OVITZ AND OUT AT DISNEY

By KIM MASTERS/HOLLYWOOD

As they sat together at an opulent wedding reception that financier Marvin Davis was throwing for his daughter at his Beverly Hills home on Dec. 7, Michael Eisner and Michael Ovitz, the ranking executives at the Walt Disney Co., apparently came to the conclusion that their own corporate union must be dissolved.

Just a week later, one of the more stunning reversals of fortune (even for Hollywood) was announced, following a frenzy of speculation that transfixed both coasts. Ovitz, the former superagent once routinely described as "the most powerful man in Hollywood," was out as president of Disney after a brief and unhappy 14 months. And he wasn't departing to take over Sony's troubled entertainment empire, as had been rumored. Simply put, he was out of a job. "There are even people who don't like him who feel sorry for him," said one of his bitter enemies, who added that he was not among them.

In a press release Ovitz acknowledged, "It is important to recognize when something is not working." For Disney, his exit comes at a perfect time: despite troubles at recently acquired ABC, its theme parks are booming and the studio is enjoying a bumper crop of holiday hits, including Ransom and 101 Dalmatians. Analysts were unperturbed. "This is as good a time as any to have this kind of change in top management," said Harold Vogel of Cowen & Co.

Ovitz hadn't planned to leave until next year, but events overtook him. He spent last week in Manhattan, attending a premiere of The Preacher's Wife on Monday. But Tuesday was rife with rumors that he was out. Wednesday evening he appeared strained as he addressed a Council on Foreign Relations meeting. As he spoke, Eisner was headed for Manhattan.

Eisner was already angry, having discovered that Ovitz had been secretly negotiating with Sony to take over its troubled entertainment operations. Those talks went off track because of Ovitz's extravagant demands, says an insider. Coincidentally, Sony boss Nobuyuki Idei was also in New York City, and thus his presence fanned the flames of speculation. Eisner arrived around 11 p.m., and was soon closeted with Ovitz. In a meeting that extended deep into the night, the two agreed to call it quits. "I can't imagine anybody having taken a greater fall in this industry," marveled a former entertainment-company chairman.

Ovitz won't walk away empty-handed. His severance package could reach $90 million if he gets to exercise all the stock options in his contract. Disney sources discounted that figure, implying that the exit deal was cut closer to $30 million.

How odd that Ovitz, co-founder of powerful Creative Artists Agency, would find himself out of his depth. Over the years, he had built a reputation as a shrewd, tough, almost omniscient leader. Besides representing an enviable list of major clients--Tom Cruise, Robert DeNiro, Dustin Hoffman, Warren Beatty--he ranged far beyond the traditional agent's role. He played a part in brokering Sony's acquisition of Columbia Pictures in 1989 and shepherded Matsushita into its purchase of MCA the following year--deals that soured for the buyers. In 1994 he engaged in highly publicized negotiations to take the top job at MCA. Once those talks collapsed, returning to CAA became impossible, and Disney opened the door.

Reports soon emerged that Ovitz was wasting time and money at Disney, lavishly redecorating his office, hiring half-a-dozen secretaries while Eisner made do with two, keeping drivers waiting unnecessarily and spinning his wheels in unproductive meetings. "Michael Ovitz didn't understand the duties of an executive at a public company, and he didn't want to learn," former Disney CFO Stephen Bollenbach told me for a Vanity Fair article I co-wrote. Ovitz's tenure was marked by a series of embarrassing flaps, such as his clumsy (albeit successful) campaign to lure television executive Jamie Tarses to ABC from rival NBC.

A more recent blowup involved Kundun, a Martin Scorsese film about the Dalai Lama that Disney plans to distribute, thanks to a deal brokered with Ovitz's assistance. One of Ovitz's few clearly defined responsibilities at Disney was to open the vast Chinese market. Chinese authorities objected to the film's critical view of Beijing and threatened to retaliate if the movie was released. Ovitz and Disney had little choice but to publicly support Scorsese.

Eisner said he wouldn't name a replacement, a statement that might concern investors who had been after him to name a potential successor ever since he underwent bypass surgery in 1994. (The slot had been vacant since Disney president Frank Wells died in a helicopter crash a few months before Eisner's operation.) But that didn't stop speculation that he eventually would have to install someone in the No. 2 job. One contender is ABC chief Robert Iger, although some observers think the network's performance must first improve. Another is Disney studio chairman Joe Roth.

A source close to Ovitz, who turned 50 on Saturday, said he will shun job hunting to seek a business opportunity, possibly in conjunction with investment banker Herbert Allen. Industry veteran Barry Diller said Ovitz took the Disney job in haste and will now have a chance to make a considered decision about his future. Says Diller: "He'll have perspective, and whatever he decides, the strong chances are that he will succeed in it."