Five years from now, there may be an answer to the question of whether Creative Artists Agency’s multimillion-dollar investment in sports was an experiment that didn’t work or a watershed event that changed the athlete representation business forever. But it is clear that, for now, there is a bold new player in the market, and one that may be more powerful than the traditional competitors sports agents have faced.
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Tom Condon (inset) brings with him
Peyton (left) and Eli Manning. |
After years of entertainment agencies making tentative forays into athlete representation, CAA, which represents the most sought after actors, writers and directors in Hollywood, made a major commitment to the business by buying the practices of Casey Close, one of the nation’s top baseball agents, and Tom Condon, the premier football agent in the country. Sources said that CAA beat out several bidders, including rival entertainment agencies William Morris and ICM.
Sources said Condon’s deal will pay him and his partner, Ken Kremer, more than $30 million over several years. Neither Condon nor his attorney, Jeffrey Kessler, would comment on that. Close will also reap millions from the sale of his practice, sources said.
Kessler did say, however, that a big factor in Condon’s decision to sell was that “Tom views CAA as the pre-eminent entertainment agency in the world.”
Another source close to Condon put it more bluntly, saying, “These guys are not doing sports to come in second.”
Although other entertainment agencies have signed various sports stars, none have acquired sports practices of this magnitude. The deals give CAA instant credibility because of Condon’s client list, which contains eight NFL starting quarterbacks, including Peyton Manning and Eli Manning, and Close’s clients, among them Derek Jeter, Derrek Lee and Richie Sexson. More than that, Condon headed the football practice and Close the baseball practice at IMG, historically the world’s most dominant athlete representation firm.
“You have the best of breed going after the best of breed, and it should be interesting,” said Peter Levin, owner of the Arena Football League’s Chicago Rush and a former CAA employee who worked in the corporate advisory group under CAA co-founder Michael Ovitz.
Although CAA is not believed to be in serious talks to acquire other sports agents, many industry experts expect that the company, which represents Tom Cruise, Tom Hanks, George Clooney and Angelina Jolie, to ultimately build a multisport athlete representation firm that could rival IMG.
Ironically, CAA and IMG are alike in some ways, including that both are seen as the top agencies in their fields. The CAA acquisitions of Condon and Close come at a time when there is speculation that two of the four smaller talent firms — William Morris, ICM, Endeavor and UTA — may merge in order to better compete against CAA. It also comes as CAA has been asserting its dominance by signing a multitude of writers, directors, actors and agents from other talent agencies, part of what the Los Angeles Times said late last year was “a yearlong blitz that rival agents say they have not witnessed in decades.”
CAA’s entry into sports also comes as there continues to be speculation that IMG may be re-focusing its businesses away from athlete representation and into the more profitable media business. In recent months, under IMG’s new owner and CEO, Ted Forstmann, many of the top executives who were put in place by IMG’s late founder, Mark McCormack, have either resigned or taken lesser roles at the company.
In fact, CAA wouldn’t have entered the sports business now had it not been for the recent turmoil at IMG, sources said. CAA was not seriously looking at a major push into sports before Close and Condon became available due to unusual clauses in their employment contracts. Those clauses were triggered when Peter Johnson, who had been IMG’s CEO of sports and entertainment and who hired Condon and Close years ago, resigned after Forstmann hired former NASCAR COO George Pyne as IMG’ s new president of sports and entertainment.
The fact that Condon and Close had the right to sell their businesses on the open market provided an unusual opportunity for CAA because IMG, like most sports agencies, typically ties down agents and their clients with noncompete agreements. The key man clauses allowed Condon and Close to take their clients and compete against IMG, although they are required to split client fees with IMG for a number of years.
CAA’s president, Richard Lovett, an avid sports fan who was a friend of McCormack’s, is said to have been approached by Condon and Close.
“We always anticipated that one of the Hollywood-based agencies would make a statement about the sports side of the business,” said Phil de Picciotto, president of multisport athlete representation firm Octagon, which unlike rivals IMG and SFX has not suffered from agent defections in the last year. “CAA took a dramatic step. They overspent in order to establish some credibility.” He added that he was “skeptical” as to whether CAA will be able to find synergies between sports and entertainment.
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Agent Casey Close (inset) has clients Derek
Jeter (left) and Derrek Lee. |
Other industry experts say that CAA may be making the same mistake that SFX Entertainment made in the late 1990s when it acquired some major sports agents, including baseball and basketball agent Arn Tellem, baseball agents Randy and Alan Hendricks and football agents Jim Steiner and Ben Dogra. SFX’s roll up of sports agencies is viewed as a failure because the agents never integrated into one company and most of them left.
But other sources say that CAA’s acquisition of Condon and Close is a different story. For one thing, the SFX culture suffered from having a bunch of entrepreneurs and competitors thrown together. Close and Condon successfully expanded their businesses in a larger corporate structure.
Secondly, CAA may not know sports, but it knows the fine art of representing talented people. “You are dealing with a shop that does what they do — representing entertainment talent — better than anyone in the world, and they are bringing in people who are the best at representing talent in sports,” said one entertainment industry source. “I wouldn’t bet against them.”
CAA has been expanding other businesses, including representing video game creators, youth marketing experts, celebrity endorsements and corporate consulting. Corporations such as the Coca-Cola Co. and Nextel have hired CAA for advice on entertainment marketing, and industry experts say it is not far-fetched to think that CAA could be eyeing sports marketing as a new line of business.
IMG, meanwhile, has downplayed the departure of Condon and Close, telling IMG employees in a memo that the revenue from the football and baseball representation businesses represents less than 3 percent of the total revenue of the company.
The real harm to IMG may not be loss of revenue, but the creation of a new, sexy rival that could be attractive to the top athletes in the world. Before CAA’s entry into sports, the William Morris Agency represented Hollywood’s biggest threat to sports agencies signing clients.
A lot has been written about athletes “crossing over” into television and movies, and that will be a big selling point for CAA as it competes for top talent.
But industry sources say that the number of athletes who will become movie or television stars will be miniscule. Although it is not clear what the real value for CAA will be, it is likely to be in areas such as endorsements and providing digital content and corporate consulting.
Additionally, sports simply represents a new revenue stream for CAA, which has so many top movie stars, directors, and writers that it has essentially cornered the market. Although CAA will have to accept lower fees of 3 to 5 percent for representing team sports athletes, as opposed to 10 percent for its entertainment clients, it still can be a healthy business when you consider the size of the contracts for top sports talent.
IMG founder McCormack started his company by representing athletes and then moving into representing events, representing major corporations for sports marketing consulting, and producing and distributing television programs. CAA is restricted from producing programming, but it already competes with IMG in representing major corporations for entertainment marketing, and it is not far-fetched to believe that once it gets a better grip on the sports landscape, it will compete with IMG for consulting work in sports marketing, as well.
Some agents say that new CAA agents Close and Condon will be hit with a backlash in the cutthroat sports recruiting game. Sports agents know that of Condon’s client list of more than 60 players, only a handful that will get big marketing deals and even fewer will get entertainment jobs.
But the sports representation business has already had a taste of what it is like to compete with Hollywood talent agencies and the results have not always been good, even for IMG.
William Morris lured away IMG client Serena Williams, the tennis star who has expressed more than a little interest in becoming an actress. And IMG lost out to William Morris on golfing phenom and potential future marketing superstar Michelle Wie. (Although Wie’s reasons for going with William Morris were said to be that she would be its only golf client, a promise IMG was unable to make.)
Condon’s most marketable clients, quarterbacks Peyton and Eli Manning, will remain with IMG for marketing under an exclusive deal they signed with IMG before Condon left the agency, according to sources familiar with the situation. But that deal, which also includes the brothers’ father, former NFL quarterback Archie Manning, is expected to expire within a year.
But IMG and other sports agencies may have more than just CAA to worry about. The Gersh Agency has already bought the practice of NFL agent Steve Feldman, and many larger entertainment firms are expected to make bids to buy agents in multiple sports to compete with CAA.
William Morris has heretofore chosen to pursue a strategy of signing a few select athletes just for marketing and entertainment work.
But Jill Smoller, who heads William Morris’ sports department, acknowledged that that could change. “We have been successful with this and intend to stay true to this path,” she said. “However, like any smart business, we will consider all opportunities on a case-by-case basis.”
Creative Artists Agency Inc.- Headquarters: Beverly Hills, Calif.,with offices in New York, Nashvilleand Beijing
- Founded: 1975
- Key executives: Rick Nicita, co-chairman;Lee Gabler, co-chairman andhead of television; Richard Lovett,president
- Sports clients: Tony Hawk; formerUSC quarterback Matt Leinart
- Partial client list: Cate Blanchett,Tom Cruise, Sofia Coppola,Hilary Duff, Will Ferrell,Tom Hanks, Angelina Jolie,Nicole Kidman, LindsayLohan, Brad Pitt, Julia Roberts,Steven Spielberg andKate Winslet. Its marketingdepartment includes Coca-Cola, Starwood Hotels &Resorts Worldwide, SongAirlines (operated by DeltaAir Lines) and Procter &Gamble
- Est. 2005 revenue: $11.5 billion
Sources: Reed Elsevier’s “Directory ofCorporate Affiliations”; caa.com
