🔑 Key Takeaways
- Choose a compatible, complementary founding team and keep the focus on solving customer problems. Find a market where you can generate revenue and prioritize building strong personal relationships with clients and interesting colleagues.
- Believe in your work and create urgency to achieve your goals. Push your creativity and connect with the right people to turn your imagination into reality.
- The old studio system limited creative talent, but breaking free can lead to incredible success. Loyalty and support from agents can help overcome writer's block and underpaid talent can evolve over time.
- Lew Wasserman revolutionized the movie business by introducing the gross proceeds deal, fighting for the artists to get a fair share, and later switching sides to create better economics for the studios.
- Michael Ovitz's understanding of the importance of packaging elements together and staying ahead of cultural trends led to CAA's success, demonstrating that agents can have a significant impact on shaping the entertainment industry.
- Pitching creative and efficient ideas can lead to successful partnerships and set new standards in the client-agency relationship, as seen with Michael Ovitz's work with Coca-Cola.
- By presenting multiple creative ideas, using Hollywood connections and outsourcing quality work at a reasonable cost, Michael and his team stood out from the competition and won the Coca-Cola account, proving that thinking outside the box and taking risks pays off.
- Trusting your instincts, taking calculated risks, and having a clear vision can lead to business success regardless of the competition.
- CAA leveraged their image and signed major stars to break into the movie business, while also providing clients with a team of agents for maximum support.
- CAA's team approach to client management, incentivizing success, and efficient communication strategies through technology and internal protocols contributed to their success as a top talent agency.
- Collaboration and a team-oriented approach can turn a zero-sum game into a positive-sum game, reaping benefits for both the company and clients. Dedication to clients is crucial to business success.
- Taking the time to understand a client's culture and building strong relationships can lead to successful business deals. Focusing on delivering quality work and leaving payment negotiations until later can also lead to profitable outcomes.
- Giving up ownership and becoming an employee can be difficult. Fear of losing the company or strained relationships can be the reasons behind selling the company. Health issues or burnout can also lead to conversations of generational transfer or leaving the industry.
- Take time to know yourself, recognize your strengths and weaknesses, and be ready to explore new opportunities. Having genuine friends can also help you succeed in life.
- Michael's decision to start his own business was based on a desire to pursue a different path than his previous employer, which allowed him to create and capture value in new ways.
- Prioritizing the longevity of a business and its employees can lead to successful negotiations and prevent entrepreneurial splintering. Financial gain shouldn't always be the main focus.
📝 Podcast Summary
Building a Strong Foundation for Startup Success
Having a strong founding team that works well together and has values aligned is crucial for maximizing the chance of having a successful business. It is critical for startups to remain focused on solving a real hair-on-fire problem for their customer base, as anything that is not in service of solving that problem is time wasted. Startups should pick a market where they can build a company that can make money. Michael Ovitz's relationship with Michael Crichton highlights the importance of fostering close personal relationships with clients and having smart and interesting people around you.
Generating Extraordinary Work by Pushing Creativity
Agent Michael strongly believes that pushing creative people leads to extraordinary work. He helped his friend Michael Crichton overcome writer's block and ignite a spark of creativity. Their discussion on prehistoric animals in an amusement park inspired Michael to write a book draft. Michael's belief in the brilliance of the book led him to connect with Steven Spielberg for the movie rights. He created a sense of urgency and Steven Spielberg agreed to read the book. It was highly unusual to begin pre-production without a script, distributor, or financing. Steven agreed to direct the movie subject to budget, Kathy Kennedy helped with the rough budget, and Michael subsequently wrote the script.
How Jurassic Park Broke Free from the Old Hollywood Studio System
Jurassic Park, which grossed over $1 billion, was made possible due to the team's ability to break free from the old studio system. Under this system, all creative talent was under contract with the studio, making it almost impossible for them to work on projects outside the system. Michael Ovitz, representing author Michael Crichton, spent years coaxing him to come up with his next big idea, even when he was experiencing writer's block. The agency model required agents to be fiercely loyal to their clients, and Ovitz's role was to back Crichton up and stimulate him. The old Hollywood system paid actors, directors, and writers nominal sums, which seems unthinkable today.
Lew Wasserman - The Man Who Changed The Movie Business
Lew Wasserman was the first to introduce the idea of gross proceeds deal, changing the entire fabric of the movie business. He negotiated hard and tough on the studio's side, but was sympathetic to the talent, giving participations out. MCA gained momentum in the '80s and early '90s since they didn't have a lot of choice. Agency CAA represents 45 of the top 50 grossing directors and made top directors like Mike Nichols make $5 million. Wasserman changed the movie business by fighting for the artists to get more of the upside, but then turned and stopped being an agent, buying pre-1948 Paramount library for Universal and making a decision that it was better economics on the other side of the deal.
The Success of CAA's Business Model
Michael Ovitz and his company, CAA, created a successful business model by packaging elements like script, director, and stars together and selling them as a complete package to studios. By doing so, they were able to control all the elements and dictate the terms of the negotiations. They never sold any material on its own and always maintained complete control over their clients' destiny. Ovitz's business insight came from an understanding that clients were the creative force and by reading a lot of magazines, he was able to stay ahead of the curve and predict cultural trends. His company's success eventually led to the idea that agents can do more than just represent talent, they can also become cultural mavens and help shape the course of entertainment.
How Michael Ovitz revolutionized the client-agency relationship with Coca-Cola
Michael Ovitz and his team pitched an idea of producing 30-40 commercials for Coca-Cola every year for the same budget as their 6-7 commercials. The commercials would target different demographics and run in a relay race-like manner throughout the year, focusing on various themes such as family, refreshment, holidays, etc. Coca-Cola was initially hesitant to accept the idea but allowed them to try one flight of commercials. The commercials' success led to Ovitz's agency, Creative Artists Agency, producing Coca-Cola's commercials for years and establishing a new standard for creative agency-client relationships, showcasing how constructive pitches can lead to successful collaborations.
Michael's Innovative Approach to Winning Coca-Cola Account
Michael and his team succeeded in winning the Coca-Cola account with their innovative approach. They presented 35 creative ideas and acted them all out, winning the hearts of the client. They also used their Hollywood connections to get A-list talent to direct the commercials. They delivered all 35 commercials for the price of just seven, and their polar bear animations cost a lot less than celebrity endorsements. Their strategy of outsourcing and delivering quality work at a reasonable cost set them apart from the competition. Overall, by thinking outside the box and taking risks, Michael and his team achieved great success and received widespread recognition for their innovative approach.
How a Group of Young Agents from William Morris Built a Successful Talent Agency
The talent agency Creative Artists Agency (CAA) was started by a group of young agents from William Morris who noticed a philosophical disagreement with where the business was headed. They decided to set up their own business and do it their way, starting out with a conscious decision to focus on television packaging. They were able to succeed with their raw ambition and background in television, even though William Morris was the top television packaging agency at the time. They never went into debt beyond their initial $100,000 investment and paid it off in six months. CAA's success proves that following your instincts, taking risks, and having a clear vision for your business can lead to success.
CAA's Success Story in Hollywood
To break into the movie business, CAA needed to dedicate agents to the movie business. They cash-flowed their TV commission business by taking advantage of the regular payments their TV clients received on Thursdays. However, without the ability to cash-flow their new movie business, they needed to sign major stars to monetize the business. They leveraged on their young, aggressive, hot, and good taste image, which was promoted by a tax lawyer named Gary Hendler who delivered Sean Connery to them. They turned Connery's career upside down, and subsequently signed Dustin Hoffman, Robert Redford, and other major stars, announcing it through an ad in Variety. CAA also succeeded because they worked as a team that provided clients with more than one agent.
CAA's Successful Approach to Client Relationships
At William Morris, one agent was assigned to one client which often led to relationship problems. At CAA, they put teams of people on clients to ensure a good relationship and increase client loyalty. The competition was weaker because they were comfortable with the old one-on-one approach, while CAA incentivized the whole company's success. CAA paid smaller front money but overpaid at the end of the year if they performed well. CAA's monopoly on the high-end TV and film business allowed them to pay executives so well. Pre-internet, CAA's failsafe system was to return all internal client calls first and use a buck slip system for communication.
Michael Ovitz's innovative approach to revolutionizing the agency system and creating a team-oriented culture
Michael Ovitz recounts his time at CAA and how they revolutionized the agency system by creating a team-oriented approach. They signed unprecedented talent like De Niro and Pacino, and packaged them with directors like Michael Mann. Through collaboration and product creation, they managed to turn what people thought was a zero-sum game into a positive-sum game. Ovitz also expanded into investment banking to save the studios, as they were in financial trouble. However, CAA couldn't afford to produce movies as they settled strikes and didn't want to take on the guilds. The team-oriented approach worked for them economically and for their clients, and Ovitz's dedication to his business and clients was evident throughout.
The Importance of Building Relationships and Understanding Culture in Business Dealings.
Building relationships and understanding culture can pay off in multiples. Michael worked hard to understand Japanese culture and it paid off with deals like selling Columbia and Tristar to Sony. Michael didn't discuss money with his clients and instead of asking for fees upfront, he told them to pay him an obscene sum if he did a good job and nothing if he didn't. He was paid handsomely for his work, but he never put a number on the table. Michael became Morita's consultant and consulted on the sale of CBS Records. He brought Morita to meetings with different entities. Michael and Herb worked on Columbia with Coca-Cola and sold Columbia and Tristar to Sony, which became Sony Pictures Entertainment.
Challenges in Transitioning from Entrepreneur to Employee
The transition from entrepreneur mogul to employee can be unbelievably hard. Lew and Sid didn't want to be owned but took the deal out of fear of losing the company. Matsushita didn't want to ruffle Lew's feathers, so they decided to sell the company instead of negotiating with him. Michael Eisner's heart attack and quadruple bypass led to the conversation of generational transfer and the sale of CAA to the next generation. Ron Meyer blew up and left because he couldn't deal with talking to clients anymore. Michael Ovitz decided to stick it out for another year before taking the Disney conversation more seriously.
Being Open to New Opportunities and Having True Friends Can Change Your Life
It's important to know oneself and make game plans accordingly. Michael was not a good employee, and he should have realized that before accepting the job at Disney. However, he made a mistake, but it worked out fine for him. He took some time off after Disney and then got back to work when Marc Andreessen and Ben Horowitz asked him to be on their board at Loudcloud. They gave him a roadmap to a new career that changed his life yet again, and he had a third career. Thus, it's pivotal to keep one's eyes open to new opportunities and be ready to explore and take chances. Also, having good friends and true friends is a boon that can change one's life.
Michael's Journey from CAA to Entrepreneurship
Michael's job is to bring together talent and financing, help them market, monetize, and strategize their product. He has been doing this for 30 years. He considered diversifying CAA but couldn't figure out how to divide it up amongst the players. He made a clean break and started his own business in a different field. He thinks CAA has done a great job in the core agency business, but it's not what he would have done. Michael avoided the service-oriented client business and found it easier to be a buyer. He created and captured a lot of value in other scenarios and made a sweetheart deal for the next generation that he sold the firm to, which they didn't have in cash.
Michael Ovitz's Long-Term Vision for a Thriving Franchise.
Michael Ovitz was motivated by the desire to keep the franchise alive and thriving, not just for immediate financial gain, but for the long-term benefit of the business and its employees. He was able to negotiate an interest-free loan for payment over the next five years because he didn't care about receiving payment immediately. His focus on the longevity of the business and keeping employees united prevented them from breaking off and starting their own ventures. Michael's success as an agent and his prior discussions with Disney ensured that money was not a problem for him. Acquired's final episode of the season concludes by thanking the listeners and Acquired's LPs, including the exclusive LP-only content in the future.