The Ultimate Mogul

By JANICE CASTRO LOS ANGELES

Tom Cruise is on the line.

Call Warren Beatty.

Barry Levinson wants to talk about the new script.

Mayor Bradley called. And Barbra.

Would anyone like something to drink?

It's after sundown at Creative Artists Agency in Beverly Hills, California, but all three floors quietly crackle, as ever, with the buzz of incredible deals being hustled, of fabulous concepts being bruited, of hurried corridor conversations between 28-year-old talent agents who feel privileged -- no, blessed -- to be in this place.

In a corner office on the top floor is the soft-spoken 46-year-old from whom the swirl of glamour and adrenaline and influence derives. Michael Ovitz, CAA's co-founder and chairman, does not on first glimpse look like the most powerful man in show business. His scratchy voice and gap-toothed grin are real, even warm. This is the guy who sends streams of cold sweat down elegantly coiffed necks? This guy with the rosy complexion and slight stoop, who gives the impression that he has all the time in the world to hear about your weekend? Who keeps a giant bowl of Hershey's Kisses and a Gumby doll in his office?

This is the guy. How powerful is Mike Ovitz? He's so powerful that when the heads of two film studios and one of his own senior employees were asked last week what they thought of him, all three men sang his praises but insisted on anonymity, for fear that Mike might be upset that they had said anything at all -- and then had second second thoughts, calling Ovitz to confess pre- emptively that they had talked to a reporter.

Why is Mike Ovitz so powerful? Very simple: most of the really big movie stars are represented by him and his agency, including Kevin Costner, Robert De Niro, Michael Douglas, Whoopi Goldberg, Tom Hanks, Michael Keaton, Bill Murray, Al Pacino, Barbra Streisand and Robin Williams. They also represent most of the top directors, including Steven Spielberg, Martin Scorsese and John Hughes. And most of the top screenwriters. The only weak spot, according to one of those reticent studio chiefs, is in music; there, CAA's client roster is peopled by such nobodies as Eric Clapton, Michael Jackson and Madonna. If you are a movie executive or a producer and you want to get a film made, it's possible to proceed without Ovitz's complicity -- but not advisable.

Being the ultimate agent, however, isn't enough for Ovitz; he's thinking bigger, ignoring nearly all the comfortable old show business boundaries. Lately he has extended his radius of operations, scaring the bejesus out of Madison Avenue by devising two dozen smart, sexy TV spots for Coca-Cola, and he may be looking to poach other business from the ad agencies. And still he wants more. He has turned himself into the movie industry's highest-profile investment broker in the past few years, arranging the multibillion-dollar acquisitions of Columbia Pictures by Sony and MCA/Universal by Matsushita.

And now, in a move that has whipped up an uncharacteristically public feud in Hollywood, Ovitz has gone one, possibly crucial step further: he has been retained by Credit Lyonnais, the French bank that took over MGM/United Artists in a foreclosure last year, to straighten out its bad-news, $3.4 billion movie-loan portfolio (last month the bank wrote off a third of those loans), to find new investments and, Ovitz hopes, to sell the studio. In the view of Jeff Berg, who runs rival International Creative Management, Ovitz's arrangement makes him crypto-chairman of MGM, which represents an untenable -- and perhaps illegal -- conflict of interest. "I want to solve it politically within the industry," Berg said last week, backpedaling from his initial talk of legal action. But he intends to keep the pressure on CAA and Ovitz. "He didn't think I'd call him on it," says the ordinarily very cool and calm Berg.

Will CAA clients get special treatment from MGM, as Berg suggests? Or will the opposite happen, with MGM getting sweetheart deals for the actors and directors and writers whom Ovitz's agency represents? And when the bank finally gets around to selling MGM, will Ovitz's insider knowledge give him an unfair edge in making or avoiding deals for his clients with the studio?

Maybe none of the above, and certainly ICM's Berg is a little disingenuous in his outrage. There is some truth to CAA's contention that if it helps keep a major studio alive, that will ultimately accrue to the benefit of everyone working in Hollywood. But when Berg went to the press, Ovitz was stung. Since both men are people of such consequence, their fearful peers are careful not to take sides, even anonymously. "It was a bold move on Mike's part," says the currently successful head of a studio, "and a logical move on Jeff's part." "This place," says Anna Perez, who just became CAA's chief spokeswoman after a steadfast four years as Barbara Bush's press secretary, "is beginning to feel just like the White House."

The controversy is an unusually spectacular example of a larger dirty secret of all of today's entertainment businesses: with the same powerful agents and lawyers regularly representing performers and producers and executives on all sides of the negotiating table, real and potential conflicts of interest are chronic and rampant -- so much so that the wheeler-dealers have a hard time taking outsiders' ethical qualms seriously. "The only way to avoid the appearance of potential conflict of interest in this business," says CAA's & president, Ron Meyer, "is to represent only one client. And then, of course, you'd have no business and no clout and no one would care."

What makes Mike run? For starters, he surely wants to cleanse himself of agenting's residual Sweet Smell of Success-era taint. In the old-fashioned show business pecking order, according to a veteran producer at one of the studios, agents were "one step above child molester." Ovitz and CAA have given their trade glamour and stature of a kind that was unimaginable a generation ago, but they still can't order a movie or TV show into production; they are still only middle people, not buyers. On the other hand, Ovitz has turned down the top job at Columbia Pictures and, perhaps, other major studios. To run a studio would cramp him, make him less singular. And although he still spends a majority of his time on his famous clients (85% of his day by his reckoning, 60% to 70% according to an underling), being an agent -- taking Dustin Hoffman's calls, holding Sylvester Stallone's hand -- may have come to seem unchallenging.

But the simplest reason for all the extracurricular work may be the strongest: Hollywood remains in a deep recession, and the agency will earn more from one Matsushita-MCA deal than a whole lifetime of 10% fees from Kevin Costner. If Ovitz is able to unload MGM at a decent price, according to a knowledgeable source, Credit Lyonnais will probably pay him north of $30 million. Plus, as long as he has his main talent-peddling business going strong, Ovitz can very profitably cherry-pick in the secondary realms. He can create an ad campaign here and arrange a corporate acquisition there, but he doesn't need the high-overhead staffs of researchers and analysts that real ad agencies and investment banks must hire.

He insists, of course, that all he really wants is to serve his clients. "Imagine all of the most talented artists here," he says, extending his right hand, palm up. "Over there," he says, pointing to a television set and launching into a spiel that he may have delivered once or twice before, "is a primitive version of a machine that will offer nearly unlimited possibilities for entertainment within about 10 years. What I have to do is get these talented people through a period of relatively low demand the best way I can. Because once those technologies are in place, there will be the most incredible shortage of product!"

In fact, Ovitz is as close to a visionary as Hollywood gets. And in great measure he is powerful because he is so good at what he does. "Studios like him," says one studio lieutenant, unnecessarily withholding his identity, "because he is honest, straightforward and reliable." CAA is a disciplined, very closely managed organization -- some would say oppressively so. CAA agents must collaborate on projects and share information for the good of the clients and the agency; at ICM it tends to be every agent for himself. Ovitz is a devotee of the ancient Chinese philosopher Sun Tzu, whose Art of War, in addition to emphasizing the use of elite shock troops, extreme flexibility and deception, says that a general must nurture loyalty. "CAA has been there 18 years," says a studio head, afraid like his peers to compliment Ovitz on the record. "It gives them continuity of relationship with their clients that the studios don't have."

The fear of Ovitz and CAA in Hollywood is intense and practically universal, though perhaps not wholly warranted. The hot screenwriter Joe Eszterhas says Ovitz threatened to ruin him when he switched to ICM 3 1/2 years ago, but his writing fees have kept climbing. CAA client Michael Douglas appeared in his Basic Instinct, and CAA tried to get its clients cast in Eszterhas' forthcoming Sliver. In late 1991 Wall Street Journal reporter Richard Turner co-wrote a devastating article about Ovitz's overenthusiastic involvement in a penny-ante company pushing QSound, an unsuccessful audio technology. Ovitz apparently sputtered at the time that Turner was finished in Hollywood, "a dead man." However, as with Eszterhas, reason apparently returned -- "You can't always pick winners," Ovitz says today of QSound -- and he now takes Turner's calls.

The problem with CAA is not the tough talk, but the incestuous, ever widening network of pushme-pullyu relationships that are the basis of Ovitz's remarkable success. Feature film "packaging," in which a talent agency assembles the cast, director and writer for a movie from among its clients, is practically an Ovitz invention -- and, again, inherently corrosive of an agent's devotion to a client. If you're a CAA director client and the agency pressures you to cast an inappropriate CAA actor client in your movie, are your interests being ideally served?

As Ovitz and his agency increasingly forge alliances that cross conventional boundaries, the sense of a quasi-monopolistic old-boy lock on the industry becomes greater. Ovitz worked for Matsushita in its acquisition of MCA, and he also negotiated pay packages with the Japanese on behalf of the MCA executives -- with whom he now regularly strikes deals for his filmmaker clients. CAA represented Stanley Jaffe and Sherry Lansing when they worked together until a few years ago as independent producers; now they run Paramount, against whom CAA continually negotiates deals. CAA is also a regular bargainer with 20th Century Fox, which Joe Roth ran until late last year, when Ovitz helped him negotiate an astonishingly sweet producer's deal with Disney. And Mike Eisner, who runs Disney, is one of Ovitz's best friends. The beneficiaries of such coziness, of course, have no problem with the blurry roles; it is simply the way business is done. "I'd rather all the elements in a film came from the same agency," says a longtime studio chief. "Otherwise there are wars."

Among those whom Ovitz's arrangement with Credit Lyonnais took by surprise was Alan Ladd Jr., the chairman of the bank's MGM studio. "By the time the bank told me about the deal," Ladd says, "it was a fait accompli." He seems tentative about the whole thing. "I don't think MGM is for sale at this time." However, CAA sources confirm that Ovitz is indeed out to find a buyer.

Guy Dufour, a director of the Credit Lyonnais, dismisses the fears of Ovitz's critics who fret about conflicts of interest. Ovitz will meet with the bankers often, maybe monthly, but Dufour says Ovitz will wield no operational power over the studio. "Absolutely not. False -- completely wrong," he says. "MGM has its own management. MGM makes its own decisions. We do not tell it what to do; nor will anyone else." His presence, however, will inevitably be felt by studio executives and by moviemakers cutting MGM deals.

Ovitz calls the consulting arrangement "a minuscule part of my business." A close financier friend says it's "light stuff for Michael. He should be able to dash off this kind of advice on the car phone while he's taking his son to the ball game." Perhaps, but a fee of, say, $30 million would in fact represent a very significant fraction of CAA's annual revenues.

The eminent New York investment banker Felix Rohatyn, who is Credit Lyonnais's official banker and represented MCA in the Matsushita deal, thinks his friend Ovitz may be getting perilously close to unavoidable conflicts of interest. "If Michael is involved both in the restructuring of the entertainment companies that Credit Lyonnais has an investment in -- by - bringing in talent, by directing their entertainment strategy, by helping them get television product or motion picture product -- and at the same time provides financial advice as to what to do with these companies, then he's probably going to be walking a very fine line," Rohatyn warns. "There is both the possibility and the perception that that could occur. And he's dealing with a set of clients in Hollywood that is far more paranoid than anything I deal with."

CAA's rivals, particularly the folks at ICM, are doing their best to stoke these fears. Says Bill Block, a cocksure young agent at ICM: "This deal? It's like the Oliver North thing -- the full implications weren't brought out." Certainly, sour grapes and not simply righteous indignation plays some role: two years ago, ICM hired one of the Credit Lyonnais officials who was in charge of many of the bank's movie-industry loans during the go-go '80s, and it also happens to be making forays of its own in the ad game.

ICM is energetically spreading the idea that Ovitz isn't minding the store. Says Block about CAA's extracurricular businesses: "Smart clients question what's the value-added service when senior agents are busy with outside deals, and they get shunted to junior agents." His boss Jeff Berg echoes that point: "My core business is managing the careers of talented people." This may be the major risk in Ovitz's expansive strategy; CAA clients could start to feel neglected and then restless, even if their fears were unjustified.

And CAA seems to be rising to the bait. "Those are the kind of guys," says one CAA executive of his ICM counterparts, "who steal scripts from one another's desks." The Ovitzites say Berg is ranting and raving to make himself seem like Mike's equal -- an idea they find absolutely absurd. "I will not be intimidated by the threat of failure," says Ovitz, with uncharacteristic heat, "or coerced by that kind of talk. I will do what I have to do."

For Ovitz that means continuing to push the boundaries of what a Hollywood talent agency does. On his telephone is a sign that reads, COMMUNICATE! And early each morning, he slips on a high-tech headset, plugs the extralong cord into that phone and spends the next 12 hours working his relationships, cajoling, brokering, turning that exhortation into new ways of making money.

With reporting by Bruce Crumley/Paris, Georgia Harbison/New York and Martha Smilgis/Los Angeles