CAA Bets on Kavner’s Multimedia Moxie

Somewhere out there--maybe in Silicon Valley, or perhaps in Hollywood--is the Ed Wood of interactive multimedia: an auteur whose digital destiny is to produce the CD-ROM equivalent of “Plan 9 From Outer Space.” Part of Bob Kavner’s job today is to make sure Creative Artists Agency doesn’t do that deal.

That’s not the sort of creative challenge Kavner faced as AT&T; Co.’s designated multimedia mogul, but what the heck! There’s no business like show business. When CAA chief Michael Ovitz made Kavner the agency’s multimedia maven in June, it was widely--and rightly--regarded as a very clever move, a strategic coup.

Here was a top executive of the world’s largest telecommunications company--who spearheaded AT&T;’s $7-billion acquisition of computer maker NCR and oversaw practically every multimedia investment the company made--coming to a Hollywood talent agency that viewed digital technologies as creative media in their own right. So what if close scrutiny revealed a curious lack of success in AT&T;’s multimedia portfolio? CAA’s high profile would buy instant credibility in technology.

After all, a charismatic Michael Ovitz might eloquently articulate a vision of tomorrow’s entertainment software to CAA’s corporate clients, but what does he know of ATM and frame relay technologies compared to massively parallel multimedia servers? A Kavner type can credibly discuss new-media technology trade-offs with the Baby Bells, the TCIs, the Matsushitas and the Microsofts.

And, in light of where all these new media might be going, a Kavner could wield far more influence--and make far more money--being CAA’s multimedia maven than AT&T;’s multimedia mogul. That’s CAA’s--and Kavner’s--gamble.

“When it comes to this new world, there is no master script,” Kavner says. “As we represent clients in traditional media, we need to see how we can grow existing business into new venues. . . . We are bringing our clients to the opportunities that are just beginning in interactive media, and we’re bringing the interactive media companies in here to explore what we can do with them and for them.”

Smoothly and precisely, Kavner details a few of the ways CAA is now trying to restructure the relationships between the technical and creative communities. Nothing on any pending deals with the Baby Bells, mind you, but for the comparatively tiny CD-ROM development business, Kavner says, ‘let’s break the economic model.” Instead of creative talent negotiating for a chunk of the revenue, he observes, “let talent become an investor in the business. . . . Let’s shift the focus from the revenue stream to equity participation.”

In other words, CAA will become a strategic media investor for its clients--a radical departure for a talent agency.

And that loops back to the questions about Kavner’s record in running AT&T;’s multimedia business. The answers aren’t flattering. If, as the saying goes, success has a thousand fathers while failure is an orphan, then Bob Kavner could be sued for nonsupport.

Back in January, for example, Kavner gave the keynote address at the Winter Consumer Electronics Show and took that opportunity to demonstrate an AT&T; venture-funded video game communications product called “The Edge.” It was supposed to be an example of the phone company’s commitment to the consumer market. AT&T; killed it in September.

In August, AT&T; announced that it would take somewhere between a $50-million to $80-million third-quarter charge for shutting down its Eo unit, a personal communicator company that Kavner played an integral role in championing and acquiring. Similarly, AT&T; was a major supporter of 3DO, a much-hyped video game hardware company that has been struggling since its launch more than a year ago. AT&T; has also had a tough time scaling up its ImagiNation Network, an investment it made in the tiny but innovative Sierra Online.

But it is equally fair to say that AT&T; has proved far better at cutting checks than adding value to its multimedia investments. On an objective financial basis, there are few venture capitalists who envy AT&T;’s investment returns. On relationship terms, there are few multimedia entrepreneurs who are still enthusiastic about their AT&T; partners.

Kavner bristles at the criticism. “Only if you believe in long shots would those investments have had an impact on AT&T;,” he fires back, correctly noting that he spent only a small portion of his management time on new-media firms. “It may have been strategic investments for them, but those were tactical deals for us.” In other words, it was no big deal.

Of course, much of AT&T;’s multimedia investment difficulties arise from the fact that the company was as much, in the words of AT&T; Chairman Robert Allen, “placing bets” on a broad range of companies as hewing to any particular strategic vision. When you mix that with AT&T;’s massive bureaucracy and divisional infighting, you have an institutional recipe for trouble. More often than not, Kavner’s multimedia shop proved incapable of overcoming those barriers.

But he politely dismisses any suggestion that those barriers played a role in his decision to leave AT&T; for CAA.

The core issue here is not AT&T;’s undeniably spotty investment record in multimedia, but what that might imply about CAA’s future multimedia relationships. It’s one thing to get points on a movie; it’s quite another to own 20% of a company that’s worth nothing. No doubt acquiring Kavner gives CAA new opportunities to do new kinds of deals. But as Kavner well knows, doing the deal is far easier than doing the technology. Unless it cares to repeat AT&T;’s mistakes, CAA and Kavner are going be spending less time doing deals and more time implementing them.