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Company Town | THE BIZ / CLAUDIA ELLER

Rumor Mills Grinding Over Ovitz Exit

November 26, 1996|Claudia Eller

Hollywood is a breeding ground for rumors. And some rumors never die.

One that has remained center stage for months now is that Michael Ovitz, the president of Walt Disney Co., has a backdoor plan to run Sony's U.S. entertainment operations.

Last week, despite a formal denial from Sony Corp.

President Nobuyuki Idei and despite continual denials from the Disney camp, Hollywood was abuzz with speculation that Ovitz and Disney Chairman Michael Eisner had worked out an exit agreement and were just waiting for an appropriate time to announce the move.

A recent variation of the rumor on the circuit was that Ovitz had been talking with Sony but had overplayed his hand as he had earlier, both with that company as well as with MCA, and that the discussions were aborted weeks ago.

The gossip is no doubt being fueled by a series of articles over the last few months reporting troubles in the relationship between Ovitz and Eisner.

Such gossip and negative press has an impact on Ovitz--who has a number of enemies in Hollywood who would like nothing more than to see him fail--and undermines his credibility.

But one reason the speculation about Ovitz leaving Disney doesn't go away is because the underlying circumstances spurring it don't appear to be changing. That is, Ovitz and Eisner seem to have found themselves in an unhappy marriage.

In a recent article in Vanity Fair magazine, Stephen Bollenbach, Disney's former chief financial officer, went on the record--where few in this industry dare to tread--to confirm just that.

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Bollenbach, who resigned from Disney early last year to become chief executive of Hilton Hotels, was quoted as saying, "He [Eisner] would tell me, 'I've known [Ovitz] for 25 years, but after he came to the company, I don't know him at all.' "

In speaking out, some might say Bollenbach had an ax to grind.

He opposed Eisner hiring Ovitz, and the Disney presidency is a job he himself undoubtedly coveted.

Bollenbach, Eisner and Ovitz could not be reached for comment.

The various newspaper and magazine articles critical of Ovitz have been devastating to the former superagent, so say a number of sources who know him.

And those who know Ovitz say he's visibly unhappy and frustrated. Eisner is more difficult to read.

When colleagues ask him about the situation, he shrugs off the queries as if nothing at all is wrong. Both Ovitz and Eisner continue to deny they are having problems and keep pointing to how well Disney is doing, which is true.

The company's stock has soared this year with the general upsurge in blue chip stocks. Disney shares rose $1.375 to a record $73.50 on the New York Stock Exchange on Monday, up 38% from its 1996 low of $53.25 early this year.

At this juncture, Ovitz is sitting on options worth more than $80 million, which are a huge incentive for him to stay at the company.

Nevertheless, sources say tensions between the two Michaels are real.

What Ovitz hoped and believed would be a partnership with his dear friend of many years is in not that, they say.

Eisner was looking for someone to help administrate his company, not actually share the role of running it, despite what he initially claimed publicly, some sources contend. Those who know Eisner well say he's not about to change and give up any more control than he already has.

And, let's face it, Ovitz is not someone who would be satisfied being anybody's sidekick.

One executive who has known Ovitz for many years says: "He is pained. All of this has clearly gotten to him. He's found it impossible to make a difference and that's a terrible thing. If it doesn't change, something has to change."

According to that executive, change means that Ovitz will have to find another job. It's just a question of when and where.

The reason Sony keeps coming up as the place, regardless if it truly is, is because it seems logical.

Because the company is in such bad shape, it would give Ovitz the chance to make a difference.

Ovitz is close to Idei and supposedly was one of several executives to recommend the hiring of John Calley as the new head of Sony Pictures.

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According to sources, Calley has told friends and associates that he would be entirely comfortable with Ovitz coming in to run the entire show, filling the spot left vacant when Mickey Schulhof was fired last year.

But Idei was emphatic last week that "it was not necessary at this moment" to bring anyone in over Calley.

When the media was pursuing the rumor a couple of weeks ago, Sony's corporate communications department in Tokyo issued this statement: "Sony has had a long and ongoing excellent relationship with Michael Ovitz. However, we currently have no plans to hire him for any position in the Sony Group."

Still, many in Hollywood are betting that Ovitz won't be eating at Disney's executive commissary, the Rotunda, this time next year.

Calley's First Move: Calley, known as a more hands-on executive than his predecessors, is moving swiftly to make some structural changes at Sony Pictures after two weeks on the job.

Fred Bernstein, president of Columbia TriStar Motion Picture Cos., is being let go and his position eliminated. Other executives are also likely to follow as part of a reorganization throughout Sony Pictures Entertainment.

Bernstein joined Sony in 1994 after serving as a senior vice president of the MCA Motion Picture Group.

He's a well-respected business executive who helped run the operations of the movie companies under former SPE President Alan Levine.

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