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Ovitz unplugs TV unit

Fire sale, exec shuffle on as ATG shutters

Artists Television Group is history.

The television company Michael Ovitz started two years ago is winding down its activities, shedding employees and will cease to exist in its current form. That much Ovitz’s execs now acknowledge.

Talks still are taking place, however, which may result in several ATG execs moving to another existing company and/or clusters of talent gathering elsewhere. But the possibility of preserving ATG as such has faded.

“We’re now talking to multiple people about alternative deals that are smaller in scale,” an ATG source said. “Our desire would be to keep together as many of the assets as we can that we took so much time putting together — and finalize as big a transaction as we can.”

But it’s far from clear whether a transaction would include all of ATG’s shows (such as CBS’ frosh comedy “The Ellen Show”), execs (ATG prexy Eric Tannenbaum, to name one) and its talent roster.

One thing is for certain: Any new entity would not be branded ATG.

ATG execs hope to set up a new mini-ATG as a wholly owned pod at a major studio, similar to Paramount TV Group’s ownership of Spelling TV and Big Ticket TV.

But ATG’s new strategy is to sell off its assets piecemeal has opened an even deeper Pandora’s box of questions, including how ATG will handle its output deal with Sony once the fire sale begins. Sony currently advances ATG roughly $375,000 per seg for every sitcom it gets on the air and $450,000 for every hourlong skein.

In exchange, Sony takes a 17.5% distribution fee based on gross revenue generated by sales of ATG product. There’s no doubt that Sony maintains an interest in series such as “The Ellen Show,” which the studio has already sold internationally.

But if an ex-ATG exec gets a series on the air written by a scribe who had an overall deal at ATG, would Sony be involved? No one, including Sony execs, know for sure.

“Resolving the Sony situation is something we’ll take up as we wind this down,” an ATG insider said. “We’re confident they’ll work with us (in formulating a solution).”

Also up in the air: What happens to the leftover execs, series and deals at ATG once its largest chunk is sold off.

CBS execs, for example, say they may absorb the full cost of producing laffer “The Ellen Show,” which the net’s CBS Prods. currently co-produces with ATG, or shop around for a partner.

“We will take care of ‘Ellen,'” a CBS exec said. “It’s not an issue. There will be producers in some shape or form.”

ATG is also producing the fall WB reality gamer “Lost in the USA” this fall, as well as the WB midseason entries “Cedric the Coach” and “No Ordinary Girl.”

Until last week, ATG execs had hoped to forge a joint venture with a partner studio to keep the company intact and fund its day-to-day operations. Ovitz and company held conversations with virtually every company in town, including Paramount, CBS, NBC, 20th Century Fox TV and Warner Bros. Paramount had been singled out in particular as a front-runner to absorb ATG.

But none of the companies — themselves facing tighter economics in the wake of a soft network ad market — were interested, especially due to ATG’s backend arrangement with Sony and stable of overall talent deals.

ATG changed course Aug. 8, cutting 18 staffers but keeping a core staff of 20 “transition” execs. Despite the uncertainty, Tannenbaum and company are still taking network meetings and pitching around town.

The company, however, has stopped making any new deals.

From the beginning, vet TV execs questioned Ovitz’s television strategy. Rather than start slow, ATG quickly started competing with the big guys by focusing on volume.

“There is no middle ground,” he told Daily Variety last year. “We are either going to make it or we’re not going to be in business. That’s the bottom line.”

In the process, the former agent invested as much as $100 million of his own money to fund the creation of ATG. Early on Ovitz talked to potential strategic partners including AT&T and NBC, but those discussions never became serious.

ATG started off by investing roughly $60 million in talent deals and another $5 million to $7 million in overhead costs. The studio attracted a strong roster of writers and producers, including Darren Star, Paul Haggis and Tom Fontana, outbidding more established studios (with steady revenue streams) in the process.

“They spent like drunken soldiers,” said one rival studio chief. “They outbid us across the board. But one bad year, and they can be totally exposed.”

As a result, ATG launched strong out of the box, landing four shows on the fall 2000 schedules its first season out. Tannenbaum succeeded in what he set out to do — getting as much ATG product on the air as possible. (No matter how or where ATG ends up, most industry players expect Tannenbaum to quickly land on his feet.)

But none of those entries — Fox’s “The Street,” the WB’s “Grosse Pointe,” NBC’s “The Weber Show” and ABC’s “Madigan Men” — made it to a second season. Midseason entries such as NBC’s “Fighting Fitzgeralds” also quickly burned out.

And with only part of its costs covered by its Sony deal (or by partners such as Touchstone on “Madigan”), ATG was quickly forced to shoulder the brunt of those shows’ deficits.

“You always should have 100% of your financing covered,” said one industry exec familiar with the ATG deal. “To quote Mel Brooks from ‘The Producers,’ the first rule of showbiz is never use your own money. The second rule of showbiz is never use your own money.”

Questions remain as to how the ATG sell-off will affect sister management company Artists Management Group. Although ATG and AMG are separate companies — with separate boards and separate financing — a number of AMG’s TV clients (though not all) also have overall deals at ATG. That’s kept Hollywood speculating over what Ovitz might do with AMG, if anything, once the ATG problem is settled.

In contrast to the fast track initially seen at ATG, Ovitz’s film production arm, APG, has been slow out of the gate with its slate of pics.

The division, under prexy Cathy Schulman, announced four big-budget pics to begin production before the end of 2000. But of the four, only one, Edward Burns’ “Sidewalks of New York,” has wrapped.

ATG execs would not discuss the company’s future, but a spokesperson said that the company was “in active discussions with several companies that have expressed interest in both ATG and its core assets. We are continuing to negotiate toward a transaction that’s in the best interest of all parties involved.”

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