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MOUSE HOUSE LOSES BIG CHEESE

Ovitz ankles prexy post; pockets $100 mil+

After just a year on the job, Michael Ovitz has stepped down as president of the Walt Disney Co. The executive often referred to in the media as “the most powerful man in Hollywood” as recently as a year ago now is out of Hollywood. He officially exits his post Jan. 31.

Disney chairman and CEO Michael Eisner has no plans to fill the post, which once again raises the question of succession. In a moment of deja vu, Eisner spent the day talking to key Wall Street investors: He did the same thing two years ago when Jeffrey Katzenberg exited the studio.

The news was announced after the market closed. Disney stock closed down 2 points at $70.25 in what generally was a down market.

“I will miss Michael’s energy, creativity and leadership at Disney,” Eisner said in a statement. “We have been doing business together while being friends for many years and I know that both our personal and professional relationships will continue.”

Speculation now centers on what the onetime Creative Artists Agency chairman will do. He will not surface at Sony Corp., according to a close associate of Sony president Nobuyuki Idei. Sony also continues to publicly debunk the rumor. Contrary to speculation in the Wall Street Journal, Ovitz will not be going to Viacom, Viacom insiders said.

Ovitz, who was getting an annual salary of $1 million, leaves Disney with $50 million in cash and $3 million in stock options for his settlement, sources said. However, he also is due an annual bonus and is owed $10 million upon termination of his contract, according to the agreement. With stock options and cash, sources said Ovitz could possibly make $140 million to $160 million from his year at Disney, insiders said, although that figure could not be confirmed. The 14-page contract was negotiated by attorney Ron Olson and CAA’s Bob Goldman.

Ovitz will continue to serve as an adviser and consultant to the company and the board of directors.

One scenario making the rounds on Wall Street two weeks ago had the former exec possibly hooking up with investment banker Ted Forstmann of Forstmann Little & Co., whose partner recently resigned.

Ovitz has been closely aligned with the company, which acquired computer publisher Ziff-Davis in 1994 for $1.4 billion in cash; Ovitz is on the board of directors of Ziff-Davis. Forstmann Little also bought out General Instrument in 1990 for $1.6 billion. GI works closely with TCI and Bell Atlantic, and has agreements with Intel, Microsoft and Novell.

Checking options

Ovitz was unavailable for comment, but sources close to the executive noted he has no desire to become an employee again. Ovitz apparently has no immediate plans for his future, but wants to remain in the entertainment business. Ovitz has told friends he plans to take some time off and assess his options.

Sources inside and outside the studio said the split between the two Michaels was mutual. “Michael Eisner has been my good friend for 25 years and that will not change, but it is important to recognize when something is not working,” Ovitz said in a statement.

History of an alliance

After negotiations broke down with Edgar Bronfman Jr. for Ovitz to run MCA, and Seagram installed Ovitz’s longtime CAA partner Ron Meyer as president and chief operating officer, Ovitz surprised the town a month later by joining hands with Eisner (Daily Variety, Aug. 15, 1995).

But the marriage was not a happy one for anyone at the studio. Ovitz walked into a job that was ill-defined and subsequently tried to carve out his own niche. By doing so, he stepped on the territory of other executives at the company and alienated many of his peers. The divisions had been running autonomously since the death of Disney president and COO Frank Wells and the subsequent exit of Katzenberg.

One observer at Disney noted, “(Eisner) never came out and said this is a guy that has many talents. He never gave him any authority. After a while, people thought he didn’t say those things because he didn’t believe them himself.”

Hand in many pots

Ovitz first tried to get involved in ABC, to the chagrin of many of its employees (story, page 71), then he turned his attention to the feature film area, where he and motion picture chairman Joe Roth initially bumped heads. Ovitz brought into the Disney fold his former clients Sean Connery and Martin Scorsese, as well as his former roommate Frank Marshall and his partner and wife Kathleen Kennedy. He also got involved in Disney’s huge deal with the McDonald’s Corp., although he did not initiate that relationship.

But all was not magic for Ovitz in the Magic Kingdom.

Around the same time he took responsibilities for Disney’s aggressive expansion efforts in China, Ovitz also entered into the agreement with Scorsese, whose deal was driven by a film about the Dalai Lama. That prompted an outcry from the Chinese government, although on Wednesday China backed off its militant stance.

Another irritant in the Eisner-Ovitz relationship may have stemmed from talks between Ovitz and Idei, sources said. Ovitz and Idei had several meetings to discuss possible business deals between Sony and Disney. In the course of those discussions, Idei was said to have inquired about Ovitz’s availability to work at Sony, according to insiders. Although the conversations took place months ago, Eisner only found out about it a week and a half ago, sources said.

Disney had no comment. Ovitz was unavailable to comment, but spokesmen for him denied he ever talked to Idei about employment possibilities at Sony once Ovitz assumed his Disney post.

Ovitz confided to friends months ago that he was unhappy in his job and wanted to find a way out of Disney.

Contrasting careers

Ovitz’s experience at Disney contrasts with his first career as an agent. He was known for pushing the envelope to the edge in the talent agency business and consistently broke new ground.

Under Ovitz’s leadership, CAA became the first talent agency to sign major corporate clients. Ovitz’s modus operandi was always to align with the No. 1 company in its product category: He aligned the agency with the Coca-Cola Co., with shoe manufacturer Nike and brought together the telcos for a new media venture.

With Coca-Cola, Ovitz’s bold move threatened and challenged Madison Avenue, while in Hollywood it changed the way the talent agencies thought about their business. Neither the Nike relationship nor the much-heralded Tele-TV ever created significant returns.

In 1993, Ovitz became a consultant to French state-owned bank Credit Lyonnais, which raised the ire of ICM’s Jeff Berg, who questioned the alliance as a conflict of interest. After the three main Hollywood guilds blessed the union, Ovitz subsequently helped the bank to bring in new management with Frank Mancuso, his longtime friend John Calley, and helped place his own agent, Mike Marcus, at the studio.

Close associates said Ovitz enjoyed the spotlight as well as the title of “most powerful man in Hollywood.”

Change of choice

“Eisner was looking for someone to take a load off of himself, and at the end of the day he realized that he picked the wrong individual,” one observer at Disney said. “With Frank Wells you had someone who didn’t care about the limelight and only cared about the work. He was a very even-keeled guy who was a good sounding board for (Eisner). He gave Eisner the limelight. And he was there behind the scenes. That’s not Ovitz’s style.”

Insiders note that Eisner, who had undergone triple bypass surgery years ago, has in recent months gone back to working 14-hour days.

The friction between the two executives became the subject of several magazine and newspaper articles that villainized Ovitz. The situation got so disruptive it prompted the two Michaels to go on CNN’s “Larry King Live” in October to debunk the rumors — an unusual, if not unprecedented, move for executives in any publicly traded company.

In his statement Thursday, Ovitz made a veiled reference to the plethora of stories, saying, “I hope that my decision to leave will eliminate an unnecessary distraction for a great company.”

News of Ovitz’s impending exit snowballed over the past week and ended with a press release Thursday. Speculation heightened Wednesday, when corporate spokesman John Dreyer and Eisner flew to New York to meet with Ovitz.

(John Brodie contributed to this report.)

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