Now, Ovitz was playing hardball over MCA again–but this time he wanted the trophy. Ovitz has so far kept characteristically quiet about his plans. But in a series of exclusive interviews with NEWSWEEK, he acknowledged publicly for the first time that he was in negotiations with Seagram Co. to run the entertainment giant. At Seagram’s annual meeting in Montreal last week, chief executive Edgar Bronfman Jr. told shareholders that the giant liquor conglomerate expected to complete its $5.7 billion purchase of 80 percent of MCA from Matsushita as early as Monday. What wasn’t said was that Bronfman hoped to appoint Ovitz as the studio’s chief executive at the same time or soon after.
Ovitz has been called “the most powerful man in Hollywood.” But he doesn’t look the part of a mogul. The almost shy, still boyish-looking 48-year-old talent agent shuns the spotlight. Only rarely does he talk on the record with reporters. Yet this retiring public persona masks a fierce negotiator who pushes the envelope for his clients and his company. With a handful of partners, he created the biggest talent agency in show business. Creative Artists Agency represents everyone from Tom Hanks to Barbra Streisand. Confounding his rivals, he has pushed well beyond the traditional confines of the agency business to help engineer a series of precedent-shattering financial deals. Among them: the bailout of MGM/United Artists and Sony Corp.’s acquisition of Columbia Pictures. Ovitz rocked Madison Avenue four years ago by snaring the ad account for Coca-Cola Classic. (Those Coke-swigging polar bears are CAA’s.) Most recently he’s teamed up with three Baby Bell telephone companies to explore the new world of interactive media. As different as these deals appear, they all have something in common: they came about because of Mike Ovitz and his determination to push, push, push to the boundaries of what’s possible.
The MCA deal began taking shape shortly after Bronfman announced that he was acquiring the company. Ovitz was the clear front runner for the job, after Barry Diller, the former head of Fox Inc., disavowed any interest. Representatives of the two men met in New York and have spoken frequently by phone. Their discussions have been tough and complicated from the start. Ovitz wanted a big paycheck and a major stock position in the company. Insiders put the value of the deal at upwards of $250 million, which would include the buyout of his 56 percent stake in CAA. It’s easy to figure out the fees that would come in from old and new projects. What isn’t easy is valuing something as intangible as a talent agency’s ever-changing relationships with stars, especially when the chief asset was Ovitz himself. Seagram and Ovitz were also said to be talking about buying out CAA cofounders Ron Meyer and Bill Haber, who might accompany their boss to MCA.
For all the difficulties, it looked as though Bronfman and Ovitz had moved closer to an agreement until last Thursday night, when the talks turned rocky. Sources said Bronfman privately complained that Ovitz–represented by L.A. attorney Ron Olson–was asking for too much. Although it’s unclear whether Bronfman has said so to Ovitz, he wants to get a management team in place at the earliest, so he can implement his growth plans. For example: negotiations with Dream-Works, the company formed by Steven Spielberg, Jeffrey Katzenberg and David Geffen, are on hold until MCA gets a new chief. “I told Edgar we’d sit with his new management,” said Geffen. “We’re perfectly willing to work with Ovitz.”
Ovitz was also playing coy. “I’ve been offered opportunities now as I have in the past,” he told NEWSWEEK late Saturday, suggesting that he is exploring more than just an MCA deal. “I can’t predict the future, but the only thing that is for sure is that I love my life at CAA.” Some people close to Ovitz were rooting for him to make the deal. “I have encouraged Mike to take this job,” said Mickey Schulhof, chairman of Sony Corp. of America, the other Japanese-owned player in Hollywood. “He’s at the stage of his life where this kind of challenge is good. And it’s good for the industry.”
It wasn’t just the big bucks Ovitz wants that made the deal so complicated. One issue, sources said, was who would go with him from CAA. Most insiders expected Meyer and Haber to leave with Ovitz; others were less sure. Ovitz himself worried that taking too many key players could bring down the agency, the last thing he and his fellow founders wished to see. Other insiders believed that Ovitz hoped to take some of CAA’s service businesses, like the advertising account. Sources also speculated that Ovitz might be getting a last-minute ease of cold feet. Relinquishing Creative Artists would mean giving up the final word, and accepting Bronfman as his boss. An exceedingly guarded man, Ovitz was further said to be concerned that the financial and other details of his deal will become known, as required by U.S. securities laws governing public companies such as Seagram.
Seagram wouldn’t comment on any aspect of the negotiations. But Bronfman, a decade-long friend of Ovitz, was almost gushy about his friend. Said Bronfman in a recent interview: “Michael is one of the most visionary, insightful and intelligent executives in the industry, without question.”
Even if the deal falls apart and Ovitz stays at CAA, the assumption will be that it’s only for the time being, that he’ll be in play again. In time, top spots might open at other entertainment companies or positions outside the industry. One way or the other, friends say, Ovitz has tired of the constant care and feeding of stars that’s the essence of the agency business, and hankers for a job where he can make a creative imprint rather than simply packaging talent.
While Ovitz may have outgrown CAA, it would be hard to overstate the agency’s power–or Ovitz’s role in creating it. The agency represents a veritable galaxy of some 1,200 of the world’s biggest actors, musicians, directors and screenwriters. They are a gold-plated roster that includes Demi Moore, Robert Redford, Brad Pitt, David Letterman, Barry Levinson, Sydney Pollack, Steven Spielberg, Janet Jackson, Barbra Streisand, Stevie Wonder, Jonathan Demme and Oliver Stone, to name but a few. Last year, eight of the top 10 draws at the U.S. box office included at least one major CAA client. Paramount’s “Forrest Gump” was packed with them, from Hanks to director Robert Zemeckis.
The agency has done as well by its stars, too. Out of the $660 million that “Gump” has so far reaped in worldwide ticket sales, Hanks and Zemeckis alone, two CAA clients, have garnered about $31 million each. (Meanwhile, Paramount insists it hasn’t yet earned back what it shelled out to make the hit flick.) CAA collects a chunk of that, typically 10 percent, and it all adds up. Ovitz is rumored to earn $35 million a year. In the late 1980s, he commissioned the renowned architect I. M. Pei to design a marble-and-reflective-glass headquarters at the intersection of Santa Monica and Wilshire boulevards in Beverly Hills. As much art museum as corporate workspace, its walls are lined with striking paintings. Ovitz has a serious private collection as well, full of Schnabels and Liehtensteins. His dealer, Pace Gallery’s Arne Glimcher, describes it as “a major collection in the world.” Otherwise, with the exception of his taste for Armani suits (he gets a discount from his friend the designer), Ovitz lives with his wife of more than 20 years and three children, a few driveways from O. J. Simpson’s house.
The story of Ovitz’s rise has all the elements of a schmaltzy young-man-on-the-make movie. Born in Chicago, he moved to Los Angeles with his parents and younger brother in the early 1950s. Settling into suburbia, they lived in a tract house in the San Fernando Valley. He attended public high school with the likes of erstwhile junk-bond king Michael Milken. He was also just one of many adolescent boys who admired a certain schoolmate from afar. Sally Field was “hot stuff,” Ovitz remembered over lunch at his home last week. “She had the lead in all the school plays. She was a cheerleader.” Ovitz once thought he might like to become a doctor and majored in premed studies at UCLA, where he is now a member of the hospital’s executive board. But a job as a seersucker-clad tour guide at Universal Studios altered his career forever. There, and later in a similar job at 20th Century Fox, Ovitz would see agents hanging around the set, keeping an eye on clients. They intrigued him; they were financial types, not talent, so he didn’t quite know what to make of them. His next stop: the mail room of the William Morris Agency, where many a mogul before him (including Diller and Geffen) launched their careers in entertainment.
Ovitz got his big break when the agency’s president plucked him from the mail room to fill in for his secretary, who happened to be out sick. Ovitz blossomed into a TV agent, booking guests on the “Carol Burnett Show” and peddling game shows to the networks. In 1975, Ovitz and four partners broke away from the agency, partly disillusioned by its old ways of doing business. They opened their own agency, financing it with a $100,000 credit line that two of the partners secured with their homes. Their wives doubled as secretaries and receptionists. With luck and pluck and no small dose of smarts, they started to grow the business.
From the beginning, CAA did things differently. Instead of chasing stars, Ovitz & Co. pursued their lawyers, business managers and studio execs. That way, if the handlers heard that an actor was disenchanted with his agent, they’d refer him to the new shop in town – and a new guy named Ovitz. The way Ovitz played the game, he would use one client to chum up business for another. When the agency signed Robert Redford, for instance, he was ecstatic. “It was good news for every male client we had,” recalls Richard Nicita, a top gun at the agency. That’s because a script that Redford turned down might be good for another of CAA’s stars. “Mike made the agency business into a real business,” says Herb Allen, the prominent entertainment-industry banker.
What makes Ovitz so powerful today? For one, there’s the sheer number of stars CAA can “package” into an unbearable deal. Ovitz & Co. have an almost unmatched ability to pitch and sell a television show, say, whose director, writers and actors are drawn from his stable of talent. Some of television’s most popular shows are essentially CAA solos: “Beverly Hills 90210,” “News Radio,” “The John Larroquette Show.” While CAA and Ovitz didn’t invent packaging, they’re among its most aggressive practitioners. Rather than collecting the standard 10 percent from their clients, they take a more lucrative stake in the show’s revenues.
They don’t do that on movie deals. Yet the agency still gets a payback. Ovitz doesn’t go so far as to tell studio execs that by hiring this or that actor for one project, they’ll better their chances of getting an even bigger star or director for another project. But, studio executives say, that’s often implied. If there’s sometimes a fist in Ovitz’s velvet glove, there’s just as often a handshake. A number of top studio executives think he’s a huge plus in the all-too-often unpredictable business of movie-making, where schedules can fall apart and costs can soar if a writer fails to produce a script or an actor drops the job. “Mike’s very reliable,” says Jonathan Dolgen, president of Viacom’s entertainment group, which includes Paramount. “He never told me something and then called back to say he couldn’t deliver.”
Another Ovitz trademark is courting the right players and making sure he populates the industry with friends. He helps actors who have been out of work, or down on their luck, get parts. If they make it, he gets the pay-back. If an ex-agent wants out of the business, or if an employee doesn’t work out, he helps. He found a job for a former CAA agent–as studio boss of MGM. Ovitz hasn’t reaped the greatest benefits. So far, archrival Jeff Berg, of International Creative Management, has landed more of its clients at the studio. But Ovitz counts such “favors” as tokens of good will, investments that sooner or later will have value.
His generosity extends to potential allies outside the entertainment business. When Northwest Airlines’ chief, Alfred Checchi, got the flu on a trip to L.A., Ovitz sent over flowers and a vat of chicken soup. When Checchi later relocated to Los Angeles, Ovitz helped get his kids into a good private school. Ovitz never asked for anything in return. But when he needed help on the Matsushita-MCA deal, Checchi lent them some of his financial specialists to crunch numbers and help structure his deal for the Japanese.
Things don’t always go so smoothly. Ovitz’s skills never shone as brightly as in 1989, when he helped Japan’s Sony Corp. buy venerable Columbia Pictures from Coca-Cola. It was the biggest transaction in Hollywood history–and one of the most double-edged. It garnered Ovitz $10 million in cash but a good dose of acrimony as well. Sony’s president, Norio Ohga, now chairman, is said to have demanded to review Ovitz’s time sheets, but the demand was never relayed to Ovitz. Ohga, as it turned out, never saw them. But, recalls one Toyko-based Sony executive: “We were all appalled by how much the Columbia people were spending.” Later, some Sony studio executives complained that Ovitz planted negative stories in the press about the company when its fortunes later soured. Ovitz was bitter, they speculated, that Sony hadn’t taken his advice on appointing a management team for its new acquisition. At any event, Ovitz and Sony’s current studio executives are now said to be friendly again.
Ovitz wasn’t ready for a big role at Sony, not then, at least. But in recent years his desire to run a major public corporation has seemed to grow. Ovitz helped Seagram’s Bronfman think through an earlier entertainment venture, the spirits company’s acquisition of a 15 percent stake in Time Warner. That, too, proved controversial. Time Warner’s management feared that Seagram might attempt to acquire the company; others speculated that Ovitz coveted CEO Gerald Levin’s job. Ovitz has denied any such ambition, as does Bronfman. “That was an invention of Time Warner,” he says dismissively. Ovitz, though, has not been shy about critiquing Time Warner’s performance. When he once visited Nick Nicholas, after Nicholas had been ousted as Time Warner’s co-CEO, Ovitz endorsed the strategy that the former executive had advocated of selling off some of the company’s assets to pay down its debt. But Nicholas notes that Ovitz didn’t try to get any inside information about Time Warner. Gordon Crawford, an investment manager with a big stake in Time Warner, recalls how Ovitz would discuss the company. “We would talk about strategy, and he would critique it,” Crawford says. “That’s not the way I would run the company,” he would say. (But Crawford says he knew of no plot by Ovitz to take over.)
The mystery is why Hollywood’s man in the middle would want to change roles. After all, Ovitz has revolutionized the industry. He rocked the Madison Avenue world by snaring Coca-Cola’s advertising account, and more recently he’s set his sights on Kodak. Midlife restlessness may have a lot to do with it, but so does money. CAA can only make him so rich. The financial fruits of his labor are locked up in a private company, whose holdings can’t be sold off. That’s one reason, insiders say, that Ovitz has looked into acquiring one of two public advertising giants, J. Walter Thompson or Saatchi & Saatchi. “We actively looked at the ad-agency business,” Ovitz told NEWSWEEK. By getting Seagram to help buy him and his partners out at a premium price, Ovitz would escape his financial dilemma. He could also receive a wealth of stock options that would be worth tens of millions of dollars if he can increase the value of the company.
Indeed, friends said that even as he negotiated with Bronfman, Ovitz was thinking that he might miss out on an even bigger prize. Ovitz has lately been cozying up to Sumner Redstone, head of MCA rival Viacom Inc. There’s no role there for Ovitz, at least not now, but Redstone, in his 70s, may want to reshuffle his empire before retiring – and that might create something for Ovitz, a Redstone friend. Ovitz reportedly also continued to eye Time Warner. The media con-glomerate–with holdings in music, film and television–is the envy of Hollywood. If CEO Gerald Levin can’t push Time Warner’s stock price up from around $40 to, say, $50 a share, he could be in trouble – another opportunity for Ovitz.
Yet Ovitz was clearly itching for a new challenge–now. And if he does take over MCA, he will hardly be content to let the studio stand pat. Indeed, one snag in the last-minute negotiations was Ovitz’s desire to take CAA’s corporate and financial con-suiting services, such as its ad business, along with him. (In some recent years, the consulting business has accounted for nearly half of CAA’s revenues.) Bronfman resisted because these services are peripheral to Seagram’s core business.
That core business is already impressive, ranging from movies to theme parks. And there are any number of ways that Ovitz and Bronfman could make it bigger still. Analysts are already speculating that they may make a run for CBS. Interactive Tele-TV, Ovitz’s new venture with the three Baby Bells, could also find a home at MCA. MCA would be a vast new playground for Ovitz, and he’ll want as many toys as he can have. After all, dealmaking is in his blood. He’s not about to stop now.
1988: Ovitz puts together the package that produces the Oscar-wining film “Rain Man.” He represents stars Dustin Hoffman and Tom Cruise, plus director Barry Levinson.
1989: Sony hires Ovitz to advise on its $3.4 billion acquisition of Columbia Pictures. CAA reportedly takes home $10 million.
1990: The superagent brokers Matsushita’s $6.6 billion purchase of MCA/Universal–the largest buyout to date of an American company by a Japanese concern.
1991: CAA snares the Coke Classic ad account, rattling traditional advertising agencies. A new star is born: the Polar Bear.
1993: Ovitz persuades a French bank to prop up MGM/UA. Rivals blast him for conflicts of interest by representing the stars and the studio. Next coup: “Jurassic Park.”
1994: Ovitz teams up with three Baby Bells to create Tele-TV, a video service that will carry interactive services over phone lines.
Michael Ovitz’s firm, Creative Artists Agency, represents more than 1,000 clients, including Tom Hanks and Steven Spielberg. Ovitz is best known for “packaging” his actors, writers, producers and directors in single film projects, such as “Interview With the Vampire.” Here are some of last year’s highest-grossing films, which were packaged to include past and current CAA clients:
SOURCE: CREATIVE ARTISTS AGENCY ROHR, MCMANUS–NEWSWEEK
If Ovitz gets the top job at MCA, he’ll inherit an entertainment conglomerate that includes, among other things, a movie studio, a record company, theme parks and even a retail chain.
