Coke Makes Consulting Deal With Ovitz’s Agency : Companies: Precedent-setting pact puts CAA’s star-making machinery at fingertips of soft drink giant.


Hollywood super-agent Michael Ovitz--who has shaped the careers of such celebrities as Kevin Costner, Steven Spielberg and Robert De Niro--will try to work his magic on a soft drink.

In an unprecedented move, Coca-Cola Co. of Atlanta on Wednesday announced that it has hired Ovitz’s Creative Artists Agency as its worldwide media and communications consultants. CAA will advise the soft drink giant--which is trying to regain the cola marketing edge from archrival Pepsico--on everything from advertising strategy to talent tie-ins.

The agreement significantly blurs the distinction between Madison Avenue and Hollywood, putting the star-making machinery at the fingertips of one of the world’s most ubiquitous consumer companies. It also expands Ovitz’s sphere of influence beyond the world of entertainment, where he has become recognized as Hollywood’s leading power broker.

“California sets the cultural agenda for the world,” said Peter S. Sealey, Coke’s senior vice president and director of global marketing. And CAA “knows what songs we’ll be singing next year and what motion pictures we’ll be seeing in December, 1992.”


The talent agency will advise Coke at both the creative and corporate levels, Sealey said. CAA already has submitted more than 50 ideas for improving advertising and marketing, sources close to the deal said.

Though Sealey says the deal with CAA is not aimed at blunting the marketing challenge from Pepsi, the talent agency’s formidable roster of actors, directors, singers and athletes is sure to be enlisted in the effort to promote Coke products. CAA agents, accustomed to packaging such projects as “Rain Man” and “The Golden Girls,” now also will help frame Coke’s advertising strategy.

Coke controls nearly half of the $47-billion-a-year worldwide soft drink market--dwarfing Pepsi, which controls only 15%. But it has been locked in a fierce battle domestically with Pepsico. Pepsi has 33.2% of the American market to Coke’s 40.9%

Both companies spend about $200 million annually on U.S. advertising. But a survey last month for the trade publication Adweek found that American TV viewers prefer Pepsi’s commercials. About 24% of the people surveyed said their favorite ad in the past month was a Pepsi ad, while only 8% named Coke, according to the survey by Opinion Research Corp.


Advertising companies in general have relied increasingly on Hollywood stars to sell products in recent years, and some see the CAA-Coke marriage as the natural end result. Pop stars are also no strangers to soda pop. Such celebrities as Paula Abdul and Elton John already promote Coke, while Michael Jackson has been one of Pepsi’s pitchmen.

The financial terms of the deal were not disclosed. But sources close to the talks said it is open-ended. In a formal statement, Ovitz said a Coke development team--including CAA co-founder Bill Haber, movie department co-head Jack Rapke and agent Paula Wagner--had been formed.

The deal originated in Ovitz’s longtime links to Coke’s top executives. Ovitz worked with the soft drink manufacturer when the company owned Columbia Pictures; in 1989, he helped broker the sale of Columbia to Sony Corp. for $3.4 billion.

Jeffrey Logsdon, an entertainment analyst with Seidler Amdec Securities in Los Angeles, said the Coke deal dramatically distinguishes Ovitz from his colleagues at other entertainment agencies.

“No other agency is as powerful,” Logsdon said. “With this deal, the sky’s the limit.”

Some ad and marketing executives see the CAA deal as a slap in the face to Coke’s two giant New York ad agencies--McCann-Erickson Worldwide, which handles the Coke brand, and Lintas: Worldwide, which creates ads for the Diet Coke brand.

Coke, the experts suggested Wednesday, seemed to be saying that it is so unhappy with Madison Avenue’s concepts that it is obliged to turn to Hollywood instead.

“Pepsi advertising has really been top-of-mind while Coke has been all over the place,” said Greg M. Ostroff, analyst at the New York investment firm Goldman Sachs & Co.


Executives from both ad agencies declined to comment.

In its earlier foray into Hollywood--its short-lived ownership of Columbia--Coke was trying to cash in on a boom period in the movie business. Now, marketing executives say, Coke clearly is striving to do a better job of peering into the future in hopes that it can somehow forecast consumers’ preferences long before they even know what they want.

“They’re looking at creating marketing innovations in the egg before the chicken is even walking around,” said Jesse Meyers, publisher of the trade publication Beverage Digest. “Coke is looking to make deals on things that haven’t even happened yet.”

Creative Artists, for example, often knows years ahead of time about forthcoming movie blockbusters and their lineup of stars. The agency’s advance knowledge could give Coke a head start in linking its brands with top celebrities.

Pepsi’s ad agency--BBDO Worldwide--and the cola company’s in-house image makers have had a knack in recent years for teaming Pepsi with celebrities as they’ve reached their peak of popularity, analysts note.

Some advertising experts say the move by Coke is little more than an overreaction to recently losing its superstar spokesman Michael Jordan, the Chicago Bulls basketball star, to Gatorade.

“I find it curious that Coke is spending so much to get good celebrity relationships when its problems are more broadly in marketing,” said Andrew Jaffe, editorial director of the trade publication Adweek. “They need a great global campaign, but that turns on great ideas--not on who they sign up.”

Another expert on brand image-shaping said that as sales promotions become increasingly important, Coke may be setting a trend that others will follow.


If so, said Joel Portugal, partner in the consulting firm Anspach Grossman Portugal, the ultimate loser may be conventional ad agencies.

“Over the next 20 years, advertising agencies will play a much less important role in the scheme of things,” Portugal said. “Companies like Coke will have to go elsewhere for expertise. Remember, Coke isn’t looking for advice in the soft drink business. It needs expertise in the entertainment business.”

In Creative Artists Agency, Coke is getting an entertainment company increasingly involved in matters outside Hollywood.

Ovitz and his colleagues have strong ties to the New York financial community. In addition to the Sony-Columbia deal, CAA helped to broker Matsushita Electric Industrial Co.'s $6.13-billion purchase of MCA Inc. this year.

CAA also has consulting contracts with Paramount Communications Inc. and Apple Computer and has worked on behalf of several other entertainment firms.

Its talent roster is equally strong. CAA’s clients include actors Costner, De Niro, Tom Cruise, Dustin Hoffman and Robert Redford; directors Spielberg, Barry Levinson and Penny Marshall; and Madonna.

“What you’re watching is the evolution of a traditional talent agency into an investment banker and industry consultant,” said one leading entertainment executive. “This is the first time it’s happened in history. But it is clearly the direction of CAA.”

Ovitz, a private man who for years was best known for his adherence to Japanese management principles, has moved into the public eye more recently through political and charitable activities. He was rumored to be interested in heading a major studio after the MCA and Columbia deals, but sources close to the company say he is just as likely to stay at CAA.

With Hollywood in economic decline, CAA’s diversification into other areas is well timed. Analyst David Londoner has projected that studio profits will tumble 20% this year, after dropping 15% in 1990. Talent agencies are feeling the pinch from reduced talent fees.

People close to the deal said CAA’s role will be better defined in the months ahead as the talks with Coke progress. CAA is not expected to play a role in placing Coke products in movies, a common advertising practice. Nor is Coke expected to fund movie projects.


Profile: Michael Ovitz

Creative Artists Agency has been retained by the Coca-Cola Co. to revamp its marketing and advertising strategies. CAA’s chairman, Michael Ovitz, has recently become a super-dealmaker in addition to a super - agent. Ovitz successfully brokered Hollywood mega-deals on behalf of Sony and Matsushita--Sony’s $3.4-billion purchase of Columbia Pictures and Matsushita’s $6.13-billion buyout of MCA.

Age: 44

Born: Los Angeles

Education: Received a bachelor of arts degree from UCLA in 1968.

Personal: Married to the former Judy Reich. They have three young children. Both Ovitzes are involved with the Pediatric AIDS Foundation and the Environmental Media Assn. He is a member of the board of St. John’s Hospital, Cedars-Sinai Medical Center and the UCLA Medical Center, as well as a member of the Chairman’s Council of the Museum of Modern Art in New York and the Los Angeles Music Center Board of Directors. Ovitz ranks among the country’s top private art collectors and has been an active fund-raiser for Sen. Bill Bradley (D-N.J.) and Sen. Bob Kerrey (D-Neb.)

Resume: Ovitz got his first job in the entertainment industry when he was a college student, working as one of the original tour guides at Universal Studios. After college, Ovitz got a job in the mail room of the William Morris Agency, where he rose through the ranks over the next seven years. In January, 1975, Ovitz--along with other former William Morris Agency colleagues Ron Meyer, Bill Haber, Michael Rosenfeld and Rowland Perkins--formed Creative Artists Agency. The agency grew during the 1980s, becoming a major packager of prime-time television series and miniseries. The company’s current roster of more than 600 clients includes Tom Cruise, Robert Redford, Sylvester Stallone, Bill Murray, Dan Aykroyd, Chevy Chase, Glenn Close, Kevin Costner, Jane Fonda, Meryl Streep and Cher.

Business philosophy: “Every client has something he wants to do. They all have a passion about it. So our job is to take the client’s passion and to . . . extend it into reality.”