Burkle a Key Investor in Many of Ovitz’s Speculative Ventures

The $64-million question in Hollywood these days is who is financing Michael Ovitz’s ever-expanding entertainment operation, which now comprises talent management, movie and television production, Internet ventures, and music, comedy and sports representation.

The Times has learned what some in Hollywood have suspected: Billionaire investor Ron Burkle, Ovitz’s partner in several Internet start-ups and in the failed initiative to bring a professional football team to Los Angeles, is a key investor in most of Ovitz’s new entertainment ventures. It is unclear how much money the former supermarket magnate has at stake.

One reason Hollywood is curious is because Ovitz has quickly amassed a huge overhead in a series of businesses that seemingly have no immediate prospects for generating returns. He has hired more than 200 people, taken more than 40,000 square feet of prime Beverly Hills office space and has committed an estimated $60 million in deals with top television writer-producers.

Sources close to Ovitz say he also is investing his own money, though many skeptics in the entertainment industry have thought otherwise, figuring he would lay off the high risks of failure on someone else.

“I don’t need financing,” said Ovitz, arguing that it is premature to discuss a company that is still a work in progress.

In the next breath, however, Ovitz acknowledged that he is “still putting his financing together” and “is in the middle of delicate conversations.”

He stressed that he is building a new kind of entertainment company designed to create content for the digital future. He said the company would rely on unconventional economic models, but he declined to go into detail.

Burkle declined comment about his investments in Ovitz’s venture and it’s unclear how the two became partners. Both have long been active in fund-raising for the arts, politics and other causes. Burkle is known for his shrewd deal making, having parlayed his first job bagging groceries into the nation’s most successful supermarket conglomerator. He is now one of the richest men in America.

Ovitz, the former super-agent and co-founder of Creative Artists Agency, has been aggressively buying his way back into Hollywood power over the last year.

His critics believe he is trying to regain the high visibility and success he had before his short-lived stint as president of Walt Disney Co. three years ago. Ovitz walked away from Disney with stock now worth more than $60 million.

Though his new company has grabbed many headlines in the Hollywood trade papers, some of his management company’s star clients, such as Leonardo DiCaprio and Cameron Diaz, won’t be paying commissions for at least two years. In the meantime, those fees will be collected by the stars’ former representatives.

But Ovitz may find financial backing for the expensive TV writer-producer deals under a little-known provision of a recently struck distribution partnership with Sony Pictures Entertainment. Sony’s television arm has agreed to underwrite about 85% of the costs of Ovitz’s prime-time endeavors, according to sources.

Still, as one television executive said, “If he gets two shows on the air, it could cost him $50 million--and 15% of that is still real money.”

Some other financial backers have fallen through. Sources say AT&T; pulled out of a deal under discussion this summer to put up $150 million for a 25% stake in Artists Television Group, the fledgling television production studio Ovitz formed in June. Sources say NBC and Bertlesmann also passed up opportunities to be in business with Ovitz.

Since an ill-fated investment last year in the now-bankrupt theater producer Livent, Ovitz has spared no expense in ramping up his new venture, committing to a huge overhead along the way.

His talent management company, Artists Management Group, shares offices with sister companies on the sixth floor of George Marciano’s posh building on Wilshire Boulevard and Beverly Drive in Beverly Hills. He is currently building out the fifth floor, at 22,000 square feet, for his television group.

To date, Ovitz has launched a talent management firm with partners Rick Yorn and his sister-in-law, Julie Silverman Yorn; a TV group headed by former Columbia-Tristar Television chief Eric Tannenbaum; entered the Internet business; and formed separate music, sports and comedy representation units.

For instance, AMG Sports represents tennis star Pete Sampras, while AMG Music handles rock group Buck Cherry. Tannenbaum has signed multimillion-dollar contracts with such big-name writer-producers as Darren Star, whose credits include “Sex in the City,” as well as Adam Chase, a writer on ‘Friends.”

The idea is for these groups to cross-fertilize. The film and TV groups, for instance, could draw upon the music unit to make soundtracks. Sampras might be a guest on a new sports talk show ATG is developing. The animated butler that serves Web surfers on the Ask Mr. Jeeves site could become the star of his own TV show under an alliance that Ovitz has with the Web site.

Ovitz also has plans, which have not yet come to pass, to form a movie studio to market and distribute its own movies and give filmmaker clients such as Martin Scorsese, Sydney Pollack and Barry Levinson stakes in the company and in their movies.

Sources say Ovitz is still seeking investors to bankroll the distribution company and its movies.

Ovitz is also making a push into the Internet. Burkle’s investment firm, Yucaipa Cos., is the main investor in CheckOut.com, an Internet e-commerce company, along with Ovitz and former Disney Online President Richard Wolpert.

Today, Ovitz is expected to announce another deal involving CheckOut.com, which some sources speculate will include the acquisition of Wherehouse.com.

Regardless of all the announcements, Hollywood is teeming with Ovitz enemies who root for his failure.

A former colleague said, “He’s doing everything he said he’d never do: Don’t finance your own company, don’t have offices everywhere, manage your overhead--he was a nut about these things.”