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When Creative Artist Agency hired former AT&T multimedia CEO Robert Kavner five months ago, tongues wagged. What was CAA's plan for the interactive future? How would Chairman Michael Ovitz leverage his Hollywood influence and blue-chip client list to shape the converging media world.

Those questions are starting to be answered. Last week, three Baby Bells-Bell Atlantic Copr., Pacfic Telesis Group and Nynex Corp.- formed a new company to create programming for interactive networks. CAA will serve as adviser to the venture, helping the Bells make connections with studios and producers.

Mr. Kavner, 51, CAA's multimedia chief, has spent the past few months forging those deals as well as other agreements with content providers like Playboy.

In an interview with Thomas Tyrer, Los Angeles bureau chief for Electronic Media, sister publication of Advertising Age, Mr. Kavner discusses the Baby Bell deal and assesses the state of interactive media industry today.

Thomas Tyrer: How should the industry be defining new media?

Robert Kavner: If we were able to answer that question with any precision we probably have the wrong answer.

New media is really the new opportunity that the new technology will allow in terms of people's ability to express themselves. We know today the formats that are new-CD-ROM, online services and, behind that, broadband networks.

The part that makes it exciting, however, is the new platforms that will allow for new creativity in the future. What will be created on those new platforms is for the creative mind to determine.

These broadband networks that are being deployed will allow people to have relationships all over the world, and the sense of community will change dramatically.

Mr. Tyrer: Some Hollywood executives reacted to last week's announcement of the CAA deal with the Baby Bells with either derision or wonder about just what practical effect it might have on the current media environment. Why do you think the deal drew that sort of reaction?

Mr. Kavner: The whole subject matter of the superhighway has gotten to the cynical point, and the early promises created an expectation that it's going to happen in a matter of months or a few years.

So an announcement like ours, which is to create a media company for three telephone companies, can easily get caught up within people thinking, "It's just another one of those press conferences." But this is not just another agreement to meet ...

This is a very important building block, and when you build a new industry, people often ignore the first building blocks.

These companies have 30 million homes. They are very, very serious, and they don't want to define their business as being local communication companies.

They want to define themselves as being a full deliverer of entertainment and communications and information, and they're putting billions of dollars into a network that would allow for that.

Mr. Tyrer: Do you feel CAA is attaching itself to one sector of the evolving new-media landscape to the exclusion of others?

Mr. Kavner: What CAA has essentially done is taken on a client, where we will provide advice and counsel. We package cable shows and cable channels and that will continue.

The idea of having a consortium of companies create a media company came out of CAA, but what we will deliver is a consulting service. That doesn't prevent us from maintaining our relations throughout the industry, including with cable.

Right now, the telcos are not in the entertainment industry, and much if not all of our business is within the current distribution routes. We don't plan to blow that business. For every aspect of the entertainment industry, this is good news. It doesn't create any sort of proprietary environment.

Obviously, there will be competition between a cable company and telephone company in certain markets, but that is all healthy. In the process, that will open up more opportunity. CAA is creating a new window of opportunity for creative talent.

Mr. Tyrer: Is the transition between the current media and new media a revolutionary or evolutionary process?

Mr. Kavner: I choose to believe it is a revolutionary process, yet from a very healthy revolutionary standpoint.

For a long time, there is going to be television, the same way that there's a very active radio market today.

Broadcast television will be part of our lives, but there is something very fundamental coming that's not available today. There will be new forms of content, and this network is going to say, "Give me new content for people to interact with," but I don't think that's going to eliminate the need I have on Friday night to watch a film, or my need on Sunday night to see a sitcom.

Mr. Tyrer: Studio executives planning for this new infrastructure expect it to consist of a gradient from purely passive services all the way to purely interactive services. Is that an accurate model?

Mr. Kavner: That is a worthwhile way of looking at it, but I also hear those explanations-which I at times give-as a way of making sure that our current life has meaning.

If we allowed ourselves to feel that what [we're] doing today may exist in the future but the excitement will be felt somewhere else, it's depressing.

The world we have today-we'll agree will transition into whatever we may have later. But I will also assert there will be discontinuous changes, so if companies do not make fundamental changes in the way they operate, they could be left behind.

Mr. Tyrer: What ought I be doing right now if I'm managing a media company?

Mr. Kavner: Companies really need to examine the core business that they are in.

For instance, if the core competency and identity of a publishing company were the print medium, that definition will drive a behavior pattern that could keep them alive but not participate actively in the new world.

If they define themselves more broadly, in terms of their being an information supplier, and then put the resources of that company in that direction and allow for that tension [between the status quo and new directions], you can manage your way through it and grow into this new world.

Mr. Tyrer: There's been a lot of hype about a 500-channel information superhighway, yet

Mr. Kavner: I'm sorry the term superhighway ever came up, because it's creating an expectation that will only lead to disappointment.

What that hype does is create a lot of attention around it, and when it doesn't appear during the next year, it breeds resentment and cynicism. That has to be moved aside, because what you are talking about is real.

Mr. Tyrer: How long do you think this transition will take?

Mr. Kavner: This is a revolution that will take at least one generation and probably two.

Compared to what life is like today, if I were to look back 10 years, it is an awesome change-VCRs, CDs, CD-ROMs, computers, cable, the fax machine, cellular telephones.

The change within the past 10 years has been centered primarily around a couple of phenomena.

One is the personalization through the computer, meaning that I can personalize my information, and the relationship between my mind and the digital world is very intimate.

Number two is mobility. The cellular telephone has introduced a massive change.

The next 10 years will be dictated by connectivity, relationships, where the Internet is just the beginning.

Mr. Tyrer: How is the current reorganization of studios and networks, given that many studios are interested in either building or acquiring networks, tied to the new-media age?

When an industry matures, generally it goes horizontal, meaning you can look at the value added from the raw material all the way to final consumer distribution. There are industry players who are well-defined along that value-added curve.

When an industry goes into discontinuous change or an industry is created from scratch-like online services-it goes vertical.

What we're seeing now is that this industry is moving back to vertical. We see television network people moving into owning more forms of content-raw materials. They're owning different forms of distribution-customer access. We will continue to see more vertical development throughout the industry.

Mr. Tyrer: One of the real problems in all of this is the potential for abuse of information.

Mr. Kavner: The intellectual property rights are a very important part of all this, yet when you get into a digital world rather than an analog world, you'll have much greater opportunity to protect intellectual property.

If it's in digital form, you can control access, you can encrypt it, you can put meters on it right up to the digital window ...

We're going to need policies to deal with it. Otherwise, we will undermine the society.

Mr. Tyrer: From a talent agency's standpoint, if there are still so many unknown potential distribution windows, how do you go about trying to protect a client's eventual revenue opportunities right now?

Mr. Kavner: In the past, interactive rights were not even addressed, but what is happening in 1994 is a much greater awareness that, even though you're creating a linear product, you also are developing the potential for an interactive product.

Therefore, that has value and that should be protected.

We are working with our clients to make sure that their interactive rights are properly represented in addition to their linear rights, but there may be some time-lag on that.

There are a number of projects within CAA today where the concept is being developed to be everything from a linear television series or movie to an interactive game to a plush puppy.

Mr. Tyrer: What's your advice to content creators on getting into the new-media world?

Mr. Kavner: Let's say today you're a screenwriter and you look at this new CD-ROM phenomenon, and you want to write a script for CD-ROM and you have a terrific idea.

They come to Creative Artists with the idea, and we introduce it to a CD-ROM company they can work with.

If it would take them 1,000 calories to make a screenplay for film and 1,000 to make a CD-ROM, we know how much energy is expended in both.

To be honest with that screenwriter, you can say, "You can get $1 per calorie for the motion picture screenplay and if you do it for CD-ROM, you may get a nickel per calorie."

That's an order-of-magnitude difference.

However, it is quite possible-and I think probable-that CD-ROM is a first brick on the yellow brick road to the interactive world.

For those who want to develop their creative talents in interactivity, this is a good workbench. It will be followed by online services, followed again by broadband networks. That makes it worth putting 1,000 calories into it.

We want to now find a way of simulating the kinds of economic rewards that are available in a mature industry called film and replicate that in a very immature industry called interactivity.

It will not be fully replicated in the next couple of years, so you have to believe that to work in interactivity, you're developing a capability that will pay off in the long term.

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