NYT Article on The Firm Mentions Clay

The Firm was Clay's management team from May 2004 to early 2005.

Departures Cool Off Agency's Hot Start
By JEFF LEEDS and JAMES ULMER
Published: August 11, 2005

LOS ANGELES, Aug. 10 - Three years ago Hollywood was asking whether Jeff Kwatinetz and his talent management company, the Firm, had set themselves on the road to empire. Lately the question has been: are they marching in circles?

Over the last year the Firm, based in Beverly Hills, has seen a string of senior executives depart to strike out on their own or join the ranks of rivals. The executive exits are a sharp contrast to Mr. Kwatinetz's drive for dominance, whose peak - so far - came with the 2002 acquisition of Artists Management Group, the talent company assembled by Michael Ovitz, the former super-agent.

Last month JoAnne Colonna, a manager of the company's film talent department, left for a job at rival Brillstein-Grey Entertainment, taking with her a list of clients that includes Anna Paquin, Sarah Michelle Gellar, Brittany Murphy and Brendan Fraser. Only weeks before, her co-manager, Aleen Keshishian, had also left for Brillstein-Grey, along with the clients Natalie Portman, Orlando Bloom, Laura Linney and Freddie Prinze Jr.

Those moves followed the departures of the co-managers of the music department. In April Simon Renshaw left and took with him the Dixie Chicks, Clay Aiken and Anastacia; in May Andy Gould left with Rob Zombie. Gayle Boulware, who started as an assistant to Mr. Kwatinetz in the early days of the Firm and rose to become a manager herself, left to join Mr. Renshaw's new venture.

Officials at the Firm declined to comment for this article, but to hear Mr. Kwatinetz's allies tell it, the exits have been orchestrated largely by the Firm's chief executive himself, part of an overdue move to streamline the company after its takeover of Artists Management, which left it saddled with millions in debt.

"To another firm, it would seem like an exodus; to another company it would seem like this company is taking on water," said Jordan Schur, president of Geffen Records and one of Mr. Kwatinetz's closest friends. "In reality, it's a correction, of Jeff taking out people who don't want to work, people riding coattails."

Others suggest that the departures are far from over and that the exits to date reflect a wider cash crisis as well as internal doubts about Mr. Kwatinetz's strategies for expansion.

"It means that the original vision that Mike Ovitz was able to achieve, his ability to create a brand for C.A.A., never did get off the ground at the Firm," said Howard Rosenman, former head of motion pictures for Brillstein-Grey, referring to Mr. Ovitz's legendary tenure at the Creative Artists Agency. "To create branding, even the geniuses of this town have trouble. Look what's happening to DreamWorks."

While DreamWorks has put its live-action film business up for sale, Mr. Kwatinetz has so far been able to count on the support of his most substantial bulwark in the movie world, Rick Yorn, a partner in the company. Mr. Yorn joined the Firm with the Artists Management acquisition, bringing along heavyweight movie clients like Cameron Diaz and Leonardo DiCaprio.

Despite lingering speculation that Mr. Yorn would join the exodus, he has remained in place - anchored in part by business debt that is personally backed by the company's partners, including Mr. Kwatinetz, Mr. Yorn and David Baram. The partners declined to comment, but a person with knowledge of the company management said none of them planned to leave.

Even with the departures, Mr. Kwatinetz still lays claim to one of the most potent talent shops in Hollywood. In music, the company represents Kelly Clarkson, Linkin Park, Snoop Dogg, Audioslave and Jennifer Lopez, and in film its clients include Ms. Diaz, Mr. DiCaprio, Martin Scorsese, Samuel L. Jackson and Rachel Weisz. It also encompasses a film and television production unit, which currently has the series "Criss Angel Mindfreak" on the A&E cable network and was behind "The Exorcism of Emily Rose," a feature set for release by Sony's Screen Gems unit next month.

The departures also do not seem to have dampened Mr. Kwatinetz's appetite for major-league dealmaking. He has been pursuing an acquisition of the troubled Paxson Communications Corporation, for instance. And the Firm has been hitting up private equity companies for financing to create a brand fund that would purchase brand names that could be combined with its efforts to market talent.

One drag on the company has been the outstanding debt it picked up in acquiring Mr. Ovitz's unprofitable Artists Management venture. The initial terms of the financing called for the Firm to repay the debts over roughly 10 years, according to one person involved. But shortly after the acquisition, the Firm violated its bank covenant, and the bank shortened the term to just three years, this person said, forcing the company to devote much more cash to servicing the debt. Since then, the company has reduced the debt, with J. P. Morgan, to less than $3 million from more than $12 million, this person said.

All of that has come against the backdrop of a weak music industry, with the company's troubles compounded by frustration among some of the departed executives, who privately complain of what they view as missed opportunities to sell the Firm and cash in on its prominent place in the entertainment business.

Last year the company - with prodding from Thomas H. Lee Partners, an investment company that owns a small stake in the Firm - explored a plan to unite with Irving Azoff, the powerful music manager, who represents acts like the Eagles, Christina Aguilera and Jewel. The deal would have paid the Firm an estimated $60 million, according to people involved in the discussions. Mr. Kwatinetz, however, balked at the arrangement, in which his authority would have been diluted. Mr. Azoff declined to comment.

Before that, Mr. Kwatinetz had pursued a purchase of Time Warner's global music unit, a deal that would have placed him at the helm of a cluster of record labels and a catalog that ranges from Led Zeppelin to Ray Charles. But Thomas H. Lee Partners, which with Mr. Kwatinetz discussed the deal, ultimately backed a bid by Edgar Bronfman Jr., and purchased the company for $2.6 billion. Mr. Bronfman became chairman of the independent Warner Music Group; Mr. Kwatinetz received a multimillion-dollar advisory fee.

As for Mr. Kwatinetz, his drive and innovative urges appear to have survived the recent jolts intact. "He's got his eyes on the big prize," said Mr. Schur, whose label releases music by Firm clients including Weezer. "I think its about controlling a real asset that's a real media giant. He'll know it when he sees it. There definitely is a prize, but exactly what it is and what it looks like, only Jeff could tell you."

But even some admirers have come to doubt Mr. Kwatinetz's ability to realize the Firm's grander schemes - which called for cross-breeding actors, musicians, advertisers and other ventures in new business lines.

"We tried to put something together that we thought would change the industry, because the record labels are inherently unfair and take away all the artists' rights," said Mr. Gould, who remains a shareholder in the Firm. "We talked about a lot of things in secret rooms, but we never did anything. The experiment just didn't work."