Super-Agent Ovitz Gets No. 2 Post at Disney : Hollywood: Move shifts industry power balance, pairing CAA chairman with best friend Eisner.

In a seismic move that dramatically shifts the balance of power in Hollywood, Walt Disney Co. on Monday hired as its second-in-command talent agent Michael S. Ovitz, regarded as the most powerful executive in entertainment over the past decade.

The surprise announcement naming Ovitz as president--and as a Disney director--puts him side by side with his best friend, Disney Chief Executive Michael D. Eisner, in running what will soon be the world’s biggest entertainment conglomerate. Just two weeks ago, Eisner made an an equally jolting announcement when he disclosed that Disney plans to buy television and publishing giant Capital Cities/ABC in a deal valued at about $19 billion.

Ovitz, chairman of the powerful Creative Artists Agency, assumes a post held by the late Frank G. Wells, who was killed in a mountain helicopter crash in Nevada on Easter Sunday in 1994. Eisner since then has resisted taking on a new president to the point of openly spurning his former studio chief, Jeffrey Katzenberg, who campaigned for the job and left in a bitter falling out when he didn’t get it.

Ovitz, 48, would appear to be the clear Disney heir apparent, although Eisner is only 53 and said in an interview that he has told Disney directors he will be at the company at least 10 more years. Disney directors and executives stressed that any decision to name a successor to Eisner would ultimately be up to the company’s board of directors, and that Ovitz has not been promised the job in advance.

“We haven’t discussed succession at the company, but he’s the No. 2 man and if something happens to me, he’d be a pretty good candidate,” Eisner said.

The news flashed through Hollywood within minutes early Monday as phones went into overdrive. Ovitz’s former CAA partner, Ron Meyer, now president of MCA, received the news from his office on a boat off Corsica, where he was vacationing with Warner Bros. Co-Chief Executive Terry Semel.

Ovitz’s departure turns upside down the agency business, which CAA has dominated over the past two decades. And it adds a significant new dimension to the increasingly global and competitive entertainment business as today’s most successful talent agent joins the industry’s most powerful company.

Led by Ovitz, agencies developed increasing power to package films, with star salaries shooting past $20 million a picture. Studio executives complain that the system has raised costs to the point where it is more difficult to make a profit.

CAA’s primary competitors--International Creative Management, the William Morris Agency and United Talent Agency--are expected to launch a feeding frenzy to lure away major agents and clients uneasy with the turmoil.

“We’ll try to capitalize on all of this confusion,” said the head of one rival agency. Wall Street, which has in the past expressed concerns that Eisner has no clear successor amid its ABC acquisition, reacted favorably. Disney’s stock closed up $2.50 to $59 on volume of 2.8 million shares.

“From a Disney standpoint, it’s very good because it gives Michael [Eisner] some help, which he certainly needed,” said Warner Bros. Co-Chairman Robert Daly. “And for Michael Ovitz it’s a great opportunity to run such a major corporation. There are no losers here.”

Ovitz’s job involves overseeing Disney’s three operating divisions--filmed entertainment, consumer products and theme parks--and eventually ABC when Disney formally acquires the network next year. He is expected to spearhead Disney acquisitions--after digesting ABC, the company is likely to either buy a record company or launch a major internal effort to build one--as well as help Eisner oversee what is becoming an increasingly sprawling empire.

Expanding its global theme park business, which includes Disneyland and Disney World, also is expected to be a top priority. Less certain is Ovitz’s role in a telecommunications venture Disney has with regional phone companies. At CAA, he worked on a similar venture and may need to recuse himself from the operation because of potential conflicts of interest, sources said.

In Ovitz, Eisner is getting not only one of Hollywood’s most competitive executives, but one who has been privy to numerous details about some of Disney’s major rivals. In recent years, Ovitz has been involved in consulting deals related to Sony Corp., MCA and Metro-Goldwyn-Mayer.

Because Ovitz is expected to be preoccupied with major strategic and organizational issues, Disney’s business heads--such as studio chief Joe Roth--are expected to retain substantial autonomy. Sources said that Roth is likely to take on added tasks through a reorganization soon, including television, animation and video.

Lacks CEO Title

Ovitz does not have the chief operating officer title that Wells held, nor does he report directly to Disney’s board, as Wells did. Hollywood sources speculated that the lack of the operating title was Eisner’s way of retaining more power.

But company sources attributed the lack of the operating title to the fact that two top executives--corporate operations chief Sanford Litvack and Chief Financial Officer Stephen Bollenbach--report to Eisner and will continue to do so. Sources said that leaving out the title was done more to soothe feelings of senior Disney executives who must get used to the idea of Ovitz coming aboard.

Details of Ovitz’s pay package and contract--described only as “long term” but believed to be from five to seven years in length--will eventually be filed by Disney with the U.S. Securities and Exchange Commission. It is likely, sources said, that it will be weighted far more toward incentives than base salary, and laden with options, incentives and bonuses that by conservative estimates could soar past a total of $100 million over several years if the company performs well.

Eisner’s pay package is similarly structured. Since taking over Disney in 1984, Eisner has been the top-paid executive in the country, with a performance-based package that has earned him more than $600 million in pay, bonuses and profits on stock options--some of which have yet to realized--that he received as a reward for turning around the company.

Eisner and Ovitz sat for interviews Monday afternoon in Eisner’s office at Disney’s Burbank headquarters, a stark contrast in styles. Eisner was relaxed and animated, dominating the interview. Ovitz appeared tense and emotionally drained by his decision to break his ties to the agency business that began when he started working in the William Morris Agency mail room after graduating from UCLA.

“It’s a very surreal experience,” said Ovitz.

Ovitz confirmed that his recent failed negotiations to run Disney rival MCA Inc.--which reportedly was ready to lavish him with a pay package of more than $250 million--had “stimulated” his thinking about a career change.

Ovitz over the years has been offered a number of top Hollywood jobs, including running Sony’s entertainment operation and MCA, but turned them down, in large part because of separation anxiety over leaving CAA. He said in the interview that over the years he has often looked at Disney as the kind of company he would want to join. “Frankly, I’ve always had my eye on what’s going on at this company,” Ovitz said.

Eisner said the huge ABC acquisition forced him to confront the issue of adding to the company’s management depth. Some investors and analysts have suggested Disney needed more management firepower to oversee its increasingly sprawling empire. They also have questioned the lack of a clear successor for Eisner, especially in the wake of Eisner’s quadruple heart bypass last year.

“When Frank Wells died, I decided I could go it alone until I found the perfect partner,” Eisner said. “Right after Frank died, I tried to get him [Ovitz] again,” although Ovitz said the timing wasn’t right. Eisner said he has courted Ovitz off and on for 20 years as Eisner moved through jobs at ABC, Paramount Pictures and, finally, Disney.

Eisner’s quest ended on Friday, when the two men took a hike in Independence Pass near their respective vacation homes in Aspen, Colo. There, at an elevation of 10,500 feet in the middle of the Rocky Mountains, the two began to come to an understanding that would conclude in a phone conversation Saturday where, Eisner said, “the deal came together.” On Saturday, Eisner began calling Disney directors to run the decision by them, with final details worked out by midnight Sunday.

Although the talks appear to have been quick, Eisner had been seriously thinking in recent weeks about bringing Ovitz aboard. After Ovitz failed to come to terms with MCA, Eisner told Ovitz that “if it doesn’t work out, we’re still here.”

And during one strategy meeting in July in Eisner’s office, at which Disney executives brought up the possibility of buying ABC, Disney Senior Executive Vice President Sanford Litvack slipped Eisner a note. Eisner said he opened the note later, which simply read: “Ovitz.”

The deal unites two friends of 25 years who first met when Ovitz, then a young television agent at William Morris, pitched a game show pilot to Eisner, who was then running ABC’s daytime television operation. Eisner, recalling that meeting Monday, said his initial impression of Ovitz was that he was “pleasantly aggressive.”

Compatibility Factor

Hollywood executives question whether Eisner and Ovitz--both known for aggressive, domineering personalities and styles--will mesh and work together. Ovitz, who reports to Eisner, has not worked for anyone in 20 years and has relished one of the most autonomous positions anyone has ever enjoyed in Hollywood.

But Ovitz has been clearly restless with the talent agency business, as evidenced by his talks with MCA. Shortly afterward, Ovitz’s second-in-command, Ron Meyer, was hired as president and chief operating officer at MCA, with Ovitz losing his longtime partner.

Ovitz’s near-miss with the MCA job led many in Hollywood to conclude that it was only a matter of time before Ovitz would leave the agency business, which he has revolutionized since co-founding Creative Artists Agency 20 years ago. As head and 55% owner of CAA, Ovitz leads a talent agency that boasts such Hollywood heavyweights as Sylvester Stallone, Tom Cruise, Tom Hanks, Barbra Streisand and Steven Spielberg.

In an emotionally charged 10 a.m. meeting Monday with his staff, Ovitz broke the news of his move to Disney just as word was beginning to leak out. A man known for nerves of steel when negotiating contracts for stars, Ovitz was uncharacteristically shaken. His voice cracked, and at one point he appeared to be on the verge of tears in relating the agency’s recent ups and downs, several who attended the meeting said. Ironically, it was just months ago that Ovitz called a similar meeting to tell his troops he was not jumping ship to run MCA.

It is unclear how CAA will deal with having its two top executives leave within weeks of each other.

Also unclear is how the agency will divide the stakes of both Ovitz and Meyer--who shared ownership with agent Bill Haber.

The future of several Ovitz-led ventures--including advertising for Coca-Cola, a telecommunications venture and consulting French bank Credit Lyonnais about its ownership of Metro-Goldwyn-Mayer--are up in the air. A transition group was formed to run the company, as well as to work out details of creating a long-term management structure.

Despite speculation that Ovitz would eventually leave, his friends and employees were caught off guard that Ovitz would join Disney, where Eisner is the clearly the No. 1 executive.

One close associate of Ovitz’s said he believes that the agent saw his options narrowing, and that his near-departure from CAA, combined with the departure of the even-tempered Meyer, had made it more difficult to manage the agency. CAA’s younger agents are clearly restless and are eager to become partners in the agency. What’s more, the easygoing Meyer was often a buffer who took care of problems at the agency.

Ovitz’ colleagues and friends have said that in the wake of his ill-fated MCA talks--which brought Ovitz an unprecedented level of media scrutiny that included the cover of Newsweek--he has been moody and distracted.

One CAA insider said that “you could sense that MCA was a letdown for him and that it was time for him to climb a new mountain. It got too quiet. He went into a sort of hibernation. You got the sense he retreated and did a lot of soul-searching and didn’t come out until he got some resolve.”

Asked whether, in the wake of the microscope he has been under, he wanted a lower-profile job, Ovitz, characteristically terse, responded: “That’s a fair statement.”

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Joining Disney

* THE DEAL: Super-agent Michael Ovitz of Creative Artists Agency was named president of Walt Disney Co. He will assume his new post Oct. 1.

* THE JOB: Ovitz will take the job that Disney Chairman Michael Eisner has handled since the death of former company President Frank G. Wells. He will be responsible for all three operating divisions of the company--film, theme parks and consumer products--plus Capital Cities/ABC, when its acquisition is completed next year.

* THE PLAYERS

Michael Eisner, 53, took the helm as chairman and chief executive at Disney 11 years ago, and the company’s profits have increased elevenfold.

Michael Ovitz, 48, has been in the middle of many entertainment mega-deals, including Seagram’s recent purchase of MCA and Sony’s acquisition of Columbia and TriStar.