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Attack of the manager mavens

Thesps watch warily as talent reps flex muscles

This article was corrected on Feb. 14, 2003.

Here’s the way things used to be: Talent managers were guys who hung around nightclubs, scouting for talent. They took pride in guiding the careers of performers and maintaining oversight of over the deals struck by their agents.

And then managers became mavens. Or at least some of them did. And the town, as well as the talent, are presently trying to figure out the impact.

Two cases in point: Mosaic Media Group run by a cautious, savvy lawyer named Allen Shapiro. And the Firm, run by a brilliant, if volatile, music industry emigre named Jeff Kwatinetz.

These two firms are diversifying more aggressively than any other management company, swiftly branching out into a variety of fields.

Mosaic has taken a low-key approach, building one sector at a time, and concentrating on showbiz companies.

The Firm has made some high-profile acquisitions, such as absorbing the clients of Rick Yorn, now co-chairman; the company has branched into non-showbiz ventures, ranging from sneakers to soft drinks, and made news recently by laying off almost 10% of its staff.

The progress of both entities is being watched closely not only by clients but also by talent agencies which, though constrained by guild commitments, are nonetheless eager to become more entrepreneurial themselves.

Only last week, for example, CAA acquired research and marketing company Youth Intelligence on the same day Mosaic struck joint venture deals with sports marketing and urban marketing companies Elevation and SRC.

Also looking on are big ad agency holding companies like Omnicon and Interpublic, which have had a bouncy ride in their efforts to diversify and expand.

Other management companies also are looking on, but warily. Most managers want to continue their sole focus on talent, having persuaded clients that, while agents may have many pressures, managers are totally talent-focussed.

Even Brillstein-Grey, which has ventured into complex alliances in the past, is now re-dedicated to the traditional talent business (though Brad Grey personally works with key clients like Brad Pitt on some productions and development deals).

And most literary managers, like Benderspink, throw the bulk of their energies into writer-clients, involving themselves in an occasional production deal usually tied to clients’ properties, though even they are — cautiously — diversifying into talent production and brand ventures.

But a company like Mosaic has something more ambitious in mind.

Mosaic now consists of talent managers the Gold/Miller Co.; Atlas Entertainment and affiliated music management company Atlas/Third Rail Management; Dick Clark Prods.; a stake in producer-distrib Lakeshore Entertainment; and music publishing, including the Hamstein and Daksel & Seldak music catalogs (i.e., works of Aerosmith, ZZ Top and numerous country stars).

There is also a strategic alliance with urban music boutique management firm Family Tree Entertainment, its sole horizontally integrated company.

“We don’t overestimate our skills,” says Shapiro. “None of the companies we’ve invested in needs Mosaic to run. But they do provide added value.”

The wiry Shapiro sits at his desk in his 10th-floor office overlooking Sunset Blvd. (and, on a clear day, most of Los Angeles). He speaks in measured tones as he sits next to a photo of him with his arm around a smiling Bill Clinton. Though his background is as an attorney, Shapiro has produced films like Roland Emmerich’s “Universal Soldier” and Sam Raimi’s “The Quick and the Dead.”

Mosaic is becoming vertically integrated, aggregating talent, distribution and financing. It has a first-look deal with MGM and, through its substantial investment in Paramount-based Lakeshore, an international distribution pact. It also has access to millions of dollars in production financing through its relationship to CDP Entertainment, a joint venture between Henry Winterstern and CDP Capital Communications.

“We don’t have to own a client’s project, distribute it or finance it,” says Gold/Miller principal Eric Gold. “But to the extent that we have the ability to do so puts us in a better position to get movies made and shows greenlighted.”

Mosaic has avoided investing in small-fry or mothballed brands, preferring companies with proven management still in place.

Dick Clark Prods., a $140 million acquisition, retains vice chairman Jules Haimovitz. Mosaic’s lucrative music catalogs are overseen by Island Records vet Lionel Conway. Last week, it struck a joint venture with former IMG sports marketing and management execs Denny Young and Steve Lindecke, and with grassroots and urban marketing expert Steven Rifkind.

While Shapiro has been driving his company conservatively, the road has not been entirely smooth. Last September, CDP pulled out of Signpost, which was the international sales operation for the CDP/Mosaic family of companies.

“No one could have predicted the meltdown of the Neuer Markt or of the NASDAQ,” Shapiro says. “The point is, we did something about it, and did so quickly. For so long, the dot-commers in their 20s have been saying experience doesn’t count. We say it does.”

That’s why he favors the cautious approach, and sticks to showbiz ventures. “I don’t know anything about the shoe business,” quips Shapiro. “I don’t know what I could add to the candy business, either. That’s why we’re not in the candy business.”

Standing in stark contrast is the Firm. Its founder is the enigmatic Kwatinetz, a lanky man with green eyes and a jutting nose who is described by competitors as “as good a music manager as there’s ever been.”

Shrewd, energetic and often litigious, Kwatinetz acts like a CEO who wants it all. After swallowing the bulk of Artists Management Group in 2002, the company, which now has 180 employees, just struck its fourth joint venture late last year — a stake in Virgin Drinks Group, to go along with holdings like the once-moribund Pony sneakers.

This isn’t a company that manages brands: It wants to own them, even create them. (However, since these are privately held entities, figures for the Firm’s and Mosaic’s companies are not available.)

But as it branches into many non-showbiz ventures, the Firm raises the question whether any company can do this and still effectively operate its core business, which is to manage its clients.

Kwatinetz, who has expressed disdain toward the media and is reluctant to speak about corporate strategy, declined to comment about the Firm’s future, as did Firm co-chairman Rick Yorn, partner Julie Silverman Yorn and chief operating officer David Baram.

COO Baram is a former litigator; another senior exec, Steve Bannon, joined the company from investment banking.

Insiders say that the company’s potential success rests on its joint-venture consumer brand businesses, which demand a substantial amount of capital for advertising and promotion.

Sales of Pony sneakers, it was hoped, would be buoyed by Firm clients wearing them. So far, sales upticks have not happened in a significant way.

National shoe retailer Foot Locker is understood to be planning to scale back its orders for Pony — which was always an odd retailing fit, given Pony’s urban chic motif and Foot Locker’s corn-fed mainstream core demographics.

Despite branching out, the Firm is still a company run largely by managers.

But Rangit Singh, a former chief operating officer of U.K. bath and cosmetics retailer the Body Shop, has been brought in to oversee its foray into Virgin Cola; in March 2002, the Firm brought in licensing guru Steve Ross, a former News Corp. exec who built Fox’s licensing division into a $750 million a year business.

The Firm is becoming horizontally integrated, acquiring or folding management companies into one management clearinghouse.

While the Firm has a production division run by respected film execs like Beau Flynn and Tripp Vinson who are setting up projects at studios, it lacks outside sources of distribution or financing.

Early last year, Kwatinetz was telling potential investors like billionaire Haim Saban that he wanted to become the next AOL Time Warner.

With AOL TW recently posting the largest annual lost in U.S. history of almost $100 billion, Kwatinetz may now wish to revisit that grand plan.

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