Commentary

The Heist: How CAA Cracked Coca-Cola (And Ovitz Forgot To Negotiate A Fee!)

It’s the dog days of August, and I’m stuck in mid-stick.

So I figured I’d break away from all of the heinous political stories eating away at our emotions and brains these days -- a numbing stream of analysis and coverage of mad bullies, deluded manipulators, and even reality-deniers.

It’s enough to make anyone crazy.

For relief, I eagerly cracked open the newly published doorstop-sized book “Power House: The Untold Story of Hollywood’s Creative Artists Agency.” (Insert snare drum sound here.)

The author is James Andrew Miller, who, with former Washington Post TV critic Tom Shales, also gave us the definitive oral history (and great read) about "Saturday Night Live,"  “Live From New York.” He followed that with a book about the history of ESPN.

Miller does the same thing with this volume, interviewing some 500 people related to the agency, including the founders (two of whom were Michael Ovitz, who played bad cop to his kindlier counterpart, Ron Meyer), and many current employees.  

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This is a feat -- since, unlike comedians, TV stars, and celeb athletes, agents are supposed to remain stealth about their deals and their power.

The author himself acknowledges that there’s a “Rashomon effect” in the telling and retelling of tales over the years, inevitably with some settling of scores and agendas.

Still, the details are all relatable to ad people of every stripe.

CAA was born in 1975, when Ovitz and Co. fled the venerable William Morris Agency (founded in the 1890s.) They wanted to start a different kind of fledgling agency: more open, collegial, personal -- and yes, how you say, disruptive.

They brag that they started it in tiny digs (five offices) on such a small budget that their wives acted as their assistants, a story that sounds very “Mad Men,” but this time with wide collars, ties, and no Peggy.  

There were plenty of powerful women in the building, eventually.

And after years of mega-growth (and setbacks) at the three-letter agency, by 1995, all of the original founders had exited in something of a mid-life crisis, both for them and the business.

By 2010, the majority ownership of CAA was sold to TPG, a private equity group, another familiar story.  

In the preface and in artfully stitched-in essays, Miller describes how CAA transformed the entertainment business and media in general. “Lift the curtain of pop culture anywhere on the planet” he writes, “and you are bound to find CAA.”

And that curtain lift includes, of course, the medium of advertising.

There is no index in the book (perhaps to make D-listers who merely want to look themselves up have to buy it?). But if you go to the end of chapter four, “Katy, Bar the Door, 1989-1994,” you’ll find the back story of how in 1992, CAA blew the minds of the entire ad industry when it hijacked the Coke business from McCann-Erickson, which had handled the account for 40 years, through such successes as “Hilltop” and “Mean Joe Greene.”

“We were perceived as the guys who understood the ‘secret sauce’ of creating value from intellectual property,” one of the agents quoted says.

Anyway, in 1990, Don Keough, Coke’s then president, asked Peter Sealey, who had worked for Columbia Pictures when Coke owned it, to return and head global marketing. “The only burr in my saddle,” Sealey quotes Keough as saying, is that “Pepsi-Cola is generally acknowledged to have better advertising.” And he wanted this changed within the next three years.

Sealey responded that he couldn’t do that with a traditional agency that “churns out 30-second commercials.”

Having a movie marketing background and a Ph.D. under management consulting god Peter Drucker, Sealey had in mind to manage ads more like mini-films, and decided to see the guy who was by then considered the most powerful man in Hollywood: Ovitz.

Sealey and other Coke execs were summoned from Atlanta to the exalted I.M. Pei-designed L.A. building with the master collection of modern art, and Ovitz presented to them. One guy in the room remembered that “[Ovitz] knew innately …what these people wanted to hear.”

Coke’s advertising would be created through the lens of the CAA’s vast resources in every discipline. Ovitz hired Shelly Hochron to head the in-house team. (She had worked with Sealey at Columbia, and got a salary of $2 million major bucks back then.) She in turn hired Len Fink, who had been a creative director at Chiat/Day. (Ovitz said Fink received a “good salary as well.”)

Hochron is quoted as saying: “Essentially, Coke gave Michael a blank check. In the first round, we did 31 or 32 commercials. Maybe five or six were done by CAA clients and they were paid enormously well for that -- people like Martin Scorsese and Rob Reiner.”

(As an aside, I remember the Rob Reiner-directed spot. It was far treaclier and more formulaic than anything that McCann was doing at the time.)

They were fooling around with the idea of “ice cold” and the redesigned Coke bottle, and thought of a polar bear. Hochron in turn had her husband (for a million dollars more!) turn it “into a theater experience for polar bears drinking Coca Cola.” The animated result was delightful and whimsical, showing a family of bears snuggling, watching the Arctic lights, and guzzling the stuff out of a bottle.

It wasn’t the intention of the spot, but still, it was genius that people from all over the world could enjoy the wordless imagery—and it also removed the idea of Coke being an unhealthy drink for kids. Those polar bears, and their babies, after all, were pure as snow.

Still, the spot was one out of 32 tries. Any reasonably good ad agency could probably have improved on that average considerably, with that budget.

But the best part of the story comes afterward. Because it turned out that the world’s best deal-maker, Michael Ovitz, had forgotten to negotiate a fee for CAA. And by the second year, Coke had made $42 million on sales of polar bear plush toys, pencils, and frames.

According to the book, it was left to Sealey to come up with a fee that he thought was fair. “I had my accounting guys issue a check for $10 million, payable to Michael Ovitz, and I had them put it in the hands of a little toy polar bear and walk it over to CAA,” he’s quoted as saying. “Three days later, I got an envelope from Michael with a voided check and Post-it note.”

Ovitz eventually complained all the way to Coke's then CEO, Roberto Goizueta, that the fee was too low. The final payout? “Thirty-one million,” according to Sealey. "It was classic Michael Ovitz. You’ve got to admire the guy.”

Was it worth it? Ovitz left CAA shortly thereafter to go to Disney, a personal disaster for him. The Coca-Cola company now employs many agencies, as do most global brands. As it turned out, CAA became a company that “churned out 30-second commercials” for Coke.

And the cycle continues, and the world spins on.

7 comments about "The Heist: How CAA Cracked Coca-Cola (And Ovitz Forgot To Negotiate A Fee!)".
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  1. Bruce Dundore from Lazaroff/Dundore, August 11, 2016 at 7:06 p.m.

    "Sealey responded that he couldn’t do that with a traditional agency that “churns out 30-second commercials.” Of course, it was that traditional agency BBDO which churned out 30 second commercials that was kicking Cokes advertising ass.  

  2. Jeff Sawyer from GH, August 12, 2016 at 8:30 a.m.

    Wonderful piece. Thank you.

    PS Now I'm thirsty. 

  3. Barbara Lippert from mediapost.com, August 12, 2016 at 10:22 a.m.

    This just in from a source: Ovitz didn't "forget." (Of course!) He purposedly didn't negotiate a fee because he felt he could get much more once the results were in. He was right. 

  4. George Parker from Parker Consultants, August 12, 2016 at 10:39 a.m.

    Have you seen the current Coke spot... "Drinking a Coke is like winning a gold medal at the Olympic's!" Apparently, this is because "It's full of bubbles." Are they kidding? Who is responsible for this shit?
    Cheers/George

  5. Chuck Lantz from 2007ac.com, 2017ac.com network replied, August 12, 2016 at 5:24 p.m.


    Barbara: Your version does make a lot more sense.

  6. Paula Lynn from Who Else Unlimited, August 12, 2016 at 10:48 p.m.

    As an agency copywriter once said, this business was incestuious. And that was in the late 70's.

  7. Jim English from The Met Museum, August 17, 2016 at 1:23 p.m.

    Thanks Barbara.  Though not original, I liked CAA's polar bears. But more impressed with Wieden's work almost 25 years later (in particular "Generous World).

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