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CAA (with Michael Ovitz)

CAA (with Michael Ovitz)

Tue, 21 Dec 2021 20:13

Season 9 ends at the beginning — with the man who changed Hollywood forever and wrote the blueprint for A16Z’s upending of Silicon Valley a generation later, Michael Ovitz and his “Dream Factory”, Creative Artists Agency. From Jurassic Park to Ghostbusters, Back to the Future, Goodfellas, Rain Man, ER, and even the Coca-Cola polar bears... almost nothing in 80s and 90s pop culture didn’t have CAA’s stamp on it. Speaking of dreams, this episode was totally one for us, and we hope you enjoy listening to it as much as we did making it!!

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I was watching you at Bill Murray at the 92nd Street Y. How great is Bill, right? He's like the worst interviewer ever, but he's hilarious. He's Bill Murray. We'll let you talk more than Bill did. Who got the truth? Is it you, is it you, is it you? Who got the truth now? Who? Is it you, is it you, is it you? Sit me down, say it straight. Another story on the way. Who got the truth? Welcome to season 9, episode 8. The season finale of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert and I'm the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund PSL Ventures. And I'm David Rosenthal and I'm an angel investor, based in Zipertesco. And we are your hosts. He was the most powerful man in Hollywood for two decades. He is responsible for movies and TV shows you love. Like Late Night with David Letterman, Jurassic Park, back to the future, Rainman, Goodfellas, and literally hundreds of others. We are here today with Michael Ovitz to tell the story of creative artist agency, CAA, the legendary talent agency he founded in 1975, that changed the power structure in Hollywood forever. And not just Hollywood. As many of you probably know from our earlier episode this season, Michael and CAA inspired none other than Mark and Jason and Ben Horowitz to similarly change the power structure of Silicon Valley. Boy, did he ever? Ugh, what a great way to end the season. I am so pumped. Before we dive in, for the last time in season 9, I would like to welcome our presenting sponsor, Pilot is the backbone of the modern financial stack for startups. They themselves, as you know, are backed by all star investors like Sequoia, Index, Bezos Expeditions, and Stripe. And they are truly the gold standard for startup bookkeeping. Now over to our conversation with pilot co-founders, Wacim Dahar, Jessica McKellar. So as we come to the end of the season, let's turn to pilot as a company itself. Not only do you serve startups, but obviously you've been an incredibly successful one. So I'm curious, what advice would you have for all the founders listening who are earlier in their journey or maybe haven't even started a company yet that are thinking about starting one someday in the future? Real talk. Thing number one is you need to pick a problem or pick a market where you can actually build a company that can make money. But leaving that aside, I can say this from having worked with Wacim and our co-founder Jeff for nearly 15 years at this point. Piles are third company, even through two acquisitions together. Having a founding team that works well together, that is values aligned, really does make a difference for maximizing the chance of having a successful business. And it's such a precious thing that we found each other. And I know at least I'm never going to like OVM. In addition to the team being really important, I think it's critical that you really remain focused. Which is your company has one job. Which is to make a product or service that your customers want to give you money for. In other words, you have to be laser focused on solving a real hair on fire need for your customer base. And anything that you're doing that is not in service of solving that hair on fire problem is frankly time you're wasting. Well, I can't think of any better note to end our time together this season on. Nor frankly any better pitch for why all startups should be using pilot for all their bookkeeping and tax and CFO needs. Thanks so much to both of you for joining us for this whole season. Thanks for having us. You can learn more about pilot and whether they can help your company eliminate the pain of tax prep and bookkeeping by going to slash acquired. And thanks to Waseem and Jessica, all acquired listeners, if you use that link, you will get 20% off your first six months of service. Thank you, Waseem, Jessica and all of pilot. No kidding. Listeners, before we dive in, many of you already know this. A ton of you have already subscribed, but the LP show is now publicly available in all podcast players for free. So only the first two weeks of brand new episodes are in the private feed. Everything else you can go search acquired LP show in the podcast player of your choice and get all those episodes. Now, without further ado, our conversation with Michael Ovitz. Michael, welcome to acquired. Thank you very much. It is so great to have you here with us. So we're thinking, of course, like any good creative artist, we're going to steal from your book and we're going to start in media stress and then rewind just to set the stage for what's to come. Just don't ask me any hard questions. Well, I think you'll enjoy telling this story. Can you tell us the Jurassic Park story? You must be like me and like dinosaurs. Well, that was the key to all of it, right? Everybody likes dinosaurs. I think that's accurate. That's what got that movie made, basically. So you had a pre-existing relationship with Michael Criton, but he hadn't produced any new material in a while. Is that right? So Michael was a client of mine starting in the late 70s. And we developed an extraordinarily close personal relationship that went way beyond our professional relationship. And I literally talked to him every day of the week. And I did that not because he was a client, partially because he was a friend. But mostly because he was one of the smartest and most interesting people. He was really like Leonardo da Vinci type, right? He was amazing. Here's a guy who was a medical doctor, screenwriter, director, travel writer, short story writer, novelist. And just was probably the greatest guest ever have at a dinner party because he could talk about anything with an extraordinary depth of knowledge. And it's fascinating to me because later we'll talk about another friend of mine who I love putting together. And that's Mark and Dresan. The two of those guys probably sucked 90% of the brain power that God gave away in their birth years. They're just extraordinary. But Michael ran into a very tough patch, really tough patch. And a lot of writers and creative people. And you've probably heard the expression writers block. You know, they occasionally just, it doesn't flow. Artists have it as well. I have a friend who's a phenomenal painter and she just couldn't get it together for six months. It just wasn't coming out. And I think that Michael was in a position where he was going on a couple of years. And he just wasn't happy with what was coming to him. And I used to have lunch with him once a week. And I would push him constantly at the lunches to try to see if I could ignite a small spark. And at one of the lunches when things seemed the bleakest, he said to me, what do you think of three people, age younger and maybe one little older person, stranded in an amusement park off the coast of South America. And the core of the amusement park are prehistoric animals. And I looked at him and I said, wow, my young son likes dinosaurs. I like dinosaurs. And my dad likes dinosaurs. This is really an extraordinarily interesting idea. And we then talked for almost three hours about paleontology. About is it possible you could breed these type of beings in the 20th century? Could it be made real? Is it possible with in those days with the kind of technical know how that was available in the 90s to do it? And we came to the conclusion that it was worth him sitting down and trying to write it. And lo and behold, he sat down five months later. He called me up. He said, I'm sending you a draft of a book about what we talked about. And he sent it over and I remember sitting down around six o'clock in the evening, 6'30, I had something to eat. I had left the office early and I just started reading type written manuscript pages. And I didn't finish until around three in the morning. And I called him at 7 a.m. and I said, this is the best thing you've written in 10 years. And I said, I just couldn't stop turning the pages. Just as an aside, one of the great tests of whether something works or not is how quick you turn the page. And you know from reading just recreationally, if you turn the page, you like the book. And I just devoured this book. And I said to him, I said, look, this is brilliant. It'll make an amazing book. It'll make an amazing movie. And I said, there's only one guy in my mind that can make this movie. There are not two guys or three guys or four guys. There's one guy and if we don't get him, I would be worried about what this movie looked like. And he said, who? And I said, Stephen. And in our world, there are certain people that have single names. There's Madonna, there's Cher. And there's Stephen. Of course, Stephen Spielberg, who was also the one director, who is not your client. He was not my client. And I wanted him to be a client very badly. So my brain started to work on overtime. And basically I said, Michael, I'm in a call, Stephen. So at 9 AM, I called Stephen. We talked and I said, I've got something I want to send you. And I know you don't read at night. So I'm going to call your wife, Kate, Cap Shaw. And I'm going to ask her permission for you to disappear tonight and read. This is like a classic agent trick, right? Is to call somebody's spouse. I had no choice. Because I had to create a sense of urgency around this. But also I didn't want to oversell. And I didn't want to undersell. So he agreed. He said, Caller, I did. She agreed. Send him the book. He said, how much time do I have? I said, you've got today and tomorrow. And lo and behold, the next morning at 7.30 in the morning, my phone rang. And it was Stephen. He said, this just knocked my socks off. He said, I couldn't believe this book. He said, I'm making this movie. And what year was this? So this was about a year before the movie was made. 91, 92. It's very unusual to begin this level of pre-production on a movie even before the book is published. I mean, this is on the first version of the manuscript, right? Yeah, this is highly unusual. What's even more unusual is I asked Stephen to commit to the movie subject to a budget. And we had no distributor and no financing. And Stephen was the most sought after director in the business. And to his credit, he said, okay. And I called his producer, Kathy Kennedy, who oddly, her husband, Frank Marshall, was my college roommate. Whoa, no way. So I had a little credibility there. And Kathy runs Lucasfilm now, right? Or no credibility, David, depending on how you look at it. And I said, can we get a budget on this book? He said, sure. He said, but do you have a script? I said, no. So I sent him the book. Send her the book. They both read it. We did a rough budget. And Michael decided to write the script, subsequently brought in some help. And basically, I went to Universal, which was where Stephen was housed. And I called the head of the company, Sid Scheinberg. And it was kind of a famous saying at the moment, but I said, said, we got good news and bad news. He said, great. What's the good news? I said, we've got a Michael Crichton book, Michael Crichton screenplay. Stephen Spielberg's committed to direct. Kathy Kennedy's going to produce. And I said, and it's about dinosaurs, which we all love. It's three people trapped in an amusement park gone awry, loaded with prehistoric animals. And Sid, of course, is the number two day, Lewasserman, who we're going to talk about in a minute. So Sid says, okay, that sounds amazing. What's the bad news? I said, the bad news is you don't own it and we do. And I said, so Stephen doesn't control it, which means your first look with him disappears. But Stephen wants to make the movie at Universal. And he said, how much time do I have? I said 24 hours. And he asked what the deal was. I told him the deal that we were going to be partners with Universal. $1 for dollar. And he got back to me about 12 hours later said we're in. So this was all done under the tutelage of CA with Crichton and Spielberg in Kennedy. And Frank Marshall, who helped us with the budget. And it was one of the premier packages we ever put together. And we're going to talk a lot more about packages and everything you pioneered. But in the old world, the old Hollywood, all these people would have been under contract with the studio and just paid employees, paid labor. Which were asked to park one on the gross $1 billion. So actually, if you add all of them together, it's much more than that. Wow. And your team, the creative team and CA kept 50% of that billion plus. Well, the creative people had 50, which means we had five. Right. Because you had 10%. Yeah. Even though everyone tried it as saying we never took 10%. But they were all wrong. So is my math right then that Steven had about 50% of that? And Michael had about 50% of that. So each of them ended up with a quarter billion dollars from this franchise. I don't know what they ended up with. They didn't have an equal split. Okay. Steven had more because as a director, you command more. But they both did very well. And as David brought up, if this was done under the old studio system, all of them would have been under contract to a different studio. And the odds of loaning them out were nil. And then the odds of getting this made outside the system would have been almost impossible. Before we dive into this old system that David's going to take us to here, I just want to point out how unusual it is. I mean, you represented Michael. And for years, he's sitting there with writers block. And you're just getting lunch with him every week, like coaxing him along, trying to figure out what that next big thing is. Even though he's your client and you're spending all this time of attention, but the agency business model is to get 10% of what actors, directors, writers are creating. And if he's not creating anything, you're spending a ton of time with him as obviously client friend and as your belief in his future that sort of made this all possible. Well, that's true. But I will say one thing about the agency business that is really not well known. The agents are depicted as money-grubbing, as not loyal, aggressive, short-sighted sometimes. But you know, the reality of it is, I don't know many agents like that. The agents that I dealt with at CA, the agents that I competed against, were vigorously and ferociously loyal to their clients. A lot of them were in the same position I was with Criton. There is zero chance that I would have let that guy down, none. And I knew he was having a tough time. And it was my job to be there for him, period. Not a discussable issue, not a choice, not an option. I had to be there. And I will tell you, I tried some hokey things to get him stimulated. You know, I brought him other people's ideas. Sometimes I'd bring him an idea so bad to try to get a chuck a lot of them where he'd look at it. And I'd say, what are you thinking? And I said, well, I'm thinking that maybe you'll think this is so bad that you could do something just a little bit better. And frankly, the agency to their credit went around telling everyone that Criton was working on an original. And by the way, that was unequivocally untrue. He was working on nothing. I mean, he could barely get out of bed in the morning. He was really wiped out. He felt he had just spent all his creative currency. So my job was to just back him up and stimulate him into thinking that he could do it again. You know, back when all these folks were under contract, I'm really, I mean, reading about Old Hollywood and learning how the old studio system worked. To me, it's like a sports league. There were five teams, the major studios, then a couple independence, a couple major minors. They were all a sports team that had the owners back in New York and had the GM and the manager. Those were the studio bosses. And then all the actors, directors, writers, they were players. They were like LeBron James. They might be paid well. Well, that's a bad example because the players make so much more money now. It's like an NFL player in the 70s. Yeah. They played for the team. And if they didn't go out and play, they would get suspended. I think that you could safely compare the studio system to today's NFL. And they had people that made a lot of money. They had artists that were getting in their time substantial sums of money. You know, the Douglas Fairbanks, the Mary Pickfords, then if you moved into the next era, the contract players, the Clark Gables, the Jimmy Stewart, the Kerry grants, they were paid in those days, money that was unthinkable. Even for the folks where it was a large amount, it was committed up front, right? They didn't get a share of the proceeds until who was the first to really get a gross proceeds deal. Well, the first is the famous story of the movie Winchester 73 where Lou went into the studio and suggested a lesser front money payment for a piece of the back end. Prior to that, artists were paid what's called flats, which is a flat fee. And they didn't get a basic participation. And I think that what he did is he changed the entire fabric of the business. And so that was Jimmy Stewart in Winchester 73 and Lou was his agent. Yes, it was his agent, which is funny because then Lou went to the other side. And if you go all the way up to Jurassic Park, you know, he got stuck with participations. I had a similar issue with Lou and sit over back to the future where they were running the studio. And by this point in history, Lou's original trick of hey, let's get Jimmy Stewart cut in on the back end. He's a partner in this movie is going to participate from the upside. You would take what he did and what CAA really did was multiply that over and over and over again such that the talent was really participating in the upside. So then by the time you bring Jurassic and you bring back to the future to Lou when he's a studio head at Universal, that's got to be kind of a wild full turn of events to really get the better of that deal. Well, it was interesting. One of the things I said to Lou when our director Bob Zemeckis, who's a brilliant director, was going back for back to the future two and three. And I wanted a larger participation for him. My opening line to Lou was you caused this problem. It didn't go over very well. Who was Lou? Because from the outside perspective, like here's how I sort of see things. Lou was an agent. He was like Anakin Skywalker, right? He was like fighting for the artists to get way more of the upside. But then he went to the dark side and he stopped being an agent and MCA, his agency bought Universal and all of a sudden he's on the other side of the table as a studio boss. Now from your perspective, trying to stiff the artist. How did this happen? He made a decision. First, he bought the pre-1948 Paramount Library for Universal and he made a decision basically that it was better economics on the other side of the deal. Why take 10% when you can have 90? First, he bought review television. Then he bought Universal. For a period, by the way, Lou was still an agent while he owned review television. Oh my goodness. So he had the ultimate monopoly. He's on both sides of the transaction. Yeah. You know, I've always felt and I still do. I'm really interested in dealing with conflicted people. Because if you have a conflict, in essence, you want it to work out on both sides. So a lot of times I'll go to someone with a heavy conflict to this day to work out a problem. I'm thinking of Lou and MCA as sort of opening up a seam for artists, but then closing it again. But maybe that's not totally accurate. How would you characterize Lou then and what he did with Universal? They gave participations out. They didn't stop it. They negotiated hard and tough on their side. No different than we did on our side. But they were sympathetic to they didn't just say, look, we're not doing this. We're reversing it all. And frankly, as CA gained momentum in the 80s and early 90s, they didn't have a lot of choice because of the 50 top grossing directors. For example, in 90, CA represented like 45 of them. So it was impossible. You couldn't say no. I remember when we signed Mike Nichols, me, he rest in peace. A great director. I'll never forget a call he made to me. He was getting 2.5 million to direct. And when he became a client of ours, we went to make a deal for him. I called him up and I got him 5 million. And he said, I don't understand. That's not my price. And I said, well, it is in the context of being a CA client. Because 5 million was what the top directors made at that point in time. So I said, Mike, you're a top director. I said, if you want, I'm happy to take 2.5 of it and donate it to charity. At the time I was raising money for the UCLA hospital, we were going to rebuild it. So I said, I'll be very happy to take that 2.5 million for the hospital. And he said, I'd love to do that. But I'm very pleased to have the full amount. Did he make a donation to the hospital at least? He did. He made a small donation. It was not 2.5 million. But he was very generous. He was a great man and a great director. All right. So let's go back to this era before you got into the business here. You mentioned Lou bought this pre-1948 catalog, which was a genius move. Because you could then run these films on television, which was rapidly sort of proliferating around the US and make all this money on owning the rights to this catalog that are playing. Meanwhile, MCA buys Universal. So you have one company there that's both an agency and a studio. Well, Washington DC of course doesn't like this. And they use the same word that you did, which was monopoly. So the hammer comes down and my understanding is MCA couldn't function as an agency anymore, right? That MCA Universal turned into a pure studio. Let me give you a sidebar rumor. Lou, that most of us that were in the business would bet on as a fact. Lou was the chief fundraiser for the Democratic Party in West LA. There are stories, Glor that Lou called one of the Kennedy brothers and suggested that MCA be broken up as a monopoly. Why would he do that? Well, it was really if it's true, it makes a lot of sense because it's brilliant. Because what Lou didn't want was MCA to stay together as an agency and leverage him at Universal. So by breaking up MCA, that whole company went into a group of tiny agencies, none of which could give him a problem until we came along. We were his worst nightmare because we created MCA on steroids. And we would never sell any idea or client unpackaged or naked to a studio ever, ever. So anything we did was pre-packaged where we controlled all the elements and our clients controlled their own destiny. By controlled all the elements, you mean the script, the director, the stars, everything. It was in our clients best interest for us to go with a package to negotiate because the counter party, they had no choice. So we could dictate terms. So frankly, we legally set prices. Even though you're not supposed to price set, we basically did it. Because you owned the scarce commodity, which was the complete package and no one else had access to that and then you would just go sell that one package. That's right. So if you had stripes or ghost busters or Gandhi or twins or kindergarten cop or any of the 350 films that we packaged, Tootsie, Rainman, and go down a forever list, you had a choice. You'd buy the package or we'd sell it to somebody else because we viewed the studios as distribution entities, period. We didn't need them to tell our clients how to make the films. Now we did need them to distribute in market. They were great at that. We never sold a single piece of material on its own ever. It all came wrapped up with elements. Where did that insight come from? Because I know in the sort of pre-CAA studio world, you know, the talent agencies would represent the talent. And then the studios would do development. They would buy the script and they would attach a director and they would turn it into a film and then they would go cast the actors. How did you sort of get the idea of, oh, we could do that? Well, the idea was pretty simple, frankly, in that when we started in 74, we didn't have any clients. So all we had were relationships. So all we could do is put elements together and try to attach ourselves and hang on to a booking bronco. And by doing that, and if we could hang on, it developed that as we took clients in, we'd surround them with elements. Because it became very clear to us that clients were the creative force and they were the ones that were going to dictate what was going to happen. It was kind of the same reason that I encouraged everyone at the agency to read a lot of magazines. Now, you can't think of magazines today the way we did. Because in the 70s, 80s, 90s, and early 2000, magazines were vital part of the culture of the country. They were the internet. It's correct. Pre-Internet. My thesis was that art directors of magazines and editors were always six months ahead. They had to be because it took three months to get a magazine out on a month to let it sit on a newsstand. So they had to think six months in advance. So I urged everyone at the agency to read, we had a list of 100 titles that they needed to look through every month. I subscribed to 200 magazines. And I didn't read them all, but I would sit and thumb through them while I was on the phone. So, you know, I would read things like golf, digest, motor trend, automobile, car, and driver. Why did I read those? Well, I'll tell you why. When I met Paul Newman, I actually had something to talk to him about. Paul Newman loved cars. Now, could I talk for days? No. But I had enough to get through an hour. So whatever we read, current events, you know, we read women's magazines like McCalls and Red Book and Vogue and Marie Claire. Why did we look at these? Want to see what fashion looked like. If you want to talk to an actress, you're going to have some insight into look and feel and what people are thinking. It doesn't mean it was always right, but it gave us a firm overview of editorial process by people whose job it was was to predict the future. You're in the business of being able to relate to people and quickly build strong trusted relationships. And also get a sense of where culture is going. You know, we got the account to do all the advertising for Coca-Cola. Because we were really culture mavens. We really had a sense of what the audiences wanted to see. And before we did this, there was this kind of unwritten rule that only buyers could do that. You know, studio executives and network executives. And my thesis was I had a partner named Bill Haver who was head of our television department. He was one of your founding partners, right? Yeah. Bill Haver could read a screenplay, a teleplay, and give as good a notes as any executive at any television company. As a matter of fact, I could probably make an argument. He could probably do it better. He was really good at it. We put together Shogun. As a mini series, everyone said, Bill and I were crazy that we'd lost our minds. Who cares about the far east? And how do you make a TV series about a bunch of Asians and one in Anglo? Well, it was our point of view from everything we were reading that Asia was becoming a very hot commodity in the 70s and 80s. People were really interested in what was going on. The rise of electronics and electronic companies like Sony and Matsushita, Panasonic, National. These were major players in our business developing hardware for all of the software that our clients were creating. And those are the kinds of things we would think about, but moving back to Coca-Cola. We weren't in the ad business, but we had a sense of what people wanted to watch. So I was at a Allen and company conference. And her balance was on the board of Coca-Cola. And of course, the CEO and president of Coke were at the conference. And we were having a coffee out on Herb's porch. And both guys said to me, we're getting hurt by Pepsi-Cola. And bear in mind, in the 80s and 90s, there was a book written called The Cola Wars, where these guys were fighting like cats and dogs for market share. We talked about all this on our Berkshire series. This is, of course, Roberto Guizetta and Danquilla that you were talking with, right? Yeah. So I said to Dan Quillo and Roberto Guizetta, look, I think you guys are making a mistake with your advertising. And they said, why? And I said, well, you're doing six or seven commercials a year. They said, how do you run the same commercial on Seinfeld that you run on daytime and that you run on, you know, late night, I said, they're all different demographics. What are you doing? They said, wow, that's interesting. I said, could you come to Atlanta with some of your people? I said, yeah, if you send a plane for us. Hey, Coca-Cola historically is one of the most sought after advertising accounts in America. I mean, Mechan Ericsson, you know, had this account, had it on lock for decades and decades and decades. They sell a pure commodity product that's differentiated by brand. They pour a ton of money into brand advertising. Yeah, they were running a business that spent five to six hundred million a year on advertising worldwide. So I gathered 10 of our agents and I took them from different demographics and different departments. I had men, I had women, I had music agents, film agents, TV agents. I had a personal appearance agent, I had a book agent and they did send the airplane and we flew to Atlanta and they brought in all 12 of their worldwide geographic division heads. They got them all there for an all day meeting. What are your staff that could you tell them like, hey, we're going to go do an ad pitch to Coca-Cola. Well, I'll tell you what they thought. Most of them thought I'd taken leave of my senses. How could we be in the advertising business? And a couple of them looked at me and said, wow, we can do this. Why can't we do it? But my point of view, 80% of our company thought there was something wrong with me that I probably had. We had food poisoning or something that went to my head because it just didn't seem to equate to them. But to me it did because what do we do? We read material and try to tell a client like Michael Crite and Steven Spielberg, do you make a movie about dinosaurs? Can we recommend that to Dustin Hoffman? Can you make a movie? We think you should make a movie about an autistic guy. Tom Cruise should be your brother. We took the same positions that a buyer took. No one owns creative thought or opinion. Look, you two guys look at something on TV tonight. You have an opinion about it. When you're right more than you're wrong, that opinion is a trusted opinion. And we were right more than we were wrong collectively as a group. So we flew to Atlanta. We sat. We looked at every single commercial they had ever done. We listened to the complaints of the department ads geographically. And I said to them, give us 90 days and we'll be back to you. And I knew it would take us two weeks because I already had the idea that I thought was going to work. But I never liked to over promise and under deliver. I like to under promise and over deliver. So about two weeks later, I called Don Kio. I said, we're coming back to Atlanta. I'm going to pitch your idea. He said, you said you needed three months. I said, well, we kind of accelerated it. We got so excited and we drank a lot of Coca Cola. You're good. We asked him up. So we flew in three weeks to the day after we met the first time and we pitched a simple idea. We said, look, for the same money you're spending. We're going to do 30 to 40 commercials a year. They're all going to be for different demographics. It'll cost you the same as your seven commercials. We're going to do a mascot for you. Polar bears turned out to be the polar bears. Still running 25 years later. We are going to run your commercials like a relay race. So first of the year, we're going to do a hopefulness February. We're going to go into Valentine's Day and love Easter family summer refreshment fall back to school Thanksgiving family again. We're going to run a polar bear. And they said, how do we know that's going to work? And I said, you don't because we didn't. They didn't. We just said, we believe it. Let us try one flight of commercials. And they said, how many do you want to do? I said 40. And they said, you're crazy. But if you want to do 40 for the seven, the budget for seven, you got it. So they asked us, then they called back and backtrack because mechanical been their agency for 40 years. And they said, will you come do what's called a shootout? And I shoot out is where you come in and all the ad agencies pitch to the executives. And I said, we will do a shootout. If Don and Roberto attend the CFO Doug Ivester attends because he is the keeper of the money. You're head of marketing Peter Celia, tens and three or four, your other key executives attend and we'll do it. And they said, okay. And they set the date was set. I'll never forget this for 11 o'clock on a weekday. And I flew our team of five people in the night before we checked out the room we were going to do it in. We rehearsed what we were going to pitch. And we went for a very nice dinner. I bought everybody knew our money clothes. And we got up the next morning. Never forget this. We went to the gym. We had a nice breakfast and we walked in at a quarter to 11 and sat down and we looked the part. One would say it's a show of strength. And at five to 11, the McCann people, there were 35 of them drifted in having just gotten off a six am flight from New York. And I'll tell you they looked like they were all in a blender. They kind of looked like live smoothies. They were wrinkled and ratty and all screwed up and nice people too. But whoever said to them to fly in the morning made a critical error. Anyways, they flipped a coin and they said they won. And we were hopeful that they would say what we thought they would, which is they'd go second. Because we wanted to go first and blow their doors off. And we did they won and they said, we'll go second. And I said, great, we'll go first. And we went in and we presented 35 ideas. And we acted them all out and each one ran 30 seconds. And we did it crisp and clean with music, with expression, with enthusiasm. I started it. A guy who just passed on winning Len Fink and Shelley Hockeran who worked with us, went in and helped us. And Len, I remember I did a commercial about a dog and he barked like a dog. He got on the ground. And we had these guys. And I will never forget I was sitting next to Bill Haber, but next to me was John Duneer from McCann Erickson and then a guy who had been friends with Don Keele for 35 years. And we were drinking buddies. And this guy wrote Donor a note. And I saw it by accident. And it said, we're screwed. And sure enough, we finished. And then they came up. They were so bad that after seven or eight minutes of presentation, they sat down. And awarded the account. And of the 35 commercials we presented, they approved every single one. Wow. And these commercials, am I understanding right that coming into this, you know, you didn't have big name actors wanting to do commercials. You didn't have movie caliber directors doing commercials. But one of your aces in the hole was not only are we going to cope with these great concepts. But we're going to go get our a list CAA talent to do this. And we did. We got a lot of our top directors who were between movies to do the commercials paid them well. They made money. You made money. Coke did great. Everybody was happy. But more importantly, you know, it's funny. Our competitors put out all this press. CAA is going to use their clients to make commercials. House stupid blah blah blah. I'll never forget one of our clients, Dick Donor, who did Superman called me up laughing. He said, I just read this article in variety that we're all stupid for doing these. He said, I just cashed my check. He says, I'm between movies. I couldn't be happy. Or I just want you to know that we thought out of the box. Nobody else did. And when we did the commercials, I said to Roberto, I want you to premiere them like a movie. Invite the press and run them all because 35, 30 second commercials is less than 20 minutes. Any random for the press and the press we got was insane. We got the cover at Time magazine, which was important at the time. We got a love letter in the New York Times. We got unbelievable press except for the advertising journals shocking who said we were robber barons. I'm shocked. We were ruining the business. But here's the factoid that is fascinating. This is prior to people knowing the word or its meaning outsourcing. Mechan Ericsson had 300 human beings working on the Coke account. We had six and we edited everything. We just didn't make them. But we hired a company called Rhythm and Hughes to do the animation. They weren't on our payroll. But they did a great job. Right. Those polar bears cost a lot less than Tom Cruise. Let's put it that way. The polar bear is we did very reasonably and we delivered 35 commercials for the cost of seven one quick side bar that will move on. We sent the bills to the CFO who was a friend of mine at the time. Name Doug Ivester and we sent a bill for a commercial called timeline that we made on an Apple two-week computer in black and white. And it just showed the timeline of Coca-Cola at various times in history. And we sent a bill I think for as I recall for like $35,000 for a 30 second spot. And that was probably more than it actually really cost on that computer. So they sent us a check for three and a half million dollars. And I called up. I said, what is the three and a half million for us as a bonus is no we thought you made a mistake on the invoice. No one's ever done a commercial for us for anything less than three and a half million. So we just we didn't want you to run out of money because we were a little shop. And I said, Doug, I hate to tell you this. I'm not going to cash the check but it was 35 grand for the commercial. He said, I can't believe you did that. That's the kind of stuff we did. So we're talking about this point in history where you would already become this big successful agency. You were already representing these people branching out into things like trying to take on Coke's advertising. Can we hear the entrepreneurial story from you of how CAA came to be in the first place because you really started with nothing like zero. It's actually pretty simple. I'll try to give you the highlights. A group of us. There were probably 15 young agents at William Morris, maybe 20 all in our 20s. And I was the assistant to the president of the time, Bill Haber ran the TV talent department. Ron Meyer was a first class talent agent. Roland was a and Mike Rosenfeld worked TV packaging agents. And basically we noticed a disagreement philosophically with where they were taking the business. And crazy as it sounds, CAA was born out of a bad staff meeting at William Morris where the guy worked for who was head of the television department. His name was Sam Wysport. Announced with great pride and passion that he had signed Ann Miller, which will mean nothing to you two young guys, but she was a 50s song and dance queen and a Broadway star. We said in a staff meeting, we all sat in the back. We weren't allowed to sit at the table because we weren't senior enough. And one of us got up and said, look, Ann Miller is a talented lady. But we should be signing Bob Redford and Paul Newman and Dustin Hoffman and Sean Connery and Sydney Pwattie and we should be signing those people, not Ann Miller. This is William Morris. We've been around since 1898. We're on the wrong track. Well, the older guys went ballistic. You then saw a division at William Morris that never healed. And then they made a cardinal tactical error. The head of the training department that trained all of us was the former roommate of the president Sam Wysport, his name was Phil Welman. And he was a tough ex-Marine drill sergeant and he trained everybody and bottom line, they fired him. And he called us down. He was almost in tears. This was a guy that used to get up on the top of his desk screaming at us at the top of his lungs. This was before people were woke. You know, this was like we were trained the old fashioned way. And we felt, my God, we were embarrassed. It was debilitating to watch this. This guy was destroyed. That was the beginning of the end. We started talking all of us. We narrowed it down to five people that we wanted to be in business together. And we made a decision to leave and set up our own business and do it our way. That's it. No more or no less complicated than that. All right, listeners, for our second sponsor of this episode and the last time this season, it's pitch book, the leading financial data provider for venture capital, private equity and M&A. It's been an awesome season with pitch book. I've probably run, I don't know, a couple thousand queries. Well, they've been the sponsor of the show. We're super grateful to have had their support, not just to sponsor the show and to give listeners access. I think many of you have taken advantage of the free trial they've been offering. But also they've been sending us awesome data to help us prepare for episodes, which anything that it makes it so David and I don't have to spend all hundred hours researching is much appreciated. I think you probably know by now, but pitch book pulls back the curtain and shows the real story behind private companies. I think that's what we do. But I guess is what pitch book does to. It's like acquired but in software. It's like acquired but in software. There you go and more tabular because data tables don't read well on aircrafts, etc. Anyway, our huge thanks to pitch book for everything that they've done for us this season. It's an awesome product. Obviously I use it all the time to learn more. You can visit pitch book dot com slash acquired or click the link in the show notes. To my mind, looking from the outside at you all in the beginning of CA and then everything it would become no doubt. A absolutely essential and probably the primary ingredient was just all of your collectively and you personally just you're like raw ambition. Certainly hadn't lots has been written about that. I'm wondering though too is it also fair to say that your background because most of not all of you came from television was that kind of a secret weapon because packaging was more common in television a and be television was still relatively new imagining most of the old people at WMA and then also in the studio business just weren't. Tune into this new world right. No actually if it's a good question but let me correct something William Morris was the top television packaging agency. And we all knew how to package television is very different than packaging movies because in television the producer is a key element and in movies it's the director and the director actor. And actors are cast and television prior to the 80s when fading movie stars were brought into television but the thing about William Morris is they bifurcated TV and movies at a time when they were starting to come together and that was a thesis that we didn't agree with so that helped us leave. But it was a different business at the time and William Morris wanted to keep them separate and we were asking the head of William Morris picture department and television partner run joint meetings because people could work in both areas and they refused to do it that was another nail in their coffin. So when we started we made a conscious decision to be TV only because by sag rules that pay every Thursday and we started our business on a hundred thousand dollars and we never went in to debt beyond that paid that debt often six months and never carried ten cents a debt ever. And the reason we didn't as our TV clients got paid every Thursday so we took our commission but in 1978 we made a decision that we needed to be in the movie business and the only way we could do that was to dedicate agents to the movie business so we made a decision that I would start the movie business in 79. And the rest of the guys would stay in television but that Mike Rosenfeld who was in the movie division at William Morris with me would start a movie division at C.A. That's a great insight because you could cash flow the business if your customers your clients were getting paid every week but it's pretty hard to run a business when you have no you haven't raised any money if you're waiting one to three years for film projects to come together and then get paid on the back end after gets made. Correct. Can I ask what was it like to get your first big star and what's the story of C.A. sort of actually building a sort of reputable and viable talent roster. So there was a lawyer in century city named Gary handler and we moved into century city very early on and I noticed his name on the placard in the lobby. Did a little homework and discovered that he quietly had a tax practice and he represented every major movie star in the business. So I decided to sign him as a client. You signed the lawyer a tax lawyer. He was going to be my client. So I went up knocked on his door, introduced myself, learned everything that I could about him and then proceeded to become close friends with him. And he delivered Sean Connery to me. Wow amazing. I will never forget talking to Sean 1979. I grew up on bond. I remember a call being said. I didn't have a clue what to say to him. And I was struggling for words. But I should have gotten Academy Award for best actor for that call because I actually sounded like I knew what I was talking about but I didn't. But I learned I learned on the job. I'm sure Sean's not a dumb guy and he'd been in the business forever at that. Why'd he go with you? Like there must have been some rational reason for doing that. He went with us for only one reason. Gary handler told them we were young, aggressive, hot and had good taste. And Gary handler proved to be right. We did an amazing job for Connery. He had come off three really low grossing not so good movies. And we turned his career upside down. But after him Dustin Hoffman signed with us. And just one after the other I will tell you a funny story. There was a literary agency top literary agency name Adams Ray and Rosenberg. They had about 400 of the greatest writers in television. Few feature writers but mostly TV. And Rick Ray was best friends with Mike Rosenfeld, one of our partners. And Mike was desperate to merge with them and I said I'm happy to entertain it. So we had this meeting with the three Adams Ray Rosenberg partners. Sam Adams Rick Ray and I think his name was Lee Rosenberg. And the five of us and we sat in a little conference room in our crummy little Beverly Hills office. Which by the way was rated by SAG because the people that we leased it from were running a house of ill repute out of it. And the screen actor's guild was going to yank our license little did we know. So we got out of that mess and we were sitting in the conference room. And I will never forget this Rosenberg said, you know, we're going to have the best television agency in history. Because we're never going to sign Robert Redford or Dustin Hoffman or any of these people. And this was before we signed Sean Connery. And Ron Meyer and I looked at each other and Mike Rosenfeld we looked at them and I said, well, that's not true. We're going to sign all those people. Yeah. And they said, you're nuts. You're not going to sign any of them. So I said, well, we plan on signing every single one of them. Because we want them a monopoly on talent to give us leverage to turn the paradigm around against the distributors. And they said, that'll never happen. I said, thank you meetings over. We're never going to merge. And about six months later we signed Connery and then every week we signed a famous movie star after that. And didn't you take out an ad in variety announcing it? Yeah. Thanks for reminding me Ben. We took out these giant red ads in variety every Friday and the Hollywood reporter on Monday. And it said, CAA is pleased to announce the worldwide representation of Robert Redford, Sean Connery, Dustin Hoffman, Sydney, Bwatt, and we just went on and on. And every time we ran an ad, I ripped one out of the variety folded up and mailed it to Adam's Ray and Rosenberg. And it got to be a stale joke after a couple of years. Well, this feels like a huge principle of yours and CAA, which was really strength leads to strength. It seems like you were always looking around and identifying what's the new way that we've become more valuable. And how do we leverage that into the next thing? Can you talk about that in some of the other ways that you just by sheer force of will or by counter position against other agencies, how you were able to be different than everyone else around you and win? Well, we were different for one solid basic reason, which is that we basically worked as a team. So if the two of you were clients of ours, you didn't have one agent. What we resented at William Morris is that one agent coveted one client and you couldn't go anywhere with that because human nature is such that eventually there's a relationship problem. It just is the longer you're around someone, the more there's a relationship problem. So we went ahead and put teams on people. We had some clients that burned through three, four or five agents, but they never left us. As a matter of fact, in a 25 year period, I think we lost under five or six clients. We never lost clients because we had teams of people on them that they could relate to. No actor ever had a literary agent. We'd have a literary agent on an actor. Well, why would we do that? Well, it would be stupid not to. Why wouldn't we? What does an actor do with all they do is read scripts to see what they want to do? What is a literary agent do? All they do is read scripts to see what actors roles are available. So we were in a state of shock that actors didn't have literary agents when we looked into it. We were saying, wow, are we stupid? Or is everyone else stupid? I mean, obviously you all were young and aggressive and willing to think differently. But why was the competition so weak? I don't think they were weak. I think they were very comfortable in the old shoes. They liked the one-on-one. They coveted representation. Their meal ticket was their individual clients. At CA, your meal ticket was how well the whole company did. If the company didn't do well as a group, every individual suffered. Who owned these competitors? Like you said, when CAA did well, y'all did well. It was a partnership. How were economic structures at other agencies? They just made what they called market deals. So if you wanted to hire an agent, you try to pay them whatever they asked that was a market deal. And we did just the opposite. We paid very small front money and said at the end of the year, if we do great, we're going to overpay you. We're going to pay you more than you can get elsewhere. We had an agent who was co-head of our movie department get offered a job by Jeff Bergett, ICM, who was a very good agent. And Jeff invited him to a meeting and the guy came in to see me. And he said, what should I do? I'm just going to turn it down. I said, absolutely not. Go take the meeting. Now I had two things in my head when I told him that. One, I wanted to know what they were going to be doing and what their thought process was going forward. And I knew that he'd get that out of them. But two, I knew they'd under offer him. And I wanted him to see what he could get elsewhere. I didn't tell that to him. So he went and took the meeting and they were having a jolly time until it came to comp. And I had instructed our guy to ask for what he'd get paid. So the answer came, I'm going to pay you more than I'm making. So the question is, what are you making? And so Jeff said, I'm going to pay it like, you know, a million a year or something. And the guy who took the meeting looked at him and said, that's very generous. But I'd have to be taking a 75% haircut to do that. And that worked for me at every level. One, it was good for my guy to hear what he was worth at a competitor. Two, I love the competitor knowing that a guy way beneath his station is making four times what he's making. And three, it created a loyalty factor for me. And why were you able to just make so much at CAA and frankly just overpay to keep people there? Like, what was it structurally about CAA where you were able to just run this incredible cash flowing business? Well, first of all, we were accused constantly of taking cut commissions. And finally, people realized we couldn't be paying what we're paying to people if we were cutting commissions. Secondly, we had a monopoly on the high end TV and film business. So we were minting money and we just paid it out to our executives period. And as you're talking about all this, of course a team oriented approach makes more sense than this individual lone wolf thing. But there are tradeoffs involved in every decision and the tradeoff involved in showing up to every meeting with five people and having a network of people surrounding every client is that you need just way more communication and way more structure and way more systems. What are some of the examples of the things that you put in place to actually make this work? Because I'm imagining you probably talked to like 50 people a day for 15 years. Well, you're off by about a factor of five. So an average agent in our place would run 200 to 250 phone calls today. Some were 15 or 20 seconds. So you got to bifurcate this into pre internet and post internet. So pre mail, we had a system that we developed that was fail safe. One, return all internal clients. First two, you don't go home at night without returning every call and three. We had a what's called a buck slip system. Which was everyone had buck slips, which were these pieces of kind of heavy paper that had your name on it and you'd write a note to an associate. And I would say Ben spoke to Scorsese recommended good fellas call me if questions that would get sent from my office to that person's office to your office in real time. It was our form of email. Then he had to answer me that he had read it. So he'd strike it out and answer it. Send it right back to me. So when Scorsese called him, which he did, he'd say fantastic. Mark Marty, I heard that Michael talked about good fellows couldn't be happier about the decision. And then Marty goes, wow, these guys are on their business. Is there an archive of all these somewhere? No, they're all trashed. Oddly, we locked up our trash every night just so you know, because we found someone going through our trash. And that was really scared me to death if you want to know the truth. This add some color as to why the mail room was so important when people say started in the mail room at CAA, you were an essential part of the fabric of the system. Well, the mail room at our place was a fast track to a career. If you could make it through the mail room and the way we handed down clients. So if you guys were agents with us. And if we signed a giant star, we brought you in as part of the team. And if you were good, you made your own relationship. Well, that's the benefit of the team approach to rate is you could go out and sign. I don't know XYZ. Let's say Scorsese, but then you could bring Ben and me in. And then that probably let you go sign a lot more Scorsese, right? Well, David, time was our enemy. So I needed a way to loosen myself up. So how would I do that? Well, I'd have people behind me working with clients that I signed. So we signed Hoffman, Pacino, and D'Anero, which had never been done in history. And they're known as leading men at the time, right? They were sort of competing leading men. Well, my thesis was they weren't competing if they were with us. I said to Dustin Hoffman, help me get D'Anero. He said, why? I said, because wouldn't your rather I told you what he's doing. Then me not knowing. He said, wow, that makes sense. So we got D'Anero, you know? And then when I got both of them, I said to both of them, I want to sign out. And of course they looked at me. What are you crazy? You got the tool of us. And I said, no, I'm not. You can work with each other. And on top of it, we'll all know everything. And you're not really competing. Because at the end of the day, the director makes the decision. The agent doesn't make a decision. But we packaged D'Anero and Puccino with Michael Mann called it heat. Yeah. You build all this up and then you make the pie bigger for everybody by packaging. Well, that would have never happened. It would have never happened. And on touchables, they would have never gotten costner and connery in the same and Andy Garcia in the same movie. They were all clients of ours. And we wanted them to work together. We were a very family oriented business. We wanted our clients to work together. And it worked for us economically and it worked for them. You took an aspect that people thought was a zero sum game. And you made it a positive sum game. Our job was to create product for our clients period. We had people dedicated that had no clients that were only involved in creating product. That was their job. No agency did that. We also had 15 readers on staff. Michael, can you take us toward the last few years of your time at CAA? We talked about this period where you're signing your first clients. You went on to represent 45 of the top 50 in Hollywood. Talked about your foray and advertising with Coca-Cola. There's two little pieces of this chapter remaining. One is you kind of getting into investment banking. And maybe I should pull kind of there. You definitely turn CAA into an investment bank. And I think you were the top grossing investment banker in the world the year that you did your first deal. And then the second I want to talk about when you explored universal and potentially becoming a studio head yourself. So the first was a natural evolution of what we were doing the studios were in trouble financially. And it became very clear to me that they were going to need financing and traditional financing wasn't going to work. Universal was under siege. People were taking stock positions corporate raiders out of New York. Columbia was in trouble. MGM was in trouble. Warners believe they're not was in trouble. So I was very friendly with a brilliant guy named Herbert Allen. And her was an investment banker taught me a lot about the business we used to spend a ton of time together. And I got this idea that we could bring financing to save our marketplace because frankly if any of those companies went out of business so did we. I couldn't afford for universal or Columbia MGM or Warners to shut down or to reduce the scope of their budgets. CAA couldn't put up a hundred million dollar budget for a movie you need to the studio to finance it was worse than that and we weren't allowed to produce. I had a white paper written by the most prominent entertainment lawyer in the business at the time Frank Rothman who's passed away great guy. And I wrote a 10 page opinion that we couldn't produce. Because I wanted to go into that business with our directors and create a director's company. But we didn't want to take on the guilds plus the writer's guild director's guild were run by C.A. clients. Right, you'd be pissing off here clients. And we were settling strikes Bill Haberny settled one of the writer's strikes in the 80s. We couldn't afford that. Back to the studios being a financial trouble. Literally you have the reverse problem of the Wasserman back in the day of you now have the power on the cell side. You need fragmented buyers. I needed people that are buyers with money period. So I started building relationships in Japan. First relationship I built was with a division of Matsusha electric and I hoped that I would be good enough in the meeting that they division would recommend to Matsusha that they meet with me. But before I got to that I was representing people that were involved with Sony. And I got involved in the sale of CBS records to Sony and built a relationship with Noria Oga who was the number two at Sony who ultimately introduced me to achao marita. And I became maritas and Oga's consultant. We consulted on the sale of CBS records. And then Mr. Marita came to see me and wanted to buy. Get into owning content because he was upset that Betamax which was a superior technology to VHS was losing to VHS. He won the owner studio. So I started calling different entities that I thought made sense and brought Marita into meetings. The first entity I called was Kirk Kirkorian who owned MGM. And I had a meeting at my home one morning late morning pre lunch with Achao marita. Kirk Kirkorian and myself to discuss selling MGM to Sony. And Mr. Marita was a very clever guy. We were a great team. He came with a box. And he stuck it in the middle of the table. And Kirk couldn't get his eye off that box. And halfway into the meeting, Marita opened the box and he pulled it out. And it was a tiny little video camera which was a prototype for a video tape recorder camera. And Kirk was blown away by the fact that when Marita would take video of us in the room with natural light and play it back through our TV set. Kirk went nuts. He equivalent of Steve Jobs putting an iPhone on the table in 2005. So Marita just kept talking and then Kirk said how do you want to pay for this. And Marita said you know we would finance it through Sony and we have the cash. And then as the meeting ended, I could see that Kirk was lusting after this camera. Marita packed it up, put it under his arm and left power move. And that was how we ended the meeting. Subsequently, I couldn't get traction with Kirk. So herb and I started working on Columbia which Coca-Cola owned. And the rest is history. We worked the deal. And through a long process. Arrange to sell Columbia and TriStar to Sony. And that became Sony Pictures Entertainment. Yes. And herb and I did that deal with no one else just the two of us. And it became a template that he and I then did over and over again. What do the economics look like when you arrange a deal of that magnitude? Do you agree up front to a fee? Do you say hey, let's figure it out later? Do you agree to a fixed price? So I did something in those days that cannot be done today. And let's bear in mind guys, this is 35 years ago. I worked my tail off to understand Japanese culture. And I read everything that was published. I studied the language I studied the culture. I studied the art. I studied how they treated people. I read everything under the sun that wasn't tacked down. There was a Japanese American bookstore in rock center. I was their biggest customer. I love it. And I took a shot at something which paid off for me in multiples. So all of the banks excluding Allen company and me asked for a fee letter up front. We asked for nothing. We said, look, if we do a good job, you can pay us an obscene sum of money. If we do a bad job, pay us our expenses and we're all good. You didn't specify what the obscene sum of money was. Now, I remember in a meeting at Matsushita in Hawaii, they said, what feed you want? I said, if I'm not successful, I just want my expenses. If I'm successful, I want you to load up a brinkstruck and back it up to my house. They got the picture by saying that we're saying, look, we want to exceed all fees ever paid. But we never put a number on the table. Do you know I never once had a discussion with any of them about money and I was paid for handsomely by everybody. So, okay, we got to know what is the brinkstruck end up looking like for the Sony deal and then for later the Matsushita deal. I don't remember exactly what I got paid on the Sony deal, but I got paid twice because I got paid for the record deal and then for the studio deal. On the Matsushita deal, they gave me $120 million to pass out to all of the consultants. And I passed out money to everybody generously because we had Washington lobbyists, we had PR people at Allen & Company. And this is to buy Universal. Yeah, was to buy MCA Universal, which by the way I tried to buy for Sony, but Lou turned me down. Said he'd never sell to the Japanese. But when his stock went from 65 to 20, he changed his tune. And so Matsushita is the parent company of Panasonic. Is that right? The brand that Americans would know. And they ended up owning Universal for was it 10 years before it sold to Seagrams, then VVND, then NBC? They had a very bad experience with Universal. So when I brought the CEO of Matsushita to the Universal lot after the deal was consummated, I had had lunch with Lou the day before. And I said to him, I said, Lou, you are the greatest executive in our business. And I said to you, I want you to sell this company. They're paying me to consult. And I want you to feel free to use me because I understand their mentality and their culture. And I said, with all due respect, you don't. And I said, I'm here for you. And a very apocryphal thing happened when I brought these guys to the gate. I dropped them off. They shook their hands and turned his back on me and didn't invite me in. And that was the beginning of the end for him because he didn't understand them. And they couldn't communicate with him. He didn't understand how to deal with them. And four or five years afterwards, they called up and his contract was up. And he and Sid ran Universal like they didn't have owners. But they did. And they're smart guys, but they couldn't make the transition. And they didn't make the transition. Well, clearly, having read about him and even going back to the Sony courtship, clearly, Lewin said didn't want to be owned. They didn't want to be owned. They took the deal out of fear of losing the company. The value of the Universal real estate was probably 18 bucks a share and their stock was going down to 20. So it was a no brainer, a no brainer for private equity firm. And when these situations come up, it just got to be hard to go from entrepreneur, mogul, self-employed, king of the world to being an employee. It just has to be an unbelievably hard transition. I can't imagine how they did it. I was always shocked that they were going to do it, but I knew they didn't have any choice. But Matsushita didn't want to ruffle lose feathers because one thing the Japanese companies are always ultra sensitive to is politics. And Lew was still very connected politically. One of the guys on the MCA board was a guy named Bob Strauss who was head of the Democratic National Committee. They didn't want to mess around with this so they called her and I up said, we'd like to sell the company. That was all they said. And the reason was they didn't want to try to negotiate with Lew. They just put up the company for sale and Herb and I were working with Edgar Brauffman, frankly, on trying to take over Warner Brothers. This was before the Warner Brothers and Ty Make merger. This was before. Got it. And we had quietly accumulated 14% of the stock through Allen and company for the Brauffman family. And I met with Steve Ross three weeks before he passed away. He was one of the greatest guys in history of the business. And he gave me three hours of his time where I came to him and said that Seagurm would put up 6 billion of cash with a standstill. And Steve assigned the deal to his deal maker. And then as he got sicker and passed away and all fell apart. Well, Michael, as we come up toward the end of your tenure here at CAA, can you talk us through the generational transfer and the sale of the business to the next generation, the young Turks and then your time at Disney after that. How did that all come to be? So I was pretty much hitting the end of my useful life as an agent. I was about to turn 50. I had been working since I'm 16 in the entertainment business. First for Lew, right at Universal. It was my first job tour guide at Universal Studios. And I just didn't want to be in service anymore. I wanted to try to run a public company for five years and then frankly thought about going into public service. Not private service. And I was very friendly with Michael Eisner. He was one of my closest friends. He had a heart attack and a quadruple bypass. Two of the board members started talking to me. And I spent a year talking to them on and off on and off. And then Ron Meyer blew up. He just lost it. He just couldn't be in service anymore. He was over 50. He had hit a point where he just couldn't talk to clients. I will never forget this. He had a conversation on a Sunday that probably lasted six or seven hours with one of his clients. It was so vester Stallone. And he finished the conversation and tried to have a rest of his Sunday and slide called back. Want to start the conversation all over again. And that's a little unusual but not completely unusual. That's within the realms of reality for an agent. Yeah. And the entertainment business it is. Yeah. Look actors or gypsies. They have no one to talk to except their agent. So Ron just couldn't deal. And also I had thought about going to MCA and at the very last minute they tried to change the deal. And it became clear to me that Edgar wasn't in charge. And just too many signs as a deal maker said to me this isn't going to work. Now that was before Ron decided to quit. So I figured I'd stick it out another year. And then afterwards Ron had already made up his mind to leave. And I should have realized he had two feet out the door. When he left it just made me take the Disney conversation more seriously. The board members that were friendly with me, one of the board members owned a boat with me. We were really tight. And he said we want you to come over and create the culture here that you had at CA. And Michael was sick. He wasn't supposed to work every day. And I always like to say I am the greatest cure for heart disease. Because when I came over as working seven days a week, 14 hours a day. And he was supposed to work two days a week. And he started working a little harder and harder. And his doctor was telling him not to. And it just was very clear from the beginning. It just it wasn't going to be a team effort. And whatever reason I threatened him, which shouldn't have, because I didn't want his job. I had a game plan for myself. I didn't want to die at Disney. I didn't want to die at CA. I wanted to try different things with my life. Like what I'm doing now. I love what I'm doing now. And all of the training I had as an agent has led me to a career in the digital world that's fantastic. Because what am I doing? I'm packaging. I'm putting young founders together with money and distribution. And nothing different than I did for 35 years. It's all the same. Except I'm doing it with smarter people. And I really enjoy it. But when I got to Disney, it was very clear there was a head-to-head conflict. And Michael undercut me every chance he could. And after a couple of years, I just didn't want to deal with it anymore. And it was one of those things. All right, listeners, for our final sponsor of the whole season and the whole year. Thank you so much to NordVPN. You know about them from all season. You know, Tom's crazy cool backstory. You know the story of how four friends got together in Lithuania and created this massive business with thousand plus employees, 15 million people using NordVPN. It's just a great bootstrapped founder story. You've probably seen them because they do an unbelievable amount of sponsorships of YouTube channels. I recently started using the product when I was in Lisbon. And I've told the story in a couple episodes, but it was just awesome having a really reliable great UX VPN to use. So if you're looking for a VPN, look no further than from your fellow acquired community member, Tom Oakman. And the whole Nord company, you can visit slash acquired or check out the link in the show notes. If the universal job had worked out, if you had gone to universal, do you think things would have played out differently? I mean, universal is a very different company than Disney, much more pure play focused on content at the time than Disney was. Would that have been better or different? You know, David, I'm going to tell you two things that both conflict with each other because you asked a really smart question. Part of me thinks that I would have done an amazing job at building that business because when I went to Disney, I put together seven initiatives that I wrote about in the book that would have made Disney a fortune starting with buying Yahoo, buying CBS records for $2 billion, which is worth 10 times 20 times that right now, buying a publishing company instead of throwing money at a crappy publishing company that they had. I had a chance to buy from universal penguin, putt them, which is now the biggest publishing company in the world. I would have done that at MCA. Those other part of me said I would have failed at MCA too because the Bronwyn family would have never given me a free reign. And frankly, I'm not a very good employee. You and Lou Wasserman both. Yeah, I mean, I shared that with Lou. My critique of Lou goes for me. I'm a terrible employee. I like to swing for the fence and I like to have autonomy and I don't like to answer to anybody. And I was too thickheaded to see that clearly and only saw it in retrospect. But I did the same thing Lou did. And I should have been more self-actualized to understand that I'm not a follower. I'm just not good at it. And I have no problem admitting that now. But you know, hindsight is 2020 vision. And it's always easy to be a Monday morning quarterback in the height of transitioning from CA to Disney. I actually thought I made the right decision. I was going to a place where the board solicited me. I'd had a years worth of conversations. My best friend running it who had a heart attack. To me, it was a no-brainer. Five years there. Then I go into public service. I actually was on the council of foreign relations and was really interested in working at the State Department in some way, shape or form. And I had a whole game plan. But you know, the best plans of mice and men. And reflecting back on that, having one of the world's best deal makers both in Hollywood and then proven in the corporate environment. It seems like a natural fit for the State Department. I felt really good about going into government service. I really did. And whether it was a State Department or something else, I would have felt really strong about doing that. But look, I made a game plan for myself just like I used to make for my clients. And I made a mistake. And I didn't take into consideration certain things that I should have. But at the end of the day, I worked out fine. I made a good settlement at Disney. Made me comfortable. I took some time off. Then went right back to work. And a guy named Mark Andreessen and his partner Ben Horowitz kind of saved my skin. They asked me to be on their board in 99. They gave me a road map at Loud Cloud, right? Yes, at Loud Cloud. They gave me a road map to a new career. And they're two of my favorite human beings on the planet. They're smart as hell. They rival Criton and intellect. They are loyal. They are smart. They are wise. And they are true, true friends. And they beat me up pretty good, which is hard to do. And they did it brilliantly and set a path for me that changed my life yet again. I had a third career. So you want to talk about luckiest guy on the planet. You're talking to him. If you would ask me in 97, if I was a lucky guy, I would tell you I was pretty stupid. But by 99, these two guys came to the rescue and showed me another way to use my skill set, which I do every day now. And weirdly, it's how I got to you guys. You got to me through mutuality of interest in the world of the internet. Can we ask you what playbook from CAA, you learned that you brought to technology? What are some things that you're doing the same or lessons you learned? You know, it's funny. I had this conversation with a founder yesterday, a young founder that I'm investing in. I do not do one thing different today than I did 30 years ago. Not one thing. I talk to guys your age that are the talent. And I put them together with financing. So they're the buyer. And then I help them market, monetize and strategize their product. It's the same thing I did. So if Dustin Hoffman says to me, I've got this idea. I want to play a woman in a dress who sees life as a man through a woman's eyes. And he's the motor. He's the talent. It's my job to surround him with more talent, get him money, help him market, strategize how to do it. And then monetize it so he makes some money doing it. I'm not doing anything different today. It's just the companies come out public, but they don't come out on film. No different. None. Zero. After you left CAA, the era was over and ended up getting bought by private equity, the agency business, at least to our eyes from the outside. It has been remade with WME and R.A. Manual and Patrick Whitesell. If you had stayed at CAA, what would you have done there? What could have made CAA enduring franchise that became a gigantic force rather than sort of apexing as you exited? So it's fun to add dinner with Ari a couple of weeks ago. He was a trainee at the agency and one of the best we ever had. And I think he's done a fantastic job at building his business and diversifying it. I spent a lot of time, which very few people know looking into how I could diversify CAA. Could I run it public? Could I sell it to private equity? Could I buy an ad agency? And I looked at buying J. Walter Thompson. I looked at bringing in private equity. And at the end of the day, I didn't know how to divide it up amongst the plumber. I couldn't figure out how to get it transitioned to a bigger entity. And Ari said, well, yeah, Michael, you could have bought an ad agency and blown the company up. But I said, I said, Ari, this was 30 years ago. Economics were different. Public entities were different. Private equity was different. It just wasn't like it is today. And I couldn't figure out I keep my core group and compensate them all. And I decided it was better to make a clean break and try to do it on my own in a different field. So how could it have been? Yeah, I could have bought J. Walter Thompson. I would have gone into debt. I wouldn't have known how to give options in what? To so many people at the agency, because how do you tell a group that's all for one, one for all, we're splitting all the proceeds. And then go through what all these companies go through is how do you give options out to everybody? Right. Because it was you and your founding partners primarily that owned 90 plus percent of CIA. No, we owned 100 percent. Okay. But there was no way to make everybody happy. And all I could see, frankly, was the agency disintegrating. And I like to think I made the right decision because unlike the decision, Lou made where MCA disintegrated. C.A. is still going strong today. They've done a great job in the core agency business. They didn't expand it beyond that. But that's okay. That's their prerogative. But I think the guys have done a pretty good job. It's not what I would have done, but it doesn't matter. It's not my company. But I'm still take pride that 45 years later, still in business. Good for them. I can't think of any other companies we've covered on this show in the 200 plus that you really were a true family business. I mean, it was a partnership. It was an LLC. Believe me, if I could have split up the business and made it bigger, I would have done it. Ari said, well, you could have been the biggest investment banker, as biggest gold months, actually. And I reminded him I couldn't have been because I'd have to compete with them and be there in a fee driven business. And that was the business I was looking to get out of. And by the way, at that moment, I'll give you the kicker, which I've never said to anybody. The thought of being in the client service business to big corporate clients was boy, that's sourd my stomach because I had had enough of service. One thing about going to Disney that I will say was positive, man, it's easier to be a buyer. Because you just everyone's calling you. It's easier to be a buyer. Yeah. You created a lot of value and captured a lot of value in other scenarios and at other points of CAA's life, you created a lot of value at the end and made a pretty sweet heart deal for the next generation that you sold the firm to. And at least my research found that you sold all of CAA to the next generation for 200 million, which of course they didn't have in cash. And they were able to pay you with the profits over the next, I know, five or so years on an interest-free loan that you effectively made them. And keep in mind, this is the business that has a enduring revenue stream of Jurassic Park and all these other franchises that have recurring revenue associated with it. I only cared about the business staying alive and I felt that if I didn't do that, 20 people would peel off and do their own business. And I wanted the franchise to stay alive. Frankly, I didn't care if I got paid immediately or five years down the road. It made no difference to me. It wasn't about that for me. I was very lucky I made quite a bit of money as an agent. It wasn't a driving force for me. And I knew I had the Disney thing lined up because that discussion contrary to what people realize had been going on for a year. It wasn't fresh. So I knew I had that and I was going to get paid handsomely to go there because they had outlined a deal to me. Before Frank Wells died, he tried to get me to come over. I was closer to Frank Wells than Michael Eisner was. Oh wow. Frank Wells was part of a trifecta at Warner's. It was Frank Wells, John Callian, Ted Ashley. So Wells and Eisner. Wells wanted me to come and be the third part of the trifecta because that worked for him for 20 years. So I knew what I was getting into and I knew money wasn't going to be a problem. Well, Michael, that's it for our storytelling and our analysis sections. Thank you so much for being here with us today. My pleasure. It was really great. I appreciate the time. I appreciate your homework and I appreciate just being a part of what you're doing. I like what you're doing. I'm glad to be a part of it. Thank you, Michael. Thank you. I'll be shortly sending David a contract with my fee structure. The Brink's track is on read. All right, guys. Take care of yourselves. All right, Michael. Thank you so much. Bye bye. Oh, so fun. Listeners, thank you for joining us for the whole season. But, my gosh, what a privilege to have Michael O'Bitts on the show. I wish we could have made this like a five hour episode. What does it we got to give Michael back? For sure. We have to. We also have to do some kind of like acquired bingo where there's an Allen and company conference square. And we figure out how many episodes that's come up on. All right. Here's the thing though. When are we going to do a live show at Sun Valley? That does feel like that's the cake topper. I think it looks make it happen in 2022. All right. New goal. All right. Allen and company, if you're listening, let's make it happen. Listeners, we want to wish you a happy holidays. We want to say thank you for being with us this season. Thanks to the close to 100,000 who joined this year, or maybe over 100,000 of you who joined this year. Thanks to all the new folks who signed up for the LP feed. LP's, of course, we love our LPs. They make the show possible. I'm saying this before the Zoom call, but I'm sure we've had a great LP Zoom call for everyone who could join before we left for the holidays. And we'll be dropping some more fun exclusive LP only content in the future. For now, if you want to check out all 50 plus LP episodes that we've done, that back catalog is public. So go check it out search acquired LP show in any podcast player. You can join the Slack at slash slack. You can get your dream job at slash jobs. David, there's so many slashes. You were like the creative artist agency of tech podcast. Start doing some packaging. Well, Michael would say we'd probably be stepping on his territory, but package some startups in the acquired community. It's happened. It happens in the acquired slack all the time. It totally has happened. People have met co-founders in the slack. I know people have raised money in the slack too. 100%. It's pretty cool. With that listeners, thank you. Thanks to Pilot, pitch book and NordVPN. We'll see you next year. We will see you next year. Who got the truth? Is it you? Is it you? Who got the truth now? Who got the truth now?