Ovitz's Rise Signals Shift in Global Entertainment REVOLUTION IN PLANET HOLLYWOOD
Peter Osterlund, Monitor, The Christian Science Monitor
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. …