative years: the information-sharing among departments and creative thinking about how to make the most of opportunities for clients.
“Richard Lovett always says, ‘The first phone call you return is your colleague’s.’ That’s the kind of culture that is ingrained here,” says Ida Ziniti, co-head of CAA’s motion picture literary group. “It’s most important to connect with your co-workers and let that inform your next move.”
Risa Gertner, Ziniti’s co-head in motion picture lit, says there are subtle but important touches that help clients feel well taken care of by the team approach. There’s an emphasis on sharing the biggest clients with younger agents in order to give them important experience as well as to tap their pulse on pop culture.
“We always make sure that good news is delivered to the client by the younger person on the team,” she says. “If there’s a problem, we make sure there’s a senior agent on the phone.”
CAA’s first really big swing during the post-Ovitz era was going deep into the sports business, starting with athlete representation in 2006; Lovett urged the partners to move into the area. O’Connor was key in executing the expansion push before he went to run marquee New York sports properties at publicly held MSG for the Dolan family. (He exited in 2017 and now heads investment fund Arctos Sports Partners.)
CAA Sports, topped by Howard Nuchow and Michael Levine, has become the agency’s second-most profitable unit, representing some $10 billion in current athlete contracts. The arm harvests even more profits through selling naming rights to venues, media rights to sports properties and consulting on everything from team logos to stadium sites. Being in business with sports has been good for other CAA offshoots like Evolution Media Consulting and Evolution Media Capital merchant bank, as well as for the firm’s relationship with TPG.
Nuchow and Levine recall attending their first CAA staff meeting as new hires in the spring of 2007. “When we watched them run through coverage on all the studios, we walked out of there saying if we could get to a place where we had one-tenth of the impact, we’d have the best sports agency in the world,” Nuchow says.
As they dig out of a pandemic-battered marketplace, CAA’s leaders face two big questions in the coming years. What is their ultimate plan for succession, and how long will the ownership structure remain in its current form. TPG owns the majority stake of 54%. China Media Capital, the agency’s partner in CAA China, and Singapore’s Temasek together own about 10%.
On ownership, Lovett, Lourd and Huvane say they see no big disruption on the horizon. Although 10 years and counting is a long hold for private equity, it’s not unheard of in TPG’s portfolio. Moreover, CAA is a small but shiny sliver of the $80 billion-plus TPG has under management.
“They love the business and the insight it gives them on the world on so many different levels,” Lourd says. “It’s worked incredibly well financially for them in terms of the return,” he adds with pride. “And we like them as humans. And that matters.”
As for the timeline of succession, the trio won’t divulge much — other than to assure that there’s a blueprint. “In that board and beyond is a planned-for succession,” Lovett says. Lourd adds: “To a person, in that group, we could get hit by a bus and the company would be fine. We’ve never been able to say that.” He says the trio is ready to be “shoved out of the way when we are no longer useful.” Lourd also uses the royal “we,” as in “We love the job more than ever.”
The split with writers has no doubt impacted the fun factor of their work. But none of them sounds like he’s ready to hang up the phone anytime soon, even if they sometimes sound wistful for the time of the Young Turks.
“In the world these days, the conversation is about technology and platforms and numbers and data and so forth,” Lovett says. “We think there ought to be an even bigger spotlight on how important the artists actually are. We feel an incredible sense of purpose and always have in support of our clients. That is our life’s work.”