As the crowd filed out of the L.A. premiere of Almost Famous two months ago, the film’s young stars – Billy Crudup, Jason Lee, Fairuza Balk, Kate Hudson – strolled outside to Sunset Boulevard to join the smokers, while the older industry insiders milled about the covered atrium. Predictably, talk turned to the $60 million film’s commercial prospects; the absence of Steven Spielberg, who’d personally lured its director, Cameron Crowe, to bring his shingle to DreamWorks; and the hippie getup Hudson was wearing that night. But the surprise buzz of the evening was about Jeffrey Katzenberg’s hair.
Of course, the DreamWorks partner isn’t known for having much hair; still, it was a shock to see it buzzed into a distinctly David Geffen-ish look. Moreover, what little remained appeared to have turned white! Had the stress of running DreamWorks finally gotten to Katzenberg, a man famed for his doggedness?
Six years after it was founded by Katzenberg, Spielberg, and Geffen, the first new studio in decades is about to wrap up its first profitable year, led by the live-action film division, which managed to boost production from an anemic six films in 1999 to twelve in 2000. The New York Times reports that the average DreamWorks film grossed $78.7 million, 15 percent more than the industry average. Throughout the summer, it released one hit after another – and not the usual wince-as-you-make-a-buck crap but well-done popcorn fare like Gladiator and What Lies Beneath.
At a time when every other studio finds itself an increasingly less important subdivision of an increasingly larger multinational corporate monolith, DreamWorks has transformed itself, for better or worse, into a pure, old-fashioned movie studio, which lives or dies on its ability to pick hit movies.
But in today’s Hollywood, that’s a scary proposition. Tom Pollock, the former chairman of Universal, explains the economics of the current film business: “In an average year, movies generate a 5 percent profit margin; in a good year, perhaps as much as a 15 percent profit margin; in a bad year, a negative 5 percent profit margin or worse. Cable typically generates a 40 to 50 percent profit margin year in, year out.”
DreamWorks doesn’t own cable, or theme parks, or an Internet business, or a TV network. Indeed, its forays into other media have proved largely disappointing, from the music division, which has mostly hemorrhaged money, to the TV division, which in six years has come up with only one hit (Spin City) on the air, to the recent debacle of POP.com, the company’s failed Internet start-up.
DreamWorks has always been a paradoxical venture, born equally of idealism and hubris, the kind of place where no one has a title (though everyone knows where the power lies). Its nostalgic stance as an old-fashioned movie studio holds considerable appeal, especially for a community that has seen its cultural hegemony usurped by the Internet, that must deal with hostile and moralizing Washington politicians, and that faces unprecedented labor turmoil.
But here’s the bad news. This summer’s spectacular box-office run will earn the company far less than it appears, because almost every film on its slate is a co-venture with another studio, with heavy profit participation from players like Bob Zemeckis and Robert De Niro. Moreover, in the movie business, luck always runs out. And by the end of October, Almost Famous and the equally well received The Contender had both tanked at the box office, while the woolly uplift of Robert Redford’s The Legend of Bagger Vance looked to be insubstantial competition for the butt-kicking pyrotechnics of Charlie’s Angels, both opening this past weekend.
No wonder Jeffrey Katzenberg’s hair turned white.
DreamWorks is run less like an ordinary studio than like a Utopian millionaires’ collective, where the chain of command is always fluid. Katzenberg is a co-owner who not only runs animation but also serves, idiosyncratically enough, as live action’s head of production. Still, in that role he defers to the husband-and-wife team Walter Parkes and Laurie MacDonald, close personal friends of Spielberg’s. The couple not only green-light pictures in conjunction with the director but vacation with him. (Geffen rarely weighs in, except to personally negotiate the studio’s numerous co-ventures.)
Relationships are everything in Hollywood, and even though it’s hard to find anyone here who doesn’t genuflect before Spielberg’s business acumen and directing skill, it’s almost as hard to find a producer or writer who doesn’t disparage DreamWorks for its institutional arrogance and off-putting penchant for micromanagement.
On a recent morning last month, Parkes and MacDonald are meeting with a writer and producer on a project called IQ 83. Parkes is dark and lanky, MacDonald an almost crystalline Wasp. They wear jeans and work out of the living room in their spacious home in the choicest section of Santa Monica.
The visitors, Harley Peyton and Adam Goodman, bring in a bulletin board on which the scenes of their script are mapped out on three-by-five cards. It’s impossible to imagine another studio head getting down to such minutiae, actually pushing those three-by-five cards around, but Parkes, a former screenwriter (WarGames), revels in it. He’s even been known to wield the pen himself, writing Morgan Freeman’s speech at the end of Deep Impact and inserting lines into Gladiator.
This does not always endear him to the talent. “He thinks he’s Shakespeare,” snorts one frustrated producer who’s worked with him. Another complains that the team doesn’t seem to value independent producers, since Parkes functions as a producer-in-chief. “They’re all to the manner born,” groans a well-known literary agent. “It’s like you’re dealing with royalty. Walter’s very imperious.”
At this moment, of course, the two are justifiably resting on their record, and simply point out that they have long working relationships with writers like John Logan, who did Gladiator, and Steve Zaillian, who’s returning to do a polish on the upcoming Sam Mendes-Tom Hanks film Road to Perdition. “Micromanagement? In certain cases, it’s absolutely true,” says Parkes. “On other movies, I just hope to be as supportive and hands-off as I can.” Screenwriter Scott Frank (Saving Private Ryan, Minority Report) agrees: “Walter’s very good at problem-solving. He’s saved my ass on a number of occasions.”
And Spielberg, Katzenberg, and Geffen are rewarding them for their efforts. Under the terms of their recently renegotiated deal, Parkes and MacDonald will be allowed to take producer credits (and reportedly first-dollar gross) on certain DreamWorks films, a situation rife with potential conflicts of interest.
But such cross-purposes are built into the DNA of the company, nowhere more than in the multiple roles played by Steven Spielberg, DreamWorks’ first among equals. Because of Spielberg, DreamWorks has been able to pad out its production schedule by cherry-picking other studios’ development slates, turning films like Saving Private Ryan, Deep Impact, A.I., and Minority Report into lucrative co-ventures. When Spielberg toyed for a few weeks with directing Universal’s Meet the Parents, with Jim Carrey, the project turned into a joint Universal-DreamWorks production. (Spielberg and Carrey dropped out, but the deal remained.) “Spielberg’s name is invoked quite a bit,” says a top agent. “It’s the trump card they pull.”
Yet except for the box-office disappointment Amistad, Spielberg has not made another movie solely for DreamWorks, and depending on directing commitments, his day-to-day involvement ebbs and flows. He was, for instance, barely involved in the production of Almost Famous, but he did impulsively tell Crowe to “shoot every word” of the 172-page script – most scripts are 120 pages – which may explain why the intimate comedy’s budget grew to $60 million.
A-list screenwriters and prominent actors have been asked to cut their fees for the privilege of working with the director. “Every dollar that DreamWorks pays is like his own, I guess,” says one former colleague. Consider the case of Paul Attanasio (Quiz Show, Donnie Brasco), who was commissioned to write a screenplay based on Scott Berg’s Lindbergh biography. Attanasio produced a treatment that presented Lindbergh as a tortured hero with a complicated marriage and a nasty anti-Semitic streak. Spielberg wanted The Spirit of St. Louis. DreamWorks demanded that Attanasio return his start money, something that is practically unheard of in Hollywood. The amount in question was nearly $500,000, and Attanasio, a top screenwriter, is indeed giving a chunk of it back.
Spielberg’s deals represent a big chunk of money that’s not going into the company coffers and this gets to the crux of the company’s curious state. Is DreamWorks just Amblin writ large?
When it comes to negotiating his own compensation, however, Spielberg plays another kind of hardball. His take generally includes an astounding 50 percent of the back end, which is part of the reason the first Men in Black left a residue of ill will. Spielberg, who merely executive-produced the Sony film, earned an estimated $100 million back end, while director Barry Sonnenfeld earned … considerably less. Indeed, when former Fox chairman Bill Mechanic initially did the math on Minority Report, a film that is burdened with not only Spielberg’s back-end deal as director but also Tom Cruise’s as star, he realized that both Fox and DreamWorks, which were jointly funding the film, would just “be doing it for the fun of it.” The deal was about to fall through. But Geffen was able to convince Spielberg of the merits of Mechanic’s argument. In the end, Spielberg and Cruise relaxed their demands, and the movie is on track for production next year.
Spielberg’s deals represent a big chunk of money that’s not going into the company coffers, and this gets to the crux of the company’s curious state. Is it just Amblin, Spielberg’s old personal production company, writ large? At least at Amblin, Universal had to absorb the losses; now he, Katzenberg, Geffen, and financial partner Paul Allen are responsible for the flow of red ink.
Though several sources at the studio have heatedly denied that the partners are looking for what industry watchers call an “exit strategy,” over the past two years they have indeed been exploring various avenues that would significantly change the structure of the company, ranging from merger talks with Universal to an unsuccessful attempt to bring Joe Roth’s Revolution studio under the DreamWorks umbrella.
Early this year, they sold off the foreign rights to Almost Famous, Everlasting Piece, and Ivan Reitman’s upcoming comedy Evolution to Sony for $100 million, a quick cash infusion that allowed them to negotiate better refinancing terms on one of their loans. Moreover, they are renegotiating the terms of their distribution deal at Universal – and they are looking for an equity investment in the company, which would allow them to further pay down their considerable debt.
A number of top Hollywood executives still wonder if DreamWorks can survive in the long run, despite its recent blush of prosperity. But it would be a shame if it failed. “In the days of the people who founded the early studios, you had to live or die based on your skill at making movies,” says Bill Mechanic, who is currently in talks to hang his production shingle at DreamWorks. “Now they don’t want to take responsibility. They run away from it. You have corporations who don’t give a shit about what they’re making. The movies have suffered. I like that DreamWorks is there for that one reason.”
As for Katzenberg’s new hairdo, those close to the mogul insist that it has no psychological implications. Apparently, he just decided to let it go gray. Sometimes a haircut is just a haircut.