Ovitz to Sell Talent Venture to the Firm

Michael Ovitz, once the reigning power player in Hollywood, has aborted his ambitious comeback attempt, agreeing to sell the higher-profile assets of his struggling talent management company to a competitor.

Undone as much by the industry’s abiding animosity toward him as by his own hubris, Ovitz on Sunday said he is ending a venture he once claimed would reinvent Hollywood for the digital age.

Ovitz imagined his new full-service venture, formed three years ago, would make and distribute television shows and movies that his artist clients would own and control. But without the support of much of Hollywood, Ovitz could not sustain his ambitious plan.

Under the deal, Ovitz, 55, would sever all ties to his talent management company, Artists Management Group, and its sister companies, according to his AMG partners Rick Yorn, 33, and Julie Silverman-Yorn, 36. AMG would cease to exist as a separate company, instead being merged into the Firm, one of the largest music management companies in Hollywood.

Ovitz, a former president of Walt Disney Co. and a founding partner of leading talent firm Creative Artists Agency, declined to comment on this deal or his future plans. The collapse of his venture leaves Ovitz, still a multimillionaire, without a role in the entertainment industry.

In a statement, he said the merged company “will be a very strong entertainment and brand management company and will have the resources to build a diverse and creative company. I wish the new group all the success in the future.”

Noting that Ovitz helped to facilitate the merger, Rick Yorn said, “It’s not about Mike. It’s about a new company moving forward.” Ovitz no longer is interested in being in the management business, Yorn said, adding that he and his sister-in-law remain friendly with Ovitz.

“This is not about buying us out of our contracts,” Silverman-Yorn said. “It’s a merger.”

“It has not been an adversarial process,” said Jeff Kwatinetz, the 37-year-old chief executive of the Firm.

The Firm, which represents groups including Korn, Limp Bizkit and the Dixie Chicks, would pay Ovitz a multimillion-dollar fee for his share of AMG and would assume more than $10 million in AMG debt and liabilities in exchange for a group of more than 40 managers, led by the Yorns, according to sources close to the deal. That group includes most of AMG’s film, television and music staff as well as those in the literary and publishing divisions.

The Yorns said they expect their clients, including Cameron Diaz, Leonardo DiCaprio, Benicio del Toro and Samuel L. Jackson, to move with them to the Firm. Most of the rest of AMG’s clients--Natalie Portman, Sarah Michelle Gellar, Ed Burns, Marisa Tomei and Dylan McDermott--also are expected to join them at the Firm.

It remains unclear what Ovitz’s personal clients, including Martin Scorsese, Sydney Pollack, Tom Clancy and Michael Crichton, would do after the sale of AMG.

The other AMG divisions--an animation company led by Ellen Goldsmith Vein, a film production company led by former Columbia Pictures Chairman Mark Canton, a sports management company and Chris Lighty’s Violator Music in New York--would be spun off into stand-alone companies. The animation company, in particular, is considering other opportunities, including merging with another company. Ovitz plans to have no stakes in the resulting companies.

A year ago, Ovitz’s entertainment companies employed more than 300 people and took up three floors in Georges Marciano’s building at the corner of Beverly and Wilshire. Now they have fewer than 100 employees. High-profile clients including Robin Williams and Oliver Stone have left the company, although the clients represented by the Yorns remained with AMG throughout its short life.

The Firm would not assume any liabilities for Ovitz’s failed television ventures. Last fall he shuttered Artists Television Group after sinking a reported $100 million into television programming development and production. Recently, Ovitz was sued for $9.6 million by the head of that division, who claimed Ovitz made “grandiose promises” and “false representations” when he hired him.

Kwatinetz would remain the Firm’s CEO with Yorn assuming the title of co-chairman of the board and Silverman-Yorn sitting on the Firm’s Executive Committee. “We’ll run it together,” Kwatinetz said. “I don’t think of the Firm as my company.”

It has not been determined where the merged companies would set up shop, but it is clear that neither Ovitz’s high-rise suite of offices nor the Firm’s loft space on Wilshire Boulevard would be large enough to house everyone.

Yorn said the details of exactly who would be moving over to the Firm will be worked out “over the next 48 hours.”

“The essential thing,” said Kwatinetz, “is this is a group of people who want to have fun and work together. When I met Rick and Julie a couple of years ago, it was clear they work very similarly to the way we work. We’re good friends. We look at business the same way. We want to have fun.”

The merged companies would be able to grow based on their ongoing businesses, according to the partners. “The [Firm] is in great financial shape,” Kwatinetz said. “We’re not looking for investors.”

Early in the Firm’s four years of business, Ted Waitt, Gateway Inc.’s 39-year-old founder, “made a small investment,” Kwatinetz said. Waitt remains a financial partner.

Earlier this year, Kwatinetz talked to billionaire television mogul Haim Saban about possibly investing in the Firm. “Jeff is what was interesting,” said Saban, who, after selling his stake in Fox Family Channel, now ABC Family Channel, is looking to invest in the talent representation business.

“Jeff’s looking to build a multifaceted entertainment company,” Saban said, noting that Kwatinetz told him he wants to build the next AOL Time Warner. Saban said he wants to focus solely on the talent representation niche. “You need a few billion dollars to do what he wants to do,” he said.

Sounding a far more modest tone with this announcement, Kwatinetz said he’s focused on merging the companies for now. The combined companies--with roughly 200 people total--could do a better job representing clients, he said. Measured by the number of managers, the combined companies would be the largest management company in the music and film businesses.

The Firm now has 130 employees with headquarters in Los Angeles and offices in Nashville and London. In addition to its more than 20 music clients, the Firm represents such actors as Martin Lawrence and Vin Diesel. It also has an active film production company and a consumer products division, owning the Pony brand of sportswear.

Born in Brooklyn, Kwatinetz moved to Los Angeles in the early 1990s and opened Q Management, a music management company.

In the mid-1990s, Kwatinetz took his most promising client, the rock band Korn, with him to Sandy Gallin’s management company, Gallin/Morey. After a flurry of lawsuits, Kwatinetz left Gallin, who declined to comment on his former employee.

After signing music sensation Limp Bizkit, Kwatinetz opened the Firm. With the addition of the Back Street Boys as a client, Kwatinetz established himself as a major power in the music industry.

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Michael Steven Ovitz

Born Dec. 14, 1946, Chicago.

1969: Works as a talent agent at William Morris Agency, where he started in the mail room earning $75 a week. Over the years, Ovitz hooked clients such as Sydney Pollack, Dustin Hoffman and Martin Scorsese.

1975: Co-founds Creative Artists Agency with four other agents from William Morris-Rowland Perkins, Ron Meyer, Bill Haber and Mike Rosenfeld.

1988: Sony Corp. hires Ovitz to help it identify and purchase a motion picture studio.

1989: Sony buys Columbia Pictures for $3.4billion and begins negotiations to have Ovitz run the studio. Discussions fail and Ovitz remains at CAA.

1990: Ovitz tops Premiere magazine’s list of Hollywood’s 100 most powerful people.

1990: Ovitz brokers a deal for Japanese consumer electronics manufacturer Matsushita Electric Industrial Co. to buy MCA Inc.-an entertainment giant that produces movies, records and theme parks--for $6.59 billion. Ovitz snags $40-million fee from the deal, raising eyebrows on Wall Street.

1995: Ovitz is instrumental in Seagram Co.’s purchase of MCA from Matsushita. Negotiations for him to run the company fall apart.

1995: Michael Eisner taps Ovitz to be president of Walt Disney Co. Ovitz is ousted 14 months later, but receives a severance package of $38.9 million in cash and stock options.

1999: Ovitz starts Artists Management Group with partners Rick Yorn and Julie Yorn. Also starts AMG Music, AMG Sports and Artists Television Group, a company that attempted to develop TV shows as well as digital entertainment for mobile phones and Internet-enabled gadgets.

2001: Ovitz disbands Artists Television Group after losing $100 million of his own money.

2002: Agrees to sell AMG to the Firm.

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Times research