By Paul Farhi

December 13, 1996 - The Washington Post

Michael Ovitz, the powerful Hollywood agent who became Walt Disney Co.'s No. 2 executive, abruptly left the company yesterday after 16 months of uneasy power-sharing with his boss, Chairman Michael Eisner.

Disney said Ovitz's departure was by mutual consent, a characterization few in Hollywood disputed, given the tensions between the two executives. Ovitz's tenure at Disney had reportedly been rocky from the day he left the talent agency he founded, Creative Artists Agency of Beverly Hills, to join Disney as Eisner's second-in-command.

Despite its smiling face to the world, Disney's corporate offices have not been a happy place in recent years.

Eisner has been struggling to find an able successor, a necessary step if Disney is to continue to shape so much of American pop culture. But so far, he has failed to find a suitable match.

"Michael Eisner has been my good friend for 25 years and that will not change, but it is important to recognize when something is not working," Ovitz said in a statement after resigning from Disney, the world's second-largest media and entertainment company. "I hope that my decision to leave will eliminate an unnecessary distraction for a great company."

The "last straw" for Ovitz's tenure at Disney, according to one senior industry executive, was his decision to back director Martin Scorsese's forthcoming movie about the Dalai Lama, called "Kundun." The movie, which Disney will release domestically next fall, has angered the Chinese government, which considers the exiled Tibetan spiritual leader a subversive agent out to undermine China's territorial claim on Tibet.

Ovitz's decision to proceed with the making of "Kundun" has jeopardized Disney's ambitions to expand its operations in China, paradoxically a project on which Ovitz personally labored. Another studio, MCA/Universal, passed on making "Kundun" because of the expected Chinese criticism.

"Disney had to stand by Scorsese once the deal was done," said one studio executive. "But it was bizarre that [Ovitz] did it in the first place when we all knew this was going to be the result."

Disney and industry executives said yesterday that Ovitz's arrival at Disney last year roiled the ranks of senior managers at the Burbank, Calif., company.

They described him as a man used to flaunting his power when he negotiated with studio chieftains as the agent of Tom Cruise, Barbra Streisand and other major stars, but ill equipped to manage a company with more than $18 billion in annual revenue.

At Disney, Ovitz tried to carve out a role distinct from Eisner's, drawing public criticism even from Disney board members that he was tampering with success as he clashed with divisional heads repeatedly. For instance, Ovitz campaigned to buy a record company, an idea that was vetoed from above.

"I told him that he was making the mistake of his life when he took that job," said one major Hollywood figure, who asked to remain anonymous. "I told him, `You're going from a king to a vassal in someone else's kingdom.' . . . I don't think Michael Eisner realized that Michael Ovitz didn't have the equipment for that particular job. Running an agency has little to do with running a company as big as Disney."

Ovitz, who didn't announce his plans, will leave Disney with a lucrative severance package that includes stock options valued at more than $100 million.

Eisner hired Ovitz last fall, shortly after Disney announced its $19 billion acquisition of Capital Cities/ABC Inc., which owns the ABC broadcast network and cable TV network ESPN. At the time, he was described as the answer for a company that had a clear leader Eisner but no strong backup executive. That position had been open ever since the death of Disney's revered president, Frank Wells, in a vacation accident in 1994.

The need for a second-in-command grew exponentially after Eisner underwent emergency heart surgery in 1994. But Eisner had refused to share power with the company's most likely No. 2 man, studio head Jeffrey Katzenberg. Rebuffed by Eisner, Katzenberg quit Disney and formed a rival studio, DreamWorks SKG, with fellow moguls Steven Spielberg and David Geffen.

While heading CAA, Ovitz brokered Sony Corp.'s disastrous purchase of the Columbia and TriStar studios and Matsushita Electric Industrial Co.'s buyout of MCA Inc. Spokesmen for both Sony and Viacom Inc., the parent of Paramount Pictures, yesterday strongly denied speculation that Ovitz was joining them.

Eisner didn't name a successor to Ovitz, nor is he likely to for months, sources said. The most obvious candidates within the company, they said, are movie-division head Joe Roth and Robert Iger, who heads ABC and Disney's television operations. Roth's division is in the midst of a stellar year; Disney's "101 Dalmatians" is the leading movie at the box office this season. ABC, meanwhile, is in a deep slump, having fallen to third place in the Nielsen ratings behind leader NBC and an improving CBS.

In trading yesterday, Disney shares were off $1.87 ¼, closing at $70.25 on the New York Stock Exchange. Ovitz's departure was announced after the close of the market, although reports of a potential resignation were rife early in the day.

Special correspondent Sharon Waxman contributed to this report.