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Ovitz to Leave Disney After Rocky Year as President

Studios: Executive will leave Jan. 31 in severance package worth up to $90 million, sources say. Job had led to increasing friction with chief Michael Eisner.


The entertainment industry's most scrutinized corporate marriage ended in divorce after a tumultuous year Thursday when Walt Disney Co. announced that Michael Ovitz will leave as its president next month, putting Michael Eisner alone again atop the world's second-largest entertainment concern.

In a brief statement, Disney said Ovitz will leave "by mutual agreement" effective Jan. 31, and will consult for the company. In the statement, Ovitz acknowledged that "it is important to recognize when something is not working. I hope that my decision to leave will eliminate any unnecessary distraction for a great company."

Acknowledging that the job didn't work out marks a rare failure for a man once dubbed "the most powerful man in Hollywood," and also for a company that is arguably the most successful in entertainment. For Eisner, 54, it represents a high-profile blunder that puts him flying solo at the top with no obvious successor.

Ovitz will depart with a generous severance deal, probably the best ever. Sources say he is getting about $50 million in cash to settle his contract--including a $10-million "termination payment" spelled out in his contract. He also will take 3 million shares of stock options that today are worth $40 million and could be worth more if Disney's stock appreciates. That gives Ovitz at least $90 million, according to sources with knowledge of the deal.

"It's a lot of money for what apparently was a mistake," said executive compensation expert Graef Crystal, who helped design Ovitz's contract for Disney.

Disney stock fell $1.875 to $70.25 on the New York Stock Exchange, although blue-chip stocks in general were down. Wall Street analysts and investors were unfazed.

"There's been speculation from Day 1, so no one is really surprised," said Jessica Reif, an analyst with Merrill Lynch & Co. She said the main concerns of investors are "what it's going to cost Disney" and "you go back to the succession issue" for Eisner.

A major Disney investor, noting that the company is highly profitable, said: "I know this is a great media event, but to Disney it means almost nothing. I don't think the company's going to miss a beat." He added that entertainment executives are "deified more than they should be when the truth is one management guy doesn't make that much difference."

Ovitz, who turns 50 on Saturday, leaves with no job lined up, and is said to be planning to take several weeks off to vacation with his family and consider his options.

He spurned overtures this year to run the entertainment operations of Sony Corp., where executives are said to remain interested in hiring him. He has been telling people, however, that he is loathe to take another high-profile corporate job in the wake of the Disney experience, and would prefer to invest in a company where he can work for himself.

Ovitz's tenure had been under the public microscope since the day he walked in the front door of the Burbank entertainment giant last year, lured from his perch as Hollywood's top talent agent by Disney Chief Executive Eisner to help run Disney. As head of Creative Artists Agency, Ovitz broadened the traditional role of the agent into such areas as advertising and investment banking.

Ovitz found the Disney job a sobering series of frustrations, which led to increasing friction between the two men who describe themselves as best friends.

Ovitz was frustrated by his poorly defined role, Eisner's reluctance to share power and repeated clashes with other senior Disney executives--notably Senior Executive Vice President Sandy Litvack and former Chief Financial Officer Stephen Bollenbach, who left the company to run Hilton Hotels. Ovitz in particular was frustrated by the lack of authority in dealing with Disney's powerful division chiefs, who became used to widespread autonomy during the period after former Disney President Frank Wells' death and during Eisner's recovery from heart problems in 1994.

Likewise, Eisner has been clearly frustrated that his high-profile hire didn't work out. He is known to have been irked when Ovitz offended some longtime Disney executives with a management style that some viewed as arrogant, and also by some high-profile missteps, such as a nasty feud with NBC triggered when he lured top programming ace Jamie Tarses from that network to ABC.

"I think it's apparent Mike's personality traits caused all this and made him more of a liability than an asset. He stepped on a lot of toes. . . . He really self-destructed," said one investor.

Some of Hollywood's most powerful figures, still smarting from clashes with Ovitz when he operated more ruthlessly as an agent, gloated privately at the beating Ovitz's image took and his troubles with Eisner.

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