The Hollywood Threat to Madison Avenue : Advertising: The stock in trade of ad agencies has always been ideas, so why is Coca-Cola going to Michael Ovitz?

These are hard times for Madison Avenue. A few years ago, the British started buying up America’s prime advertising agencies--J. Walter Thompson, Ogilvy & Mather, Compton and Ted Bates. Then, when clients found out what the Brits were paying for these agencies--allowing people with whom they had played golf to pocket payouts in the $25 million to $100 million range--they became very cross. Pretty soon, the agencies were being paid on a straight fee basis, not the accustomed 15% commission on media expenditures.

The larger ideas that people like David Ogilvy in the 1950s and ‘60s and Jay Chiat in the 1970s and ‘80s delivered to their clients (with concepts like David Ogilvy’s eye-patched “Man in the Hathaway Shirt” and Chiat’s “1984” ad to launch MacIntosh computers) suddenly became trivialized. Companies watching quarterly profits started asking questions about what it costs to produce an ad. The overall creative level of American advertising fell markedly in this restrictive atmosphere.

Now comes last week’s announcement that the Coca-Cola Co. has retained a Hollywood talent agency, Creative Artists Agency, and its principal, Michael Ovitz, to put it in touch with “global pop culture.” This certainly marks a watershed in the humbling of the nation’s advertising and marketing communities.

Advertising’s great ideas, after all, don’t exist in a vacuum. They’re intended to make a connection with the consumer--and if that connection is true, sales spurt. To do that, ad-makers have to be able to “read” the culture of the consumer.

Recently, Pepsi appears to have made such a connection with its “You’ve got the right one, baby. Uh-huh” campaign. I’d be hard put to explain in 500 words or less what that line means--but the way it’s expressed seems to have resonated with America’s pop culture. In the same class are Weiden & Kennedy’s recent “Just do it” campaign for Nike, and Foote Cone Belding’s “501 Blues” series for Levi’s.

Can Michael Ovitz make a great ad? I don’t believe so. But he can certainly come up with the idea that gives birth to such an ad. The more important question is: Could McCann-Erickson, Coke’s agency of record, do the same thing? Coca-Cola marketing chief Peter Sealey said recently that he hired his old friend Ovitz and CAA because “The culture that comes out of L.A.--films, television, recorded music, concerts--is the popular culture of the world and it is through that culture that wecommunicate with consumers of Coke and Diet Coke. We have to be ahead of popular culture today. Michael is at the crossroads of that--the conception, the birth of these projects.”

Make no mistake, being at “the conception” of great ideas and being able to read global culture is what American ad agencies used to do best. “This is one of the chief areas where we are expected to serve our clients,” says Keith Reinhard, head of the DDB/Needham agency, who has been trying to develop new agency structures to deal with changing client attitudes. He notes that advertising itself is pop culture--Bartles and Jaymes are real people to some Americans; we all think affectionately of the mustachioed Dunkin’ Donuts man losing sleep worrying about whether his donuts are fresh enough.

“We used to think that ads were at the center of a (company’s) communications program. But now we know that ideas are at the center,” says Reinhard. “A great idea may start with an ad, an event, a package or a product--but what agencies have got to do is concentrate first on the idea, not the ad.”

Peter Sealey and Michael Ovitz may not have set out to threaten Madison Avenue. But Ovitz is going to be paid handsomely for his marketing advice--more, perhaps, than McCann will net from making the ads that will grow from the ideas.

Ovitz’s ability to provide Coke with an inside track to CAA’s substantial client roster--stars like Cher or Madonna or Sylvester Stallone--doesn’t strike terror in the heart of advertising people.

But if Ovitz can legitimize Hollywood power brokers as readers of culture and sources of great marketing, then many people in advertising today will have to ask what they’re going to be doing in five years.