Mistrial of the Century

In order to evaluate Ovitz’s worth back then, the shareholders’ lawyers should have known some of the agency’s biggest actors and directors were beginning to have flops. His most important client, Steven Spielberg, formed a company with two of Ovitz’s biggest enemies, and Ovitz not only didn’t know about it, he had nothing to do with it. Some CAA clients were learning that not everyone paid 10 percent commission. And that infamous clique of five young agents, known as the young Turks, was making noises about leaving.

For two years in a row, Ovitz had not been No. 1 on Premiere magazine’s annual power list. And as Hollywood’s studios were changing hands and merging, becoming huge entertainment octopuses with tentacles reaching into television, cable, film, music, interactive media and even computer software, Ovitz felt a growing panic that he had missed the boat. If he was going to make a move to a Big Media company, he had to make it soon, verysoon.

The plaintiffs’ attorneys could have pointed out that no one knew better than Eisner that only a few jobs left in Hollywood were appropriate to Ovitz’s perceived stature, and every one was occupied. The problem now was that Ovitz had become a prisoner of his own mythology. That is why, to others around him, including Eisner, Ovitz began to appear worried, paralyzed, indecisive, even weak. The man who had always claimed to know everything now didn’t know what to do about himself. As strange as it seemed, Michael Ovitz was genuinely fearful of the future. It was the first sign of weakness for which nearly all of Hollywood had been holding its breath.

When you’ve been called the "Most Powerful Man in Hollywood" since 1986 and embraced that appellation, you’d have to be convinced another job was the best and the brightest available to any entertainment executive ever. A year earlier he’d turned down Eisner’s surprise offer to become, pre-ABC purchase, Disney’s heir apparent. Now, Ovitz was in the thick of talks to head MCA because it was the last real chance he had for a big job with a major studio. But negotiations with new owner Edgar Bronfman Jr. were not going well at all. Why should anyone care about this recent ancient history? The shareholders’ lawyers should because this is the crux of what’s wrong with how Ovitz was overcompensated at Disney. That Disney contract was based on Ovitz’s valuation during the MCA bargaining. One problem: Ovitz was still worth something then, but he wouldn’t be by the time Eisner saved his sorry ass to the tune of a seven-figure salary, millions of stock options and the usual kingly bonuses and perks.

Ovitz was demanding that Seagram pay him for his share in his partnership in CAA. He put that value at $240 million. But that was only part of the problem. The CAA partners had a buy-sell agreement that stipulated all the partners had to be compensated should the partnership be dissolved. Ovitz needed enough not only for himself, but enough to pay off CAA partners Ron Meyer and Bill Haber and then settle up with the people who were left to run CAA.

But to Bronfman’s dismay, the compensation for CAA was just the opening salvo. Ovitz next had problems with the formula of how his compensation was to be paid in stock and cash and equity, leading to yet more weeks of negotiations. Then Ovitz had problems with the tax consequences. To Bronfman’s frustration and amazement, the CAA chieftain continued to make more demands. No matter was seemingly too big, or too small and petty, to negotiate. One minute it was more money, the next it was more autonomy, then more company planes, more drivers, a limousine at his disposal 24 hours a day.

What kept driving Ovitz for more? Was it greed? Absolutely. Was it power? Absolutely. Bronfman, on the advice of his family, ultimately walked away. The collapse of the MCA negotiation was a disaster for Ovitz, like getting rear-ended is to the value of a Mercedes. The plaintiffs’ lawyers should have jumped on this passage in Ovitz’s story and painted a picture of a man with an empty hand, not one holding all the cards. Ovitz’s first worry was how it would look to the outside world. It was the lowest point of his life. Everything he had worked for two decades to build up had been pulled out from under him. He had lied. His credibility was shot with the press, with Hollywood and with his own clients and his own agency. He had shown he wanted out of the agency business. And he had betrayed his own employees by not telling them the truth and not taking care of them. All the work he had done over the years to build up his persona had all gone out the window. He was staring into the abyss, and he didn’t know what to do. Depression set in.

At investment confab Camp Allen a few weeks later, people walking down the pathways didn’t recognize the man with his head down, his eyes lowered, his shoulders slumped. Ovitz was a shadow of his former self. For the first time, the 48-year-old looked his age.