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Oh Shit! The Vultures Are Circling 

CAA picks off Steinberg’s prime NFL meat

Wednesday, Apr 12 2006
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CAA PRESIDENT RICHARD LOVETT has long hero-worshipped scoundrel genius Mark McCormack and the business-is-war ethos of the founder of IMG — that sports-modeling-authors-whomever global-management mega-giant. Everyone at CAA, Hollywood’s most arrogant talent agency, knows that Lovett has not only studied every facet of McCormack’s career but that the glorified Tom Hanks caddie has obsessed about being as good as McCormack someday. The fact that IMG’s success was founded on its agents acting like vultures who swarm over their prey didn’t bother Lovett one bit because CAA has copied that agenting style since the days of Michael Ovitz.

Lovett took to heart the two essential guiding principles of the late McCormack (R.I.P. in 2003). First, that the company was always more important than the clients, and, as far as the clients go, it didn’t matter if they were successful or mediocre; it was better to have them than not have them. The result is that Lovett at times has tangled with his partners Bryan Lourd, Kevin Huvane and others who grew up at Ovitz’s CAA thinking the agency should represent fewer, better clients and give them more personal attention than try to sustain a volume business. Ultimately, Lovett has won every battle because his mantra is market share,market share,market share. As Lovett likes to argue, there won’t be a need for any other agency if CAA has everyone.

So far, that philosophy has strictly applied to Hollywood talent. Now, though, Lovett is truly trying to ape McCormack and grow CAA, à la IMG, into the next giant of the sports-agency business on the broad back of no less than USC megastar quarterback Matt Leinart. It’s a strategy where an agency’s roster of clients is reduced to little more than the sum of its parts: this many comedians, this many leading men, this many leading ladies, this many character actors, and now this many quarterbacks and this many pitchers. It’s cold and calculating and crafty: It’s also why stars hate agents.

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In recent days, Lovett was the driving force behind CAA’s hiring of three major IMG sports agents, two in football, one in baseball. On one level, it’s a perplexing move into a hypercompetitive arena since sports agenting, especially in football, is taking it on the chin like never before. There used to be 1,100 certified agents in the pigskin business; that number shrunk by 300 after a purge by the players union. The average salary for a football player is $1.1 million but the agent takes only 3 percent. That’s why there’s so much pressure to sign first-round draft picks and quality veterans who generate giant signing bonuses and in one fell swoop cover an agent’s overhead.

Which brings us to Matt Leinart, who sent a termination letter late Monday night to his renowned sports agent, Newport Beach’s Leigh Steinberg (the inspiration for Jerry Maguire), who had just signed him in January. Steinberg confirmed the firing to me Tuesday. This is huge news considering that the NFL draft is on April 29, and Leinart is expected to be the No. 2 pick behind his fellow Heisman Trophy winner, Trojan running back Reggie Bush.

But what makes this an even bigger story is that, sources tell me, Leinart is soon expected to sign for his multimillion-dollar NFL contract negotiations with CAA, a first for the Hollywood talent agency in this arena. The agency already has had daily contact with Leinart because it represents him for marketing deals like off-the-field endorsements, licensing, autograph shows and public appearances, all where CAA can commission as much as 20 percent. Leinart signed with CAA a week before signing with Steinberg in January. At the time, a CAA spokesman told Advertising Age that the agency was not about to open a sports division. But on April 5, CAA hired powerhouse IMG football agents Tom Condon and Ken Kremer. (CAA also hired IMG baseball agent Casey Close, who represents Yankee superstar Derek Jeter and others, on Monday.)

Now Leinart will be leaving Steinberg to become a full-service client in CAA’s spanking-new sports-agency division. It’s all reminiscent of CAA’s cunning legacy under Michael Ovitz, who said he wasn’t going into the advertising business when he signed Coca-Cola to a consultancy contract in the early 1990s but then started making commercials for the soft-drink giant. Different times, same methods.

Officially, CAA cannot comment one way or another about whether it has Leinart in the fold already, and indeed a CAA spokesman stayed mum. Under league rules, Leinart’s termination letter sets in motion the five-day rule, meaning that for the next five days Steinberg is still legally the QB’s sports agent. (Leinart also filed the necessary paperwork with the players’ union Monday.)

Of course, the rules also state that, while Steinberg had this client, no other sports agents were supposed to be talking to Leinart. And, as things stand now, no agent is supposed to contact Leinart until the five days have expired. So then, how come sources are telling me that Leinart is about to switch to CAA?

“You have to make the assumption that they went to him the minute they got Condon. But how do you make the tampering case against CAA here?” one source told me. “They do it in Hollywood. They’re not supposed to do it in football. It’s totally against the guidelines. It’s totally illegal to talk to someone who’s represented about switching. The point is, rarely is a case like this brought. How do you prove it?”

Interestingly enough, I’m told that Leinart had earlier met with Condon at IMG and rejected him in favor of Steinberg. Steinberg is best known for having repped the first pick in the NFL draft eight times and for specializing in quarterbacks (Steve Young, Warren Moon, Troy Aikman, Ben Roethlisberger and Mark Brunell are or have been clients). Condon, who handles QBs Peyton Manning and Eli Manning, has snagged the first draft pick the past two years running (Eli Manning in 2004 and Alex Smith in 2005).

“But this year, he got nobody. He lost the competition for Matt Leinart first time around,” an insider told me. No doubt that’s why CAA’s first move with Condon aboard was to take Leinart away from Steinberg, even though there was no discord in that relationship.

“It was a happy marriage,” one source explained, “until CAA came along.”

According to SportsBusiness Journal, IMG claims it will continue to repressent the Mannings for endorsements, but those deals are set to expire within a year.

WHAT MOST OF THE NATTERING NABOBS on sports talk radio — who love Steinberg for his accessibility and forthrightness — won’t know is that there’s a bit of a back story to all this. At one time, Lovett negotiated with McCormack, and closed the deal after his death, for a CAA-IMG partnership in some arenas, though not in sports contracts. But that was before Wall Street big shot Teddy Forstmann bought IMG after McCormack’s passing and started pissing off existing management, which primed a string of agents — many of them in IMG’s sprawling sports division — to start looking elsewhere. What all this means is that CAA is now at war with other sports agents around the country, since the Hollywood agency is hell-bent on going after athletes’ contract business, and no longer content to just peddle their jock meat for endorsements.

Before he got the news that Leinart was firing him, I happened to phone Steinberg because I wanted his take on why CAA was suddenly entering the sports contract business in such a big way. He explained to me that “for a group like CAA, athletes can be a valuable source of content supply for motion pictures, television, video games, Internet and marketing. Sports and entertainment have merged sometime in the ’90s and continue to be one and the same.”

And then there’s the very real possibility that CAA could claim an equity position in projects generated for the athletes — who aren’t barred by those pesky Hollywood guild rules that prevent agents from representing talent and at the same time producing stuff with clients, which is what made IMG so wealthy.

No doubt that’s why I’m told CAA paid way upward of $20 million for Condon and Kremer’s business, a figure vehemently denied by CAA. (But sources tell me Condon was looking to move and starting negotiations in at least the $15 million range for his business, with 50 percent of receivables going back to IMG for three years. Prior to signing with CAA, he met with the William Morris Agency, which, in contrast, has a sports-business philosophy of only going after the best like Michelle Wie in golf, Serena Williams in tennis, Kevin Garnett in basketball, as well as Phil Jackson in coaching and the Chelsea football club in soccer. Not to mention they also represent the NFL and NHL.)

Steinberg also warned me, “Unless a practice is emphasizing high-round draft picks and valuable free agents with the potential to trigger multiple revenue streams like marketing and financial planning, the representation of football players is an inherently unprofitable business for the vast majority of practitioners in the field.”

I’m told the phrase “sons of bitches” to describe CAA was floating around Steinberg’s office after he received Leinart’s letter of termination. Ironically, USC offensive tackle Winston Justice fired Steinberg late last week because he felt Steinberg was focusing all his time on his more famous Trojan client. With his heartthrob good looks and impressive athleticism, Leinart is a twofer cash cow in both his football contract and his endorsement potential. That’s incentive enough for CAA to steamroll over anything and anyone to get Leinart. Steinberg’s just the first roadkill.

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