The American Kill Line: I Can Predict the Future

Chapter 100 A Devastating Strike from Wall Street (Seeking Monthly Tickets)

Ron spent a week ostensibly negotiating with IMG, but in reality, he personally went to Los Angeles and reached an agreement with CAA.

The first step is the equity distribution of the new company, CAA-IMG, after the merger.

The merged company, CAA-IMG, is valued at $28 billion.

Brian Lord previously held $1.6 million worth of equity in CAA, which will now be 5.71%.

Richard Lovett's $1.4 million equity stake will be converted to a 5% stake.

The remaining senior partner brokers collectively hold $1.5 million in equity, which will increase to 5.35% after the change.

Hunter Capital holds an 83.94% stake and serves as the Chairman of the Board of Directors of CAA-IMG.

Secondly, the new company retains full management rights over CAA's original film and music brokerage business.

Former co-CEOs Brian Lord and film division president Richard Lovett, along with senior partner agents, signed a 6-month contract.

The long-term employment agreement will retain the original position and management rights.

Except for major mergers and acquisitions and financing matters, it has complete autonomy in making decisions regarding CAA business, and the board of directors shall not interfere without cause.

Finally, the merged company, CAA-IMG, established a 10% employee incentive option pool.

Of these, 5% are exclusive options for Brian and Richard, with an exercise price of the fair market value at the time of the merger, vesting over four years at 25% per year.

The condition for attribution is that the combined annual compound revenue growth rate of the merged company is not less than 15%.

The two individuals joined the board of directors after the merger, each holding two permanent board seats.

Of course, these are just rough proposals.

Specifically, there is a complete agreement between Bank of America, JPMorgan Chase, and Paul Wiss, the law firm.

It not only protects the rights of the two founders from being arbitrarily dismissed.

There are also ways to counter it.

The essence of the Hollywood talent agency industry is "people binding people together," rather than "people binding companies together."

This is the premise of all logic, and no company can break this ironclad rule of the industry.

CAA itself was founded in 1975 by five individuals, including Brian and Richard, who collectively resigned from William Morris Agency.

He took all his core artists with him when he founded it.

They are the top players in this "leave the company and take the resources with you" rule, and they know how to operate it better than anyone else.

Brian Lord is Hollywood’s top agent, with connections to almost all of Hollywood’s top A-list stars, including Steven Spielberg, George Clooney, Leonardo DiCaprio, Brad Pitt, and Julia Roberts, as well as key decision-makers at the six major studios.

Richard Lovett is the soul of CAA's film business, controlling core resources of top Hollywood directors, screenwriters, and producers.

These two are CAA's star performers. If they were to leave, the artists wouldn't care about the company's reputation and would simply follow them.

The countermeasures taken by Bank of America, JPMorgan Chase, and Paul Wiss, the law firm, were also quite straightforward.

This directly increases the risk of leaving the company.

It is explicitly stipulated that regardless of the reason for leaving the company, all unvested exclusive stock options will be immediately forfeited, even if there is only one month left before the expiration of four vesting periods.

In a year, leaving the company means your job is reset to zero.

The agreement stipulates that only employees who remain in the company for the entire employment period, refrain from engaging in competing businesses or poaching company resources within two years of leaving, will have full and free control over their equity. Otherwise, the company retains the right to repurchase the shares.

During the remaining 6-year employment period, 50% of the two employees' annual bonuses will be deposited into a special trust account and paid out in installments over 3 years.

Only if, within 24 months of leaving the company, neither employee engages in competing business, poachs company artists/agents, or discloses company trade secrets, can they receive the full retention bonus.

In the event of a breach of contract, all remaining funds will be confiscated.

Of course, there are also the more important artist management contracts.

All artists' exclusive management contracts must be signed directly with CAA-IMG, not with individual agents.

In short, there are many of these stringent conditions.

Brian, Richard, and their senior broker partners were naturally unwilling to agree.

This is tantamount to cutting off their very means of survival.

But Ron pulled out all the stops, promising to launch an IPO in 5 years.

JPMorgan Chase has also made it clear that it will act as the underwriter for CAA-IMG Group's future projects.

Furthermore, Ron also allocated 10% of his stock options to top artists he collaborated with as a reward.

Nobody turns down money; Hunter Capital is that extravagant, with deep pockets and immense strength.

Even though Brian knew it was a scheme orchestrated by capital, a poisoned apple.

He would eat it with a smile.

If he objects, the top artists under his wing will lose heart.

Spielberg may not care much about this option, but what about other directors and stars?

Especially celebrities.

They are actors, playthings in the hands of powerful figures.

Now, give them the opportunity to become shareholders of a listed company, or even a partner company.

Such a huge temptation would make even artists who don't already work with the company envious, let alone those who already collaborate.

Therefore, the entire acquisition process was very fast.

This was something Ron did intentionally.

Only by being fast can you avoid being disrupted by others.

By the time the outside world realized what was happening, it was already too late.

When faced with the arrival of the "monster," the first strong reaction did not come from the four major Hollywood talent agencies.

Instead, it was the Hollywood Big Six, and among them, the most vocal critic was not Paramount, which had the highest market share, but Warner Bros.

"Why was there no warning beforehand?! Can anyone tell me, what exactly is this Hunter Capital??"

Chairman and CEO Barry Mayer nearly roared at all the executives in the conference room.

This was the first time he had been furious in his ten years at the helm of Warner Bros.

Feeling the piercing gaze upon him, the head of the film marketing department steeled himself and produced a document: "Mr. Mayer, this is information about Hunter Capital."

The assistant took the document and handed it to Barry Mayer.

Barry Mayer didn't even look at it, slapping the document away: "My question is, why is this Wall Street firm acquiring CAA and IMG? Why weren't we notified beforehand?"

Other executives and directors remained silent.

In fact, even they themselves didn't understand what had happened.

Not to mention any warnings.

The acquisition was completed in less than an hour after the news of the merger was announced.

This is not a simple merger or acquisition, but a meticulously planned and premeditated "monopoly".

Yes, their first thought was monopoly.

Finally, Warner Bros. veteran vice chairman Edward Romano broke the silence: "Barry, now is not the time for accountability, but to think clearly about what to do next. For example, whether to file a lawsuit."

.

Edward's words were met with nods of agreement from the executives and board members present: "Mr. Romano is right, this is a monopoly, and we must sue."

"It's not just us; I don't believe Paramount isn't worried. Don't forget, the Mission: Impossible series is their core product."

"And then there's Disney and Marvel. Robert Downey Jr., Chris Evans, and Scarlett Johansson are all core clients of CAA."

As he listened to the crowd clamoring for a lawsuit, Barry Mayer's face turned ashen.

A lawsuit was inevitable, but Barry Mayer also knew that if the other party dared to do this, they were not afraid of being sued.

Moreover, these people are deliberately avoiding the most important point.

This explains why Barry Mayer reacted so strongly when he heard about the merger between CAA and IMG.

Firstly, regarding the artists, there's no doubt about that.

Christopher Nolan, director of Warner Bros.' top cash cow, the Dark Knight trilogy, is CAA's most core contracted director.

The core cast, writers, and producers of the hit IP "Harry Potter" series, as well as the entire creative team behind "The Hangover" series, are all artists under CAA.

Other actors with whom he has worked closely include Brad Pitt, Will Smith, Sandra Bullock, and Nicole Kidman.

Almost all of them are under the CAA umbrella.

Of course, it's nothing.

CAA's packaged system is essentially "serving the production studio client".

Warner Bros. holds 100% control over the project's funding, distribution rights, IP rights, and final decision-making power.

If Warner doesn't want to use CAA's artists, they can simply switch to another label.

Conversely, even if CAA doesn't provide artists, it can't stop Warner from making movies; at most, the production team will be slightly inferior.

Warner's core strengths lie not only in these popular IPs, but also in Hollywood's most mature global distribution and brand commercial integration system.

Without CAA, you can choose to cooperate with WME or UTA.

Now that CAA has merged with IMG, CAA can leverage IMG to provide artists and film projects with a one-stop service that includes "film and television salaries + top global endorsements + sports crossovers + event IP collaborations".

By completely bypassing Warner's distribution system, Warner's century-old moat of studio dominance was directly breached.

A sense of crisis welled up in Barry Mayer's heart, and after the meeting ended, he immediately contacted the other five major production companies.

They plan to unite in resistance against this monster.

There is a century-old, fundamental consensus in Hollywood: no agency should be allowed to monopolize upstream talent resources and exert downward pressure on production studios.

At this moment, a bizarre scene unfolded.

Paramount Pictures, which has the largest market share and the highest annual box office, has chosen to remain silent.

Not only Paramount Pictures, but 20th Century Fox also chose to remain silent.

Don't ask, I don't know.

The boss spoke up, telling us to be quiet.

Two of the six Hollywood studios have been removed.

Sony Pictures Entertainment is in the midst of a turbulent period surrounding the reboot of the Spider-Man series.

It lacks a stable portfolio of top-tier IPs and a core creative team.

The film business is just a sideline for the Sony Group, whose main focus is on music and hardware. It has the lowest dependence on CAA among the six major companies.

Seeing that neither of them wanted to fight, they decided to let it go.

Universal Pictures' core cash cow is the "Fast & Furious" series, and its core creators have very little reliance on CAA.

Furthermore, its parent company, Comcast, owns the largest cable television network in the United States, giving it extremely strong bargaining power over artists and projects.

Meanwhile, Universal had just acquired Illumination Entertainment, and the Despicable Me series was about to explode in popularity. Since the animation business did not rely on live-action actors at all, the impact of this acquisition on Universal was almost negligible.

Warner Bros. looked around, bewildered, and suddenly realized that they had become the biggest victim in this merger.

I was originally planning to bring my second son, WME, along too.

After all, the most direct impact of CAA's growth is on the second-largest artist management company.

Before Warner Bros. could even contact them, WME, in order not to lose market share, took the lead in announcing the introduction of Silver Lake Capital.

For a moment, Hollywood was unusually quiet.

Apart from the antitrust lawsuit filed by Warner Bros.

It's as if this merger never happened.

Ron completely ignored the antitrust lawsuit filed by Warner Bros.

It was handed over directly to the legal teams of Paul & Johnson and JPMorgan Chase to handle.

Redstone's film studios and theaters are both fine.

CAA and IMG are at most a merger of two companies with similar characteristics.

At that moment, he had just signed three agreements in his capacity as Chairman of the Board of CAA-IMG.

Two of them are a five-year strategic cooperation agreement between Paramount Pictures and 5th Century Fox.

The other is a 10-year exclusive partnership agreement with Fox Sports, a subsidiary of News Corporation, to jointly operate sports event IPs, exclusive broadcasting rights, and artist management business.

Furthermore, Fox News, The Wall Street Journal, and the New York Post, all owned by News Corp., will conduct personal interviews with Ron at different times in the future.

They cultivated positive personas such as "Texas-based energy upstart," "Legendary Wall Street investor," and "Exemplary self-made American Dream entrepreneur."

Besides these factors, there was another important reason why Ron chose to bring Rupert Murdoch in.

That is News Corporation's global media intelligence network.

With this intelligence network, we can obtain information in advance about global political and economic changes, policy adjustments in various countries, and industry secrets.

More importantly, this reduces the risk of their "predictions" being exposed.

With his business nearly finished, Ron boarded his private jet bound for Silicon Valley.

In this acquisition, 70% of 1MG's equity was valued at US$12.6 billion.

TPG sold its 35% stake in CAA to Ron for almost the original price of $1.9 million.

In addition, Redstone helped him acquire a 20% stake in CAA worth $2 million.

The total acquisition price was US$16.5 billion.

Ron contributed $10 billion, and the remaining $6.5 million was borrowed unsecured by Bank of America and JPMorgan Chase.

The annual interest rate is 3%, and the debt will be repaid over five years, with 60% of CAA-IMG's net profit each year.

Therefore, integrating the two companies is urgent.

One is in New York, and the other is in Los Angeles.

It is relatively troublesome to manage.

The best approach is to find a professional manager to build the team.

This person must be an expert in IMG Sports and very familiar with the Hollywood system.

After thinking it over, Ron decided to ask people in the industry.

After asking around, Evans from Paramount Pictures' financing department finally recommended someone who sounded promising.

Mark Shapiro, former executive vice president of Disney ESPN.

"Ron, I think Mark is a perfect fit for your needs. After leaving Disney, he became CEO of Six Flags Entertainment and led Six Flags through its bankruptcy reorganization. Mark not only understands the rules of Hollywood, but he is also an expert in global sports events."

"That sounds good. Where is he now?"

"I left Six Flags Entertainment at the end of last year and am currently on vacation abroad."

"OK, please contact him for me. I want to meet him when I get back from Silicon Valley."

"OK."

There weren't any major market movements this month. Ron gave a general direction and handed it over to Victor to handle.

Everyone thought that his high returns in January were to select shareholders for the upcoming new fund.

That's both right and wrong.

He was preparing to make a big profit to select shareholders for his new fund.

But not in January, but in March.

Because Japan is going to be in trouble.

On March 11, 2011, a magnitude 9.0 earthquake struck off the coast of northeastern Japan, triggering a massive tsunami. The Fukushima Daiichi nuclear power plant faced the risk of nuclear leakage, and the yen surged to a post-World War II high.

(P.S.: The double monthly pass event is ending soon, so please use your monthly passes to vote for me!!)