The Humbling Of Mike Ovitz

Painfully, the ex-superagent gets a corporate education

As the kingmaker atop Creative Artists Agency Inc., Michael S. Ovitz wielded nearly unlimited authority and answered to no one. But Ovitz traded in his autonomy eight months ago when he left CAA to become just another employee at Walt Disney Co. True, Ovitz has the title of president, is charged with fixing the company's thorniest problems, and is billed as Chairman Michael D. Eisner's partner in running the media conglomerate. That he is also Eisner's best friend can't hurt.

But the 49-year-old is finding that corporate life can be tricky, as a recent string of dustups and bruised executive egos has shown. With Disney's stock down 13% since Mar. 14, the pressure is on Ovitz, as Eisner's proxy and likely heir, to show that he can deliver as a corporate executive. "This isn't CAA, where everyone needs to do business with Michael," says a longtime Ovitz associate. "You have [at Disney] powerful people in their own right who don't owe Michael Ovitz their jobs."

CUT-RATE ADS. By far, Ovitz' biggest headache is helping Eisner fix ABC, the television network that Disney paid $19 billion for in February, only to see its ratings go into a steep decline. ABC came in a humiliating third in the February sweeps, and its ratings are down 12% for the season. Furthermore, the margins at ABC's 10 owned-and-operated stations--which provide a big chunk of its profits--have slipped from the mid-50s to the high 40s in the last two years, says Merrill Lynch & Co. media analyst Jessica Reif, who also estimates that ABC's earnings this year will fall 9%, to $365 million, as it is forced to hand out a rash of cut-rate ads to mollify advertisers.

ABC's tumble from top-rated network status just last season has left many of its affiliates eager for a turnaround. In a February address to 225 affiliates, Ovitz and Eisner promised a quick improvement. "ABC is going to be No.1 again, and then it is going to be No.1 forever," Eisner vowed. But midway into the May sweeps, ABC is still No.3. "While affiliates are perhaps a bit surprised at the speed at which problems have developed, [there is a] breakneck, intense effort to regain the momentum that has been lost," says Cox Communications Inc. executive Andrew S. Fisher, chairman of the ABC affiliate board.

Ovitz is clearly Eisner's designated point man on ABC, though Eisner remains heavily involved in repairing the prime time schedule and spends much of his time on Disney's powerful animation unit. But both men have moved in full time at ABC's offices in Century City, Calif. Ovitz had hoped to placate affiliates by announcing shortly after the disastrous February sweeps that he had hired away NBC Inc. programming whiz Jamie McDermott to head ABC's entertainment unit, industry sources say. But while talent raids may be par for the course in the agency business, Ovitz' move didn't go over well in the more corporate culture of network television. For one thing, ABC's current entertainment chief, Ted Harbert, was apparently unaware that he might soon be reassigned. NBC executives complained bitterly about Ovitz' tactics in recruiting McDermott, who was under contract, and placed her on a leave of absence until June 15, when she is expected to be released to join ABC.

Now, Harbert, who is seen as a lame duck, is charged with drawing up ABC's crucial fall schedule under Ovitz and Eisner's close supervision. The network has not had a hit in two years, and some better-known shows, such as Roseanne, are fading. The network will announce its new fall lineup on May 20. "I think anyone might hazard a guess that the pressure is on over there," says media buyer Betsy Frank of Zenith Media Services Inc. "New management came in, and there's been very visible infighting in the ranks."

Ovitz caused even more executive unease as speculation mounted that he would soon hire his friend Howard Stringer as a top Disney TV executive. At CAA, Ovitz had recruited Stringer in 1994 to head Tele-TV, a partnership of Pacific Telesis, Bell Atlantic, and Nynex, to offer interactive TV over phone lines. ABC President Robert A. Iger was uncomfortable about the rumors, industry sources say, and Disney took the unusual step of issuing adamant statements to contradict them.

Hollywood insiders say that Disney's studio chief, Joe Roth, has also been uneasy with some of Ovitz' maneuvers. Roth, who was once Ovitz' client at CAA, is said to have bristled as Ovitz circumvented him and personally tried to cut a deal with TV producers Bernie Brillstein and Brad Grey, and then signed other former clients--actor Sean Connery and director Martin Scorcese--to lucrative studio deals. The studio chief had previously reported directly to Eisner, and he asked for continued independence when Ovitz was hired. To mollify Roth, Disney reorganized his duties in mid-April and handed him control of television production as well. But to do that, Ovitz had to ease aside Disney TV chief Dennis F. Hightower, who retired. Ovitz and Roth declined to comment for this article.

TEEN TV. Surely, some of Ovitz' moves in his new role as a Disney executive have been successful. He lured highly regarded Nickelodeon executive Geraldine Laybourne away from Viacom Inc. in December to run Disney's cable unit, which includes both the Disney Channel and ABC's interests in Lifetime and the Arts & Entertainment Cable Network. She is expected to launch several new cable channels, including an all-news offering and one for teens. The latter is especially important to Disney, which allowed Viacom to claim the young-adult audience with Nickelodeon and MTV, while Disney's smaller pay-cable channel catered largely to younger children.

Before taking on the ABC rescue mission, Ovitz had concentrated on Disney's foreign operations, which made up 29% of Disney's $12.1 billion revenues in 1995. His goal is to get it closer to 50%. To help do that, he trekked to China three times to explore building a theme park there. Disney doesn't actually own its popular Japanese theme park. It just licenses the name to Oriental Land Co. in exchange for management fees and royalties. Disney badly wants to open an Asian park that it owns outright.

Ovitz also wants to spend some of his time on smaller projects that personally interest him, like jump starting Disney's interactive-game unit and its Hollywood Records, which has yet to break a major act. And he's pushing for Disney to purchase a pro football team to play in Los Angeles. Sound like his plate is too full? Ovitz likes cutting deals, and his current projects show he prefers planting a finger in as many pies as possible. But perhaps his most important lesson, as he learns to run a public company, may be not to let a pricey acquisition--and one of his biggest businesses--run aground on his watch.

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