Japan’s Hollywood Scouts : Movies: A troika of insiders is guiding Japanese investors eager to take on the risky world of filmmaking in America.

When the Japanese come calling in Hollywood, one of their first stops is usually talent agent Michael Ovitz’s sleek new I. M. Pei building in the heart of Beverly Hills, attorney Peter Dekom’s elegant wood-paneled office high above Sunset Boulevard, or Jake Eberts’ table at the Polo Lounge in the Beverly Hills Hotel, where the London-based producer frequently resides.

Ovitz, Dekom and Eberts are part of an elite corps of Hollywood insiders who have served as location scouts for Japanese investors eager to get into the glamorous--but risky--world of moviemaking. Not content to rely only on New York investment bankers, the Japanese have turned to Hollywood’s insiders to advise them on talent and movie projects, to sort out the charlatans and self-promoters from the true success stories, to make introductions to trustworthy business partners.

“The history of outside investments in Hollywood has been a fairly unfortunate one,” says Christopher Murray, an O’Melveny & Myers attorney who worked on the recent formation of Media International Corp., a $200-million consortium of major Japanese companies that will fund everything from movie production to sports programming. Adds Robert Cort, president of Interscope Communications: “A lot of people who have come into Hollywood have done so with a real sense of arrogance.”

The Japanese want to avoid the mistakes of past investors.

In Hollywood, reality is rarely what it appears to be. An executive producer credit can mean no more than that the lucky recipient finagled part of an option on a movie script. A movie that looks like a box-office hit can actually be a money loser. A star with a household name could be at the brink of a career slide.

“Investment bankers can evaluate the worth of an investment on the basis of economics,” says Lee Rosenberg, a partner with Triad Artists talent agency. “We see things from a different perspective--the human element, the creative side.”

That’s where Japan’s Hollywood-based contacts come in. Forty-three-old Dekom cuts his own swath in the cliquish world of Hollywood. He and his firm--Bloom, Dekom & Hergott--are known for doing more than simply giving legal advice to such clients as actors Arnold Schwarzenegger, Bruce Willis and Kim Basinger, directors George Lucas and Ron Howard, and producers Don Simpson and Jerry Bruckheimer. Dekom and his partners also know who’s up and who’s down, which companies are in need of cash, and which studio executive is coming in or going out (Universal Pictures Chairman Thomas Pollock was a partner in the firm, and clients have included 20th Century Fox chairman Joe Roth and former Columbia Pictures President Dawn Steel).

About three years ago, JVC/Victor Co. of Japan joined the firm’s roster, with Dekom and his partner Melanie Cook doing general legal work for the company. Then JVC officials said they wanted to invest in Hollywood. Dekom looked around at the options, but didn’t like what he saw.

“In those days, people were submitting things to Japan (for financing) that they couldn’t get any other way,” Dekom recalls. So Dekom proposed what he calls his “home-grown” solution. He introduced JVC to another client, producer Lawrence Gordon. The Japanese last year agreed to invest $100 million in equity and debt guarantees in a new company called Largo Entertainment to be run by Gordon. Dekom designed the business plan (in return he was given a small ownership position), and JVC agreed to cede total creative control to Gordon.

Eberts was no stranger to international financing or moviemaking. The former Canadian chemical engineer and financier founded the independent film company Goldcrest, which released such Oscar-winning pictures as “Chariots of Fire” and “Gandhi” before its demise (which Eberts has chronicled in a new book, “My Indecision Is Final”). Eberts has strong ties to such English film people as David Puttnam and Richard Attenborough and has raised money for filmmaking efforts from overseas sources.

Nomura Babcock & Brown--a joint venture between the Japanese securities giant and an American financing firm--plucked Eberts’ name off a short list of major Hollywood producers and put him to work looking for investment opportunities. “He was a consultant, advising us on the inner workings of the industry.” says Richard Koffey, managing director of Babcock & Brown, the San Francisco firm that has teamed with Nomura Securities Co.

Eberts helped the company settle on a strategy of cautiously wading into Hollywood’s murky waters with a couple of $100-million investments in well-capitalized independents. Murray served as Nomura’s attorney.

After Eberts made the introductions, Nomura Babcock invested $100 million in Morgan Creek films (now distributed by Warner Bros.) and committed to at least $100 million investment in Interscope movies to be distributed and co-financed by Disney. Both independent companies have enjoyed strong success: Morgan Creek with films like “Young Guns”; Interscope with hits like “Three Men and a Baby.”

Eberts, who declined to discuss the details of either deal, noted that once an introduction is made, the Japanese--or their American partners--take over the negotiations and his role is phased out. Morgan Creek chief executive James Robinson, for example, has negotiated directly with Nomura Babcock since that first introduction more than a year ago.

“The Japanese have a tendency to do a lot of reconnaissance,” says Robinson. “While initially they use intermediaries, once they get into a deal, they will use their own people.”

The point man who has made the biggest splash is Ovitz, now advising Matsushita Electric Industrial Co. on its hoped-for buyout of MCA, owner of Universal Pictures--a deal that could be worth anywhere from $6 billion to $8 billion. Industry sources say CAA has been advising Japanese companies for five years now, but it wasn’t until Ovitz’s name popped up in Sony’s search for a studio that some details about his sideline business surfaced.

In late 1988, Sony hired Ovitz as a consultant once it began shopping in earnest for a Hollywood studio. His connection to Sony came through the former chief of Sony’s CBS Records unit, Walter Yetnikoff, according to industry sources. Yetnikoff’s relationship with Ovitz dated back to his movie deal with Disney, which Ovitz had brokered. (Out of that deal came just one movie credit for Yetnikoff--as executive producer on “Ruthless People.”)

According to insiders, Sony officials who met Ovitz were particularly impressed by his early and accurate predictions of box-office and Academy Award attention for “Rain Man,” a film starring CAA clients Dustin Hoffman and Tom Cruise and directed by CAA client Barry Levinson.

Sony already had an investment bank on retainer--New York’s Blackstone Group--but it needed Ovitz to give an insider’s view on studios that it was interested in buying, particularly MGM/UA, Columbia Pictures and MCA. His efforts included assessing each company’s movie slate and valuing the studios’ ties to talent.

Sources close to the deal say Ovitz also smoothed rough waters between Sony’s Yetnikoff and then-Columbia chief executive Victor Kaufman.

Ovitz’s efforts apparently were impressive enough to earn a job offer from Sony once the Japanese company settled on Columbia Pictures. Ovitz turned it down, however, and Sony--following Yetnikoff’s advice--hired producers Peter Guber and Jon Peters.

Ovitz’s role in leading Matsushita to MCA came as no surprise to those familiar with that Japanese company’s corporate style. “(Matsushita executives) are not real risk takers,” said Steven Clemons, executive director of the Japan America Society. “They are using Ovitz because he was successful with Sony.”

There remains widespread speculation inside Hollywood that Ovitz will eventually take a top job at MCA if the deal goes through, though CAA officials say there are no current plans for him to do so. Still, the speculation has been greeted with glee by competing agents, who are hoping that an Ovitz departure would weaken CAA, and some studio executives, who blame CAA’s aggressive dealmaking on behalf of clients for the rise in movie production costs.

Regardless of Ovitz’s future plans, these Japanese connections could be quite lucrative for CAA. It is unclear what the agency earned for its Sony services--or what it will earn if Matsushita’s bid for MCA goes through. But knowledgeable industry sources say it is possible that CAA could make the equivalent of an investment banker’s fee, or .5% of the total deal. On an $8 billion buyout of MCA, that fee would be $40 million. (While CAA’s total revenues are a closely guarded secret, some very rough estimates put them at about $70 million.)

Given the potential earnings from acting as Japan’s tour guides, it’s little wonder that other talent agencies also are turning their attention in that direction. ICM has advised some Japanese media concerns in the past and is expected to do much more in the future. Triad’s Rosenberg has made trips to Japan to drum up business for his agency.

At this point there appears to be plenty of business to go around. When attorney Murray spoke at a Tokyo seminar on Hollywood investment last spring, the room was packed with representatives of industries as diverse as steel and energy. “Even Osaka Gas sent several representatives,” he noted. “That would be like SoCal Edison investing in Hollywood.”

BACKGROUND In the last three years, major Japanese companies have started financing Hollywood movies and looking for takeover targets among the major studios. The electronics giant Sony Corp. bought Columbia Pictures last year for $3.4 billion. Matsushita Electric Industrial Corp. is now considering a buyout of MCA, which owns Universal Pictures, for a reported $6 billion to $8 billion. In these, as well as much smaller deals, the Japanese have turned to Hollywood insiders to provide needed expertise on movies, actors and entertainment executives.

THE POWER BROKERS AND THE ROLES THEY PLAY MICHAEL OVITZ

Chairman of Creative Artists Agency

In late 1988, Sony hired Ovitz as a consultant once it began shopping in earnest for a Hollywood studio.

PETER DEKOM

Attorney

Dekom helped JVC/Victor Co. of Japan finance its own production company, run by Dekom client Lawrence Gordon.

JAKE EBERTS

Producer and financier

Eberts helped Nomura Babcock & Brown settle on a strategy of investing in a pair of Hollywood independents.