The Shrinking Empire of Michael Ovitz

On a marble wall inside his Beverly Hills offices, one-time super-agent Michael Ovitz touts an expansive empire of nine separate entities.

The names--Artists Management Group, Artists Television Group, AMG Music, AMG Sports, Lynx and so on--define an enterprise that Ovitz vowed would reshape the entertainment business. He planned to leverage a star-studded roster of celebrities through an array of companies that would synchronize all facets of the industry. Central to his strategy was mining the Internet gold rush.

After nearly three years, only two of the nine names on the wall are growing businesses--a bustling talent management group and a fledgling offshoot movie production firm. The others are no longer in operation, going out of business or never developed beyond divisions within Ovitz’s management company.

Today, Ovitz’s ambitions to exploit the boom in technology are in tatters. His enterprises have been dogged by costly missteps and a failure to fully grasp the complexities of the new fields he was plunging into. And, according to people familiar with Ovitz’s failed television production company, he lost about $100 million of his own money on the venture.

“He doesn’t have the new-world order he envisioned,” said director Sydney Pollack, a longtime Ovitz client. “Sure that bothers him. Mike has a lot of ambition. He’s going to look for ways to expand his business. It will be hard to achieve what he wants to achieve without taking more risks.”

Ovitz now is focused on repositioning his business and slashing costs as he tries to interest potential investors in a pared-down management company.

“The five-year plan we had is no longer in existence,” Ovitz, 54, said in an interview. “We’re attempting to change the direction of several of these divisions.... I have been exploring investment and venture opportunities since the day we opened our doors ... and I haven’t stopped.”

Still optimistic he will create an innovative entertainment company, Ovitz added, “There are things I want to accomplish. It’s not the money as much as you have to have a large partner going forward.”

Ovitz was a force in Hollywood during his more than two decades at the helm of Creative Artists Agency, building the firm into a premier talent agency. He was dubbed “the most powerful man in Hollywood” because his agency represented many of the industry’s biggest stars and directors.

During his reign at CAA, he was known as a relentless competitor who seized every advantage. Now many in Hollywood are dining out on Ovitz’s misfortune.

“Everyone hates everyone with a passion in this business,” said Richard Donner, director of the “Lethal Weapon” series and a longtime Ovitz client. “The sharks are feeding on Mike right now.”

Ovitz said he is not interested in returning to CAA’s glory days. This time around, he is concentrating on providing more elaborate career assistance to a cadre of clients through a management company. Unlike agents, who are regulated by the state, managers are allowed to participate in clients’ business affairs.

‘Fearless’ Ovitz Took Risk on Internet Link

In less than three years, Artists Management Group boasts the largest staff of any Hollywood management firm and a stellar list of clients, including actors Leonardo DiCaprio, Cameron Diaz and Robin Williams, director Martin Scorsese and writers Michael Crichton and Tom Clancy.

Those who know Ovitz say he is determined to make another comeback.

“He’s a force,” said Julie Silverman Yorn, a partner in Ovitz’s management company. “He has always been a great representative and a great strategist.”

David Coulter, vice chairman of J.P. Morgan Chase and the former Bank of America chief executive who serves as Ovitz’s personal banker, said, “If he were in Silicon Valley, we’d call him fearless. He took an entrepreneurial risk, and, a big chunk of money later, it didn’t work out. He is going to be around and continue to play that game.”

Ovitz was certainly not the only enthusiast to get caught up in the excitement of the overheated tech economy. When the bubble burst, anyone banking on a rapid deployment of high-speed Internet links suffered the same miscalculation. Indeed, the overall collapse of the stock market left many Net investors in worse shape than Ovitz.

“There are people who are very surprised to find they can lose money in these kinds of things, and he’s not one of them,” said Marc Andreessen, chairman of Loudcloud Inc., an Internet company Ovitz invested in. “He’s fine with that.”

The most visible failure came in August, when Ovitz was forced to dismantle his TV production unit. Despite courting dozens of potential financial backers over the last two years, Ovitz was unable to land a single investor to bail out his Artists Television Group.

ATG “was never set up, ever, to be just a television company,” Ovitz said. Rather, it was designed to produce traditional shows for the major networks as well as innovative programming for digital distribution. “The main play was wireless,” Ovitz said.

Many of Ovitz’s friends and associates who listened to his digital theories at the time say they were baffled. “I never understood the structure,” Pollack said of the initial strategy. “It was so complicated.”

Ovitz’s efforts to change the entertainment industry have sputtered in large part because he was convinced that broadband wireless networks would arrive soon.

Ovitz envisioned himself as a pioneer in transmitting entertainment to consumers via mobile phones and hand-held computers. His “digital initiative,” as Ovitz described it, involved creating TV shows, sports, music, comedy, animation and other forms of entertainment for the tiny screen.

And Ovitz planned to tap his roster of celebrities to provide the content. He talked about having basketball great Earvin “Magic” Johnson file live reports from Laker games and comedian Robin Williams do stand-up routines that would be delivered via satellite to portable devices.

“Sports is entertainment, and it was critical to our digital initiative,” Ovitz said. “It’s all going to happen. Just not as quickly as I would have liked.”

Initially, Ovitz thought he could stream high-quality video to portable devices by 2002. But it turned out that a key ingredient--high-capacity wireless networks--would not be widely available for years beyond that date.

“When [it] fell apart and the digital time frame shifted, I got caught in a crunch,” Ovitz said.

Ovitz said he never intended to stake so much of his personal fortune on his elusive digital dream.

In mid-1999, AT&T; Corp. committed to buy 25% of Ovitz’s television company for $150 million, according to internal memos reviewed by The Times. But with its own financial problems mounting, AT&T; backed out at the last moment.

“That was enough money to get us through three years,” Ovitz said. Betting that he could find other investors, Ovitz used his own funds as bridge financing.

“After AT&T;, I put together a list of all of the companies and individuals that had complementary technology to our game plan. We took 25 to 30 meetings,” he said, noting that Enron Corp., Hughes Electronics Corp. and Yahoo Inc. were among the companies he courted.

Another firm approached by Ovitz was OMD USA, a division of Omnicom Group, one of the world’s dominant advertising conglomerates.

“It was a staggering figure, $50million,” OMD Chief Executive Steve Grubbs said. “The deal broke down over the size of the investment, and a business with deficit financing isn’t what we wanted to do.”

Ovitz explained his failure to secure financing by using a football analogy: “I got the ball to the one-yard line, but I couldn’t get the ball over the line.”

Los Angeles billionaire Ron Burkle was another missed opportunity. Hollywood insiders long have speculated that Burkle was a major investor in Ovitz’s enterprises.

“Ron never invested in any of my companies,” Ovitz said. Rather, he said, Burkle offered to buy 10% of the television company but never followed through. Burkle did hook up with Ovitz on a failed bid to bring a National Football League franchise to Los Angeles.

“There are days when we are like best friends ... and there are days where I’m sure he’d like me to walk through a plate-glass wall,” Ovitz said. “I never know which day it’s going to be.”

He Was Power Broker at Center of Big Deals

Ovitz began his rise to power as a young television agent in the 1970s at William Morris Agency. He eventually left with a group of other up-and-comers to start their own talent firm. The agency quickly rose to prominence in Hollywood as Ovitz ripped apart the agreements that had governed the genteel world of talent representation.

He aggressively wooed clients from other agencies and then ran up their asking prices by playing studios off one another in bidding wars.

The stars flocked to CAA, allowing Ovitz to leverage the likes of Tom Cruise, Tom Hanks, Kevin Costner, Robert Redford and Sylvester Stallone in his dealings with the studios. By the 1990s, Ovitz was the power broker at the center of nearly every important deal.

In 1995, Ovitz made his big break for the corporate boardroom, going to work for his old friend, Walt Disney Co. CEO Michael Eisner, who made him Disney’s president. The job lasted 14 tumultuous months before Ovitz was ousted with a notorious golden parachute: Disney stock and cash worth an estimated $100million at the time.

For the next year, Ovitz assumed a low profile. “I’m like a guy who has had 20 cups of coffee, a Ferrari in idle,” he said then.

It was only a matter of time for the Ferrari to shift into gear.

Ovitz returned in early 1999, promising to redefine the entertainment business by “throwing out the old architecture,” he said in an interview then.

The hub of the operation was Artists Management Group. He began in classic Ovitz fashion by raiding two of Hollywood’s hottest talent managers, Rick Yorn and his sister-in-law Julie Yorn, whose clients include actors DiCaprio, Diaz and Samuel L. Jackson.

High-Profile Clients Left Management Group

Within months, the operation expanded to 80 employees. Ovitz rented an entire floor in Georges Marciano’s newly renovated building, a Beverly Hills address with bragging rights. He quickly expanded to three floors and more than 300 employees.

Through the hiring of other talent managers and the acquisition of smaller firms, Ovitz’s company collected a sterling lineup of clients, including actors Benicio Del Toro, Natalie Portman, Laura Linney and Sarah Michelle Gellar; writers Clancy and Crichton; and “Today” show host Katie Couric.

Ovitz didn’t lose his touch in packaging high-priced talent. One of his first moves was to unite DiCaprio and Diaz with director Scorsese on “Gangs of New York,” a film that had been the director’s personal passion for 30 years. The movie, estimated to cost $110 million, is set for wide release next year.

Ovitz went on to assemble the largest collection of talent managers in Hollywood. He also added divisions--frequently referring to them as “my companies”--to create TV shows and movie productions and to handle sports stars, animators, musicians, writers and comedians.

“I think we probably could have grown a little slower,” Julie Yorn said. “But I have no regrets.”

It didn’t take long for the growing pains to set in.

Early in 1999, Ovitz pulled off one of his signature power plays by snagging comedian Chris Tucker as an early A-list signing. The star’s requirements: Get $20million for “Rush Hour 2” and Ovitz himself to represent the comedian, said two people close to Tucker.

It took Ovitz only one meeting with New Line Cinema executives to land Tucker a two-picture, $45-million package, according to two people familiar with the deal. Overnight, Ovitz turned Tucker, a supporting player with one knockout star turn, into one of the highest-paid actors in the business.

For the agent who first pushed star salaries to the stratosphere, it was just like old times. But there was no payday for Ovitz. Within months, Tucker turned down the deal and left AMG.

“He didn’t like my ideas or the offer I brought him,” said Ovitz, who has yet to sign another comparable star.

Tucker’s lawyer did not return calls.

Ovitz’s management group suffered a similar setback this month with the departure of manager Alan Berger, who took NBC’s Couric with him. The “Today” host, one of television’s biggest stars, has been the subject of an intense bidding war as her contract expires next year.

As if the move wasn’t stinging enough, Berger defected to CAA, the talent agency Ovitz put on the map two decades ago.

Going forward, Ovitz said he will be more involved in the management company.

“I’m day to day with people who make movies,” Ovitz said. “I’m involved with several of our clients who write ... involved in helping create an environment in a place that’s had a lot of difficult knocks over the last two or three months, which were not their fault.”

Julie Yorn said she and her brother-in-law, Rick Yorn, intend to continue their partnership with Ovitz and try to build AMG into a full-service talent management company. “I’m committed,” she said.

To protect the Yorns from the financial fallout of his failed TV operation, Ovitz rewrote their contract this year.

Formed in June 1999, Artists Television Group in short order landed five new prime-time network series in its first season--more than any Hollywood studio except Warner Bros.

In an era in which prime-time production is dominated by the major studios and the broadcast networks own the bulk of their own programming, it was extraordinary for an independent production firm to secure so many commitments from the major networks.

But with lightning speed, Ovitz turned into an overnight poster boy for the unforgiving economics of television production.

“It’s a game with long odds,” said Larry Gerbrandt, chief content officer at Kagan World Media, a research firm in Carmel. “Out of every 100 pilots, less than 1% survive the gantlet. And it’s a different environment now than when Ovitz was an agent.”

TV Production Unit Disbanded After Losses

None of the five ATG programs unveiled last year were renewed this fall. In December, after only three months on the air, Fox axed ATG’s most promising and expensive show, “The $treet,” by Darren Star, the producer of HBO’s sizzling “Sex and the City.” The only ATG program still on the air is “The Ellen Show,” starring Ellen DeGeneres, which is being produced by CBS.

Eager to cut his losses, Ovitz put out calls to the major studios, hoping to sell the TV unit or any of its assets.

“When I struck out with all of the studios, I had to take what we had and deal with it,” Ovitz said. “We had a lot of bodies. [It was] a Herculean task that hasn’t been fun.”

In all, Ovitz slashed his payroll from 49 employees to the eight who are overseeing the closure of the operation.

Even as Ovitz was disbanding ATG, his company continued to promise that it would deliver one show for the fall prime-time season, “Lost in the USA.,” to the WB. The WB paid the company advances against licensing fees to help cover the production costs for the staged, unscripted series--$631,417 on July 21 and $315,709 on Aug. 8, according to a lawsuit filed by the network against ATG on Sept. 28 in Los Angeles County Superior Court.

The last payment came as ATG began laying off its staff.

Yet, according to the suit, ATG continued to assure the WB that it would deliver “Lost in the USA.” It was not until Aug. 21 that ATG told the WB that it was ceasing operations and would not produce the series, the suit claims. The network demanded in writing the return of its money the same day but has received no payment from ATG, according to the suit.

Ovitz said he could not comment on the ongoing lawsuit.

Another arm of Ovitz’s enterprise, a low-risk boutique movie operation, is anxious to prove to Hollywood that it’s more than just a flash in the pan.

Artists Production Group signed a 15-picture financing deal with StudioCanal, the film production and distribution arm of French pay-TV giant Canal Plus, owned by Vivendi Universal.

A day after the agreement made splashy headlines more than a year ago, executives at StudioCanal, surprised that the Ovitz camp had over-hyped the deal by saying it potentially was valued at $900 million, put out a statement estimating its overall investment at “around $200 million” over three years.

“It was spin,” Ovitz said, noting that it is impossible to calculate the amount of the deal before any movies are made. “They pay all of our overhead and development costs.”

So far, 21 projects are in development under the deal, but no movies have started production. StudioCanal has a first look at all of the movies APG develops and the option to pick up the foreign rights in exchange for covering 60% of a film’s budget.

Cathy Schulman, president of Ovitz’s production group, said she believes the company is on track. “The way I look at it, I’m not in any race and if there was some starting gun someplace, I didn’t hear it,” Schulman said.

Ovitz’s efforts to expand into sports management looked as effortless as a layup. He long has been enamored with sports, lettering in gymnastics at Birmingham High School in Van Nuys, sitting courtside for years at Laker games and befriending players. Laker greats Johnson and Jerry West were partners in Ovitz’s unsuccessful 1999 bid to land an NFL franchise for Los Angeles.

Ovitz launched AMG Sports in late 1999, saying the company would exploit “the dynamics between the sports and entertainment businesses.”

But few of the expected synergies have developed so far. Efforts to find film and TV projects for tennis stars Venus and Serena Williams, for example, have yielded only a joint appearance on “Hollywood Squares” and a cameo for Serena Williams in the upcoming Martin Lawrence film “Black Knight.”

Ovitz tried to use his clout in television and with corporations to secure on short notice a lucrative TV deal and a big-name sponsor for a women’s professional golf tournament in Ohio. But the job proved too difficult, and AMG will pass on the problem-plagued LPGA Champions Classic next year.

“We didn’t make any money or lose any money, but it made it very clear to me it wasn’t something I wanted to do,” Ovitz said.

Veteran agents and managers say Ovitz underestimated how hard the sports field is to crack.

“The sports business is a business unto its own. It is very, very difficult and viciously competitive,” said independent sports agent Tom Reich, whose clients include Chicago Cub outfielder Sammy Sosa and Pittsburgh Penguin star Mario Lemieux.

AMG Sports chief Jeff Schwartz acknowledged that launching the venture has been difficult, but said the unit is laying the groundwork for a solid business. The division represents Arizona Diamondback third baseman Matt Williams and New Jersey Net all-star point guard Jason Kidd and participates in managing tennis great Pete Sampras.

Ovitz didn’t fare much better in music circles, where his name doesn’t carry the same clout as in the movie industry.

“The music business cares nothing about anyone who’s not in their game all day, every day,” said Chris Lighty, head of Violator, a New York firm specializing in hip-hop. The company entered into a joint venture with Ovitz’s management group to find film and TV work for such clients as Missy Elliott, Busta Rhymes and LL Cool J.

Of Ovitz’s 18 music clients, at least 14 want to pursue projects in film, television, animation or other fields, said AMG music co-chief Scott McGhee. So far, five clients have done so with Ovitz, among them rapper Rhymes and rock singer Liz Phair.

“It’s very valuable to be able to take an artist and say, ‘We have one of our directors doing this film.’ It’s a great synergistic approach,” McGhee said.

Ovitz kept his Internet investment company, Lynx, largely separate from the entertainment operations. He recently disbanded the company’s small consulting staff.

Checkout.com was one of at least eight projects Ovitz advised as a consultant or backed financially in a plan to profit from his Hollywood connections. Ovitz said at the time that Checkout would be a far different e-commerce site, filled with content supplied by his many artists.

“What we have is the ultimate destination for entertainment data,” he said. “The Internet is the greatest thing that ever happened to the entertainment industry.”

The plan was to provide consumers with inside information on celebrities and the opportunity to order entertainment products to be picked up at the local supermarket.

What Ovitz ended up with was a short-lived Web company. After his partners, including Burkle and Wherehouse Entertainment Inc., had poured in $40million, Checkout was sold at a loss, closing its virtual doors in February. At the time, Checkout was losing more than $1 million a month, according to Securities and Exchange Commission filings.

Whether Ovitz had a financial obligation to the venture has been a point of contention among the partners.

“I put a lot of time into Checkout.com,” Ovitz said. “I really believed in it.”

Ovitz is pinning his hopes on the next generation of stars.

His talent management company is loaded with up-and-coming actors, musicians and athletes. Among them are “Don’t Say a Word” star Brittany Murphy, 22-year-old professional golfer Grace Park and 16-year-old tennis player Ashley Harkleroad, whose skimpy Nike outfit was the talk of the U.S. Open.

Ovitz also has high hopes for such clients as soul singer Maxwell, whose new album on Sony Music’s Columbia label debuted Aug. 29 at No. 1 on the nation’s pop chart.

“There’s a lot to do, a lot to create, a lot to change,” Ovitz said. “Is it all going to go seamlessly? Probably not. Is it interesting? Yes. The unknown is always interesting.”

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Times staff writers James Bates, Claudia Eller, Sallie Hofmeister, Jeff Leeds and Joseph Menn contributed to this report.