Ovitz’s TV Unit Assets Being Sold Piecemeal

Artists Television Group, Michael Ovitz’s troubled prime-time production arm, is in talks to sell off assets piecemeal after failing to attract a potential buyer for the operation, according to Hollywood lawyers, agents and executives doing business with the company.

In recent weeks, Ovitz has made the rounds of major studios looking for a merger partner or buyer for his money-losing television group, which is in its second season of production. The last of those potential partners, Paramount Television, declined ATG’s overtures this week, according to people involved in the negotiations.

ATG laid off nearly half of its staff of 38 people a week ago in an effort to cut mounting losses. Now the company is in advanced discussions with several studios about transferring its four prime-time programs and a dozen talent deals in exchange for participation in any future profits.

Under one scenario, ATG President Eric Tannenbaum, former head of Sony’s Columbia TriStar Television, would set up shop at a studio or network for himself and a core group of executives and writer-producers, according to these sources. ATG would continue trying to find new homes for any writer-producer or network series not included in the package.

Tannenbaum could not be reached for comment Tuesday. ATG officials said talks are continuing.

“We’re in active discussions with several companies that expressed interest in ATG and its core assets,” said ATG spokeswoman Deborah Smith. “We continue to negotiate toward a transaction that is in the best interests of all parties.”

People familiar with the talks said these deals could be wrapped up within a week or two.

Any sale could be hampered by today’s harsh economic climate, however. A decline in advertising spending for the first time in a decade means the networks have less money to spend on new television series. Networks are increasingly relying on unscripted programs that are less expensive than the dramas and comedies that are ATG specialties.

Any studio deal would not include back-office functions at ATG such as legal, marketing and accounting services, meaning further layoffs when the operation finally is shut down.

Television executives say Warner Bros. is one logical suitor for Tannenbaum and key ATG assets. Lacking a major broadcast network and hurt by its strained relationship with NBC, Warner Bros. has fallen from its position as the most prolific producer of prime-time series.

Warner Bros. officials would not comment beyond saying that television chief Peter Roth is interested in certain ATG shows. These include “Cedric the Coach,” which is scheduled to air on the studio’s sister WB network early next year.

At the same time, ATG’s network partners are working on contingency plans to keep the four scheduled primetime programs in production. CBS has scheduled an ATG comedy starring Ellen DeGeneres this fall, and WB has three projects in various stages of development that will air over the next year.

It is unclear how much money Ovitz will recover from any transfer of the company’s television properties. Since Ovitz formed ATG in mid-1999, he has spent an estimated $50 million to $80 million of his own money on television writer-producers and executive talent. Many of those writer-producers have only one year remaining on their original three-year deals.

Some Hollywood executives said Ovitz was a victim of a consolidated media landscape, where a handful of companies control the major broadcast and cable outlets and the production studios that supply them.

“Ovitz had enough manpower to build something monumental, but his timing was not right,” said Haim Saban, who recently agreed with partner News Corp. to sell Fox Kids Worldwide to Walt Disney for $3 billion in cash. “In today’s world, you can be an artisan like Steven Bochco or David Kelley and do the work with your own two hands, financed by a studio. . . . But there is no room for a medium-sized production and distribution company, because it’s a world of giants. That’s why I sold.”

Ovitz, a co-founder of Creative Artists Agency and former president of Walt Disney, formed Artists Management Group in late 1998, envisioning a television, movie, sports, animation, music and new-technologies media empire using the talent he managed.

He planned to bring in a telecommunications or broadband giant to fund television programming, hoping to take his talent into the digital age. AT&T; was close to committing $150 million to ATG, but pulled out at the last minute.

Ovitz was searching for a partner because television producers don’t typically recoup money spent on comedies and dramas until they become a success and are sold in syndication years later.

Though ATG has several valuable assets, it is unclear what happens to some writer-producers whose shows have failed, making them less attractive than they were two years ago.

Many television executives also are predicting that ATG may be forced to hold a fire sale on some high-priced assets. There also are questions surrounding ATG’s ability to transfer contracts to new studios.

Among some of the key writer-producers in play are Darren Star, whose credits include HBO’s “Sex in the City,” as well as last season’s bombs, “Grosse Point” and “The Street.” ATG also has deals with Adam Chase, a former executive producer of “Friends,” Ric Swartzlander, whose credits include “Grace Under Fire” and “Ellen,” and Mitchell Hurwitz, executive producer of the new CBS comedy starring Ellen DeGeneres.

ATG is talking with NBC about taking on the entire Adam Chase deal. NBC, which became a 50-50 partner with ATG on the Chase deal last season, may have little incentive to double its current commitment of $1.7 million a year.

Similarly, CBS Productions already owns 50% of the DeGeneres comedy. Sources say Sony, ATG’s distribution partner, may step in to cover half the costs.