Who Is Michael Ovitz?

by Michael Ovitz

  In 1986, when Larry Tisch took control of CBS, Walter declared war on “the Evil Dwarf,” as he called his new boss. After signing superstars like Michael Jackson and Bruce Springsteen, Walter felt he’d earned the right to make Tisch miserable.

  Through his work for CBS/Sony Records, a thriving joint venture in Japan, Walter had cultivated a relationship with Norio Ohga, the Sony president who made Morita’s vision happen. Ohga had a soft spot for “the crazy American.” It was the pre-Apple era, when Sony set the standard for anything that fit in your hand. They introduced the mini tape recorder and the transistor radio, and then came the Walkman, the analog iPod strapped to every jogger’s belt. Sony now wanted a piece of the content that played on those devices, which was where their crazy American came in. Walter was eager for Sony to buy CBS Records.

  I began hanging out with Walter and his pals, music manager Tommy Mottola and attorney Allen Grubman, at an industry tavern on Columbus Avenue. They were never boring. (I watched Walter rip Allen’s shirt off at Black Rock, the CBS headquarters on West Fifty-second Street.) No one divulged much in Hollywood, but the music business was completely different. One day Walter was gabbing loudly about CBS Records being for sale, disclosing all sorts of privileged financial data. I said, “Hey, you don’t want anyone to hear this.”

  “What do you mean?” he said. “I want everybody to know I’m trying to get rid of the Evil Dwarf!”

  Not fifteen minutes later I was summoned to Tommy Mottola’s limo to take a call on his car phone. It was Michael Eisner at Disney, bottom fishing. “I hear Walter’s talking, and we want to bid,” he said. (As usual, he bid too low.) That’s when I saw the method to Walter’s madness. He was driving CBS Records into a fire sale so he could control it under a new owner.

  This music deal was the first time Ron and I diverged. I didn’t have the patience to sit on the phone with Cher for an hour; he did. I did have the patience to sit with Walter Yetnikoff for five hours as he savaged Larry Tisch and plotted how to sell CBS Records. Ron thought it was all a loss of focus and a waste of time.

  With no real platform—I wasn’t representing CBS or Sony or even Michael Eisner—I put myself in the middle of the situation. I was a connector; it’s what I did all day, and now I decided to try to connect the parties and learn what I was supposed to be doing as I went along. Through a mixture of confidence and silent observation, I kept my place at the table. No one ever said, as they would have been perfectly right to do, “What the fuck are you doing here?”

  I set up a meeting between Walter and Larry Tisch. “This doesn’t have to be antagonistic,” I told Walter. “Larry’s a smart businessman; he’ll listen to you.” Whatever you thought of Tisch’s management skills, he’d taken a theater chain and some second-tier Catskills resorts and built them into the $70 billion Loews Corporation. I thought he had earned some respect.

  Walter proceeded to do everything I’d told him not to do. He ridiculed his boss’s ignorance of the music business, called him “the Evil Dwarf” to his face, and flatly declined to prepare a budget for the coming year. I called Larry later to apologize. “I’m used to it,” he said wanly. If Walter had tried that on Steve Ross, Steve would have laughed in his face and had two security men usher him out. GE’s Jack Welch would have vaulted the table and coldcocked him. But Tisch was another breed of cat, and because Walter had bullied him into believing that CBS Records would fall apart without Walter, he was open to Sony’s proposals. Anything to get Walter out of his life.

  Sony’s investment banker, the Blackstone Group, was founded and run by Steve Schwarzman and Pete Peterson, the Sony director who had served as secretary of commerce under Richard Nixon. In Japan, a Washington résumé made you a minor deity, and Akio Morita revered Peterson’s judgment. My job was advising Walter, who ignored me, so I mostly stayed in the shadows to watch and listen. After Larry Tisch approved the sale of CBS Records to Sony for $1.2 billion, Bill Paley, the company’s chairman and founding father, had second thoughts about dismantling a large part of his legacy. When CBS’s board rejected the deal, Morita stayed calm, and he ended up paying $2 billion, which many people thought was too much. But Morita was very shrewd. By assuming sole ownership of the record company, Sony gained hundreds of millions of dollars in Tokyo real estate, an item somehow overlooked by CBS’s auditors.

  After this first exposure to corporate mergers, I made a list of M&A specialists—the right lawyer, the best accountant, a top public relations firm—and met with them to learn their craft. As I absorbed the nuts and bolts of making a deal, it struck me that it wasn’t that different from assembling a movie package: you had to put all the elements together first, get the buyer and seller in sync, then strike a price.

  With talent agencies barred, through our contracts with the talent guilds, from owning more than 10 percent of a studio or production company, the next best thing for CAA would be to broker those assets. If we had direct access to the moguls who owned the media, and would-be buyers had to go through us to get to those moguls—well, that would be a great position to be in. It became the heart of our (meaning my) new five-year plan. Ultimately, I wanted to own a studio, but I figured that if we became deal advisers or even principals, it would put more distance between us and the other agencies, bring in larger fees—and keep me from getting bored.

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  —

  Walter had a strong rival for Norio Ohga’s affections in Mickey Schulhof, head of Sony’s U.S. operations. A physics PhD who spoke several languages, Mickey was the anti-Yetnikoff, smooth and methodical. Ohga valued Mickey’s work ethic and trusted him entirely. Ohga didn’t trust Walter at all, but he valued the executive’s skill and chutzpah and the good life that surrounded him. Ohga made around $400,000 a year, absurdly low by U.S. executive standards, but he lived well beyond his means, putting up in New York at a penthouse duplex filled with high-end art near the Russian Tea Room. Mickey and Walter were the left and right sides of Ohga’s brain.

  In the spring of 1988, shortly after Sony closed on CBS Records, Mickey called Walter to tell him the execs in Tokyo were interested in buying a movie studio. Walter dreamed of becoming a mogul, and now he saw his shot. “Go find a studio,” he told me, “and I’ll buy it.”

  Knowing that Walter liked to set plans in motion without authorization, I said I could not solicit a seller until I knew we had a legitimate buyer. “Okay,” he said, “I’ll put you in a room with Morita.”

  “Why not have him come meet me in L.A.?” I said, pretty sure that would end the conversation.

  “When?”

  I gave him five openings. Walter confirmed the second date, two weeks out, and set the meeting for 10:30 a.m. at my home in Brentwood. Unconvinced, I brought home a stack of work to fill the missed appointment. At 10:30 on the dot, my bell rang. Outside I found an elegant man with a mane of wavy gray hair parted in the middle, and Walter and Mickey in tow. Akio Morita had come straight off the company jet from Japan, but his suit was wrinkle-free, his shirt pressed, his tie knotted. He looked tan and fit, like someone who’d just worked out and showered. Morita introduced himself in flawless English. We moved to my screening room and talked for two hours.

  Morita was an ebullient guy who spoke candidly about the VCR wars, a humbling defeat for his company. Sony’s Betamax, the superior machine, had lost to the VHS consortium led by Matsushita. “I don’t want to get beat again,” Morita told me. “If I had owned a movie studio, Betamax would not have finished second.” He was a believer in synergy, or what he called “total entertainment,” a mesh of hardware and content. With the acquisition of CBS Records (soon to become Sony Music Entertainment), his company was the world’s leading producer of music. Thanks to Trinitron, it was the number one maker of televisions. Video—movies and TV shows—seemed the logical next step.

  His biggest challenge was the internecine warfare among his divisions. Sony Japan, for example, refused
to communicate with Mickey Schulhof’s Sony America. Had Morita asked me, I’d have advised him to stick to hardware, or to at least buy Columbia in partnership with a TV network, so he’d have help as he familiarized himself with the terrain. Hollywood is notoriously difficult for outsiders to grasp. But agents weren’t paid to judge CEO’s plans. My choice was to help Morita or not.

  In CAA’s interests, I chose to help. As the top supplier of talent to the major studios, we had a big stake in keeping them afloat. They needed cash, and what better source in a downturn than Japan? If we succeeded, the seller—CAA—would be buying a buyer. We’d go where no agents had gone before.

  * * *

  —

  That fall I made the first of many trips to Sony’s headquarters in Tokyo. While Morita and his deputies knew more about Hollywood than other Asian executives did, they needed an insider to handicap the studio field. I eliminated four of the seven majors. Disney, thriving under Eisner, was too expensive. Sony had no chance at Warner Bros. under Steve Ross, and Rupert Murdoch was untouchable at Fox. At Paramount the problem was Martin Davis, the chairman of the parent company, Gulf & Western. He was a notorious tire kicker who opened countless deals but rarely closed one.

  That left three candidates. MGM/United Artists was in free fall, but how much would you have to overpay? Then there was Columbia, owned by Coca-Cola. Coke had recently netted a billion dollars by spinning the studio off and merging it with TriStar. For the right offer they might be persuaded to take the rest of their money off the table.

  My first choice was Universal, whose sagging stock price made it vulnerable. With movies, television, and music, along with four hundred acres of prime real estate, the company seemed a good fit, and Sony would inherit strong management in Lew Wasserman and Sid Sheinberg. But as chairman and absolute ruler of MCA, Universal’s parent company, Lew wasn’t ready to go gently. When I called to sound him out, he spat back, “Universal’s not for sale, and under no conditions would I sell to the Japanese. Don’t even think about it.”

  My next stop was Kirk Kerkorian, who’d been chopping up MGM’s assets since buying the debt-ridden studio back from Ted Turner two years earlier. Like Warren Buffett, Kirk was an unassuming billionaire. He answered his own phone and lived above a garage in a modest house on ten acres in Beverly Hills. After ushering me into his office, Kirk said, “I want a lot for the company. How would Sony pay for it?” Meaning, stock or cash?

  I laid a credit card on the table and Kirk started laughing. “I’m guessing you don’t want their stock,” I said. “I think they’ll pay cash. But I’d suggest you meet with Morita first and find out if you see eye to eye.”

  We resumed in my living room, with Morita the last to arrive. The two heavyweights sparred as I steered the talk to new Sony technologies, a topic of keen interest to Kirk. Morita was a salesman even when he was buying, and he’d come prepared. He set down a box that contained the latest Sony Watchman, their portable pocket television. Kirk stared at it throughout the meeting. At the end Morita said, “I’d like to show you what we’ll be releasing.” It was the first color Watchman, and Kirk would have killed for one—it was the beginning of the tech age, and it was really cool to have a gadget no one else did. Then Morita packed up his Watchman and left. If you want one of these, you’ve got to make the deal.

  But Kirk’s religion was maximum return. He set the studio’s price well north of a billion dollars, plus residual rights to the MGM name for his hotels around the globe. Morita said, “It’s too high.”

  Then I heard from Herb Allen of Allen & Company, Hollywood’s investment house of choice, that Columbia might be for sale.

  * * *

  —

  Seven years earlier, after the producer Ray Stark introduced us, Herb Allen had invited me to his first annual Sun Valley Conference, which eventually became known as the summer camp for moguls. Each day we had formal case-study presentations from the principals of America’s biggest companies, and over lunch afterward, I found myself musing about life with Rupert Murdoch and John Malone, the CEO of the cable TV provider Tele-Communications, Inc. I had an avid interest in the corporate side of the media business, and the corporate guys were curious about how I linked up with talent. I went back every year. The Sun Valley getaways did wonders for my networking, and my image.

  Herb was accessible to everyone but the press and the social set. He rose before 5:00 a.m., had dinner at 6:00 p.m. sharp, and was in bed by 9:00. One time I was at his Wyoming ranch when a phone call made me half an hour late to the cookhouse. Three courses were lined up at my place setting. Herb looked at me and said, “When I say 6:00, I mean 6:00.” He was smiling, but I took his point.

  Herb was a model of integrity. After Sumner Redstone broke a promise and engaged another investment bank, he sent Allen & Company a token check for $1 million. I was in Herb’s office when it arrived. He took out his scissors, cut the check into tiny pieces, and returned them to sender.

  Herb was supremely loyal. He never forgot a birthday and gathered old college pals to dinners and on biking trips. After one friend got sent to Leavenworth for a white-collar crime, Herb visited him twice a year.

  And he was a masterly businessman. Herb had shepherded Columbia to Coca-Cola in 1982, when he parlayed his shares into a seat on Coke’s board and briefly served as its chairman. Having masterminded the TriStar merger, he was still Columbia’s godfather. In 1987, near the end of David Puttnam’s stormy reign as studio head, Herb called me to ask, “Do you know anything about a movie called Me and Him?”

  I said I did.

  Herb said, “I’ve got a problem.” He’d just heard from a livid Roberto Goizueta, Coca-Cola’s CEO. “They ran it for the Coke staff and had to shut it off.”

  “Do you know what the movie’s about?”

  “No, Roberto was yelling too much in Spanish.”

  “Well, Herb,” I said, “Me and Him will never get released.”

  “Why not?”

  “Okay, opening scene: Griffin Dunne is waiting for a bus. There’s a beautiful girl walking down the street. Cut to Griffin Dunne, and you hear a voice going, ‘Wow, she’s really cute, isn’t she?’ And Griffin shouts, ‘Shut up!’ A conversation follows, but you only see one person.” I went on, drawing it out, enjoying myself, until Herb interjected “Good God!” He’d grasped the problem: Coca-Cola, the all-American company, owned a film about a man with a talking penis.

  Then came Ishtar, starring Dustin Hoffman and Warren Beatty, a notorious flop, and Coke decided that it’d had its fill of glamorous Hollywood.

  Though Columbia hadn’t been our first choice for Sony, it was the only viable option. First, I had to get the two sides in a room. That wasn’t easy because Walter Yetnikoff had a long-standing feud with Victor Kaufman, the straitlaced Columbia studio chief. I shuttled between them to remind them that fighting each other was contrary to what their bosses wanted. Kaufman finally agreed to see Mickey Schulhof for lunch. Talks began in earnest after Mickey met with Herb Allen.

  Though we sat on opposite sides of the table, Herb and his associates mentored me throughout. Enrique Senior walked me through the art of valuation, Paul Gould was my deal-point tutor, and Herb himself schooled me on how to keep the process moving. He could herd the most difficult people without cracking his whip or indulging his own ego. And because I had the highest regard for Herb’s probity, I never worried that he would try to put anything over on us.

  Sony commissioned CAA to appraise Columbia’s creative assets. The studio’s library contained more than two hundred television titles, including soap operas and Merv Griffin game shows. The movie side featured hundreds of classic films as well as some of the fruits of CAA’s stellar run (Stripes, Ghostbusters, Gandhi, and Tootsie, among others). Our assignment boiled down to an extremely amorphous question: What was an ongoing show or an old but classic movie worth?

  To solve it, we leane
d on the Harvard MBAs we’d hired away from the studios and Wall Street. One was a young man who’d flunked his prior two jobs but came so well recommended by my friend and associate Mike Menchel that I gave him a shot. I put Sandy Climan through a tough meeting in 1986 and asked if he’d start with a token salary and my small conference room for an office, and he didn’t hesitate. His brilliance with numbers soon made him my trusted deputy, and he went on to run our ten-person corporate finance unit. (Years later he’d tell people that I tasked him with conveying veiled threats to executives, which was laughable: Sandy was a short, plump Orthodox Jew who wouldn’t frighten a mouse. If I had a veiled threat to deliver, I did it myself.)

  With half a dozen staff members, Sandy compiled hundreds of pages of manually typed spreadsheets on Columbia’s library. It was painstaking, deeply researched work. There was no one-size-fits-all algorithm; we reviewed each film or TV show, line by line. What contracts were out on a given title and when did they expire? What was the current cash flow, and what did the future hold? The variables were complex. One big hit in syndication could drag six less popular movies along behind it. With Tootsie as a hook, for example, a local station could program a Dustin Hoffman weekend. The trickiest part was predicting revenues for the 150 movies in Columbia’s pipeline. But we’d read all the scripts and knew which ones we’d be packaging with our top clients, so we could estimate the box office with some degree of accuracy.