THE declaration at Potsdam. The disintegration of the Soviet
Union. The departure of Hollywood uberagent Michael Ovitz from the
Creative Arts Agency.
Of course it's an exaggeration: We are talking about the
entertainment industry, after all, where hyperbole is the
stock-in-trade and this week's designation of Mr. Ovitz as
president of the Walt Disney Company has been treated with language
most people reserve for earthquakes.
From New York to Beverly Hills, it has been a summer of seismic
metaphor. Only last week, Disney itself said it would pay $19
billion for Cap Cities/ABC Inc., while Westinghouse heralded its
planned $5.4 billion purchase of CBS. Those moves came on the heels
of Canadian distiller Seagram's decision to buy MCA, owner of
Universal Studios, from Japan's Matsushista Electric Corp.
Now, a twist in one man's career has further underscored and,
perhaps, accelerated the transformation in the business of media,
presaging an era where a handful of multimedia conglomerates
control nearly every aspect of news and entertainment available in
the United States and, to a great extent, the world. "On a micro
scale, the more things change, the more they stay the same," says
"Sleepless in Seattle" producer Lynda Obst of Disney's newest hire.
"On a macro scale, it's enormous."
To understand how the micro and macro are linked in the figure
of Disney's incumbent president, one must consider the man, the
talent agency he helped to found, and the position both enjoy in
Hollywood's food chain.
Creative Artists, known everywhere as CAA, began its life in
1975 as the rogue venture of five young and ambitious agents from
the William Morris Agency.
Ovitz, then 28, became their leader and promptly proceeded to
redefine the meaning of the term "talent agency."
Ovitz and his band became famous for their indefatigability and,
to some degree, ruthlessness. They poached clients from the rosters
of other agencies and shattered a prevailing gentlemen's-club ethos
against "talent raids."
They assembled a dazzling list of actors, writers, and
directors, winning record-breaking fees from the studios. And their
president, the secretive Ovitz, became known universally as the
most powerful man in the entertainment business.
This might have never changed, had the winds of regulatory
change not blown as they did, ultimately sweeping Ovitz to Disney.
For years, federal guidelines ensured that "content was king."
Studios produced television shows for broadcast on the networks.
But the Federal Communications Commission saw to it that network
profits came from advertising revenues; the studios, not the
networks, owned the shows themselves. After the first run of a
television series, the studio was free to take a series and sell it
for repeat viewing on the syndication market. The network was shut
out of all future profits.
That arrangement ended with the Bush administration, when new
rules permitted networks to own their own programming, reaping
advertising revenue during the first run and lucrative syndication
profits down the road.
"The networks have a finite amount of time in their schedules,
so there's a lot of competition among the production companies and
the studios to fill those slots," says Daniel Broder, a network
consultant with McKinsey & Co. "And all of a sudden they face the
prospect of competing for these very time slots with the production
entities owned by the network themselves."
Content is king
In this new environment, ownership of "content" has come to be
seen as no more or less important than ownership of the means to
distribute it. "These companies are scrambling for vertical
integration," Mr. Broder says.
Australian media baron Rupert Murdoch was the early pacesetter.
His News Corporation acquired the Twentieth Century Fox film
studio, then started the Fox network, which has since allowed his
studio to broadcast programs it would have been hard-pressed to
sell elsewhere. …