Surprising even the most sophisticated entertainment executives for the second time in two weeks, Walt Disney Co. announced yesterday that talent agent Michael Ovitz would become Disney's president.
The move pairs Mr. Ovitz, widely considered the most powerful man in Hollywood, with Disney's chairman, Michael D. Eisner, the most powerful man in the entertainment industry.
The news caught Hollywood nearly as off guard as the announcement two weeks ago that Disney would become the world's largest entertainment company by acquiring Capital Cities/ABC Inc. for $19.2 billion.
Even though becoming president of such an empire might strike many as an alluring proposition -- while also taking a role that analysts said Disney sorely needed to fill -- it will put Mr. Ovitz in the unaccustomed position of reporting to an executive even more powerful than himself.
Only two months ago, Mr. Ovitz, head of the Creative Artists Agency, ended negotiations to become president of the MCA Inc. entertainment company, explaining, "I can't predict the future, but the only thing that is for sure is that I love my life at CAA."
As for Mr. Eisner, he had been seen as reluctant to share power since the death 16 months ago of his trusted lieutenant, Frank Wells, who was Disney's last president.
And it was the ambitions and the celebrity profile of Disney's studio chief, Jeffrey Katzenberg, that contributed last year to Mr. Katzenberg's bitter falling-out with Mr. Eisner and his departure from the company.
Shareholders have feared that Mr. Eisner, who is 53 and had emergency heart surgery last year, was not preparing an adequate line of succession.
"It became clear as I started to rebuild the company that I needed a partner to go forward with," Mr. Eisner said yesterday in a telephone interview.
He said that he had tried to hire Mr. Ovitz, who is one of his closest personal friends, at other times over the years, most recently after Mr. Wells' death.
"I am the chairman," Mr. Eisner said. "I need a partner. We will understand each other's moves. The company is big and growing, and Michael joins a team that is very strong."
Investors showed their approval by pushing up Disney's stock $2.50 a share in heavy trading on the New York Stock Exchange, where it ended the day at $59.
For Mr. Ovitz, 48, the decision to leave Creative Artists Agency seems like an inexplicable change of heart. Two months ago, his widely publicized negotiations with Edgar Bronfman Jr., president of MCA's owner, Seagram Co., ended abruptly, surrounded by speculation that Mr. Ovitz wanted more than $300 million to take the job and that he was uncertain about leaving the autonomy of his own company to work for Mr. Bronfman, who also is his personal friend.
Some associates speculated that Mr. Ovitz negotiated so aggressively in part because he really did not want to leave Creative Artists.
Yesterday, Mr. Ovitz explained his decision to join Disney this way: "It was time to do something different. It was right for me. This opportunity was extraordinary. It was done quickly and cleanly."
Terms of Mr. Ovitz's employment contract with Disney were not disclosed.
Mr. Ovitz was known to have become restless as an agent and upset about the perception that he had badly fumbled the negotiations with Mr. Bronfman to lead MCA and its Universal Pictures studio, a job somewhat similar to the one he is now taking at Disney.
Mr. Ovitz's widely publicized negotiations with MCA had created turmoil at Creative Artists. And the atmosphere at the agency had become even more unstable after its second-ranking executive, Ron Meyer, left to become president of MCA in the wake of Mr. Ovitz's failed talks with Mr. Bronfman.
"The last two months have been very hard on him," an industry executive close to Mr. Ovitz said. "His standing went down in the community. He had fewer options in August than he had in June."
But Mr. Ovitz denied that there were any problems at Creative Artists. He said he viewed the Disney job as an extraordinary opportunity.
"I have known Michael for 25 years," Mr. Ovitz said. "I have watched this company and the people, and the asset base was too much not to go for it."
Many Wall Street analysts said yesterday that in Mr. Ovitz, Mr. Eisner was hiring one of the most talented people in Hollywood. "Eisner has finally solved the succession question," said Harold Vogel, who follows entertainment for Cowen & Co., an investment firm.
But some analysts wondered privately yesterday just how Mr. Ovitz would enjoy working for a close friend. Mr. Ovitz had a ready answer.
"I am working for Michael and the shareholders," he said in a telephone interview. "That is not different than working for my clients."
Mr. Ovitz will be nominated to the Disney board but he will not also serve as chief operating officer, an added role of many presidents of large corporations.
That position will go unfilled, but is effectively being carried out by Sanford M. Litvack, the chief of corporate operations. Mr. Litvack and Stephen F. Bollenbach, the chief financial officer, will continue to report directly to Mr. Eisner.
Mr. Ovitz will oversee the various operating divisions: Capital Cities/ABC, theme parks, entertainment, and consumer products will report to him.