BUSINESS WEEK MAGAZINE
How Hollywood's most successful director
sustains his creative empire
July 13, 1998
Steven Spielberg is a busy guy these
days. Just back from New York, where he was doing advance
promotion for his latest movie, Saving Private Ryan,
he is knee-deep in last-minute details. Although the film is
to be released in late July, Spielberg is still spending his
mornings holed up at the film lab, determined not to sign off
on the movie until the World War II epic has the adequately
faded look of a 1940s-era documentary.
Spielberg is consumed with making Saving Private Ryan
a critical as well as a commercial success. DreamWorks SKG,
the studio he created with entertainment moguls Jeffrey
Katzenberg and David Geffen, has so far released a spate of
unimpressive films, including Spielberg's Amistad.
That disappointment has raised anew the question of whether
Spielberg can consistently turn out top-notch serious fare
along the lines of Schindler's List, which is now five
years old. Never a fan of opening nights, Spielberg has
drastically cut back the number of people he will allow to
see the new film before it is released and has no intention
of sitting through the preview himself. ''It's flop sweat,''
he says. ''My stomach can't take it.''
If that were not enough pressure, Spielberg's days are
also packed with meetings on the more than 60 other projects
he has in development at DreamWorks. On any given day, three
conference rooms within steps of his office are filled with
studio execs, movie stars, and scriptwriters, all anxiously
awaiting Spielberg's arrival. Projects on the boards cover
everything from a computer-animated version of The Cat in
the Hat children's book to a biography of Charles
Waiting for Spielberg to walk through the door, as anyone
in Hollywood will tell you, is itself considered a privilege.
He is easily Hollywood's most successful director and
producer, with credits that read like guideposts to an entire
generation's pop culture. Beginning with his 1975 summer
horror-adventure, Jaws, Spielberg has directed 6 of
the 25 top-grossing films, including Jurassic Park, Raiders
of the Lost Ark, and E.T., the Extraterrestrial.
In an industry where only 3 out of every 10 movies make
money, 13 of the 16 films he's directed have been in the
black. All told, they've pulled in an astounding $5 billion
worldwide. As a producer, Spielberg has brought in another $4
His talents aren't limited to the movie set. Spielberg has
also proven to be one of Hollywood's most nimble
entrepreneurs, amassing a business empire that includes video
games, toys, even restaurants. It is a measure of his
importance to DreamWorks that his partners have given him
unusual independence, allowing him to direct and even produce
films for other studios. To satisfy his near-obsessive
interest in video arcades, DreamWorks created a joint venture
with Sega and Universal Studios so that he could provide
creative input. ''When we first started DreamWorks, I said to
Jeffrey, 'We ought to call this new company the Spielberg
Brothers,''' jokes Geffen. ''Anything Steven thinks is
important, we want to invest in.''
And invest they have. This summer, DreamWorks will have
three films that are expected to do serious box office
business (page 102). One, the meteor film Deep Impact
that Paramount Pictures Corp. and DreamWorks share, has
already passed $240 million. Spielberg is also the creative
spark behind six animated TV shows, including five being made
by Warner Brothers. On the side, Spielberg is producing
another potential blockbuster, The Mask of Zorro, for
Sony's TriStar Pictures unit. And he is helping Universal
Studios Inc. design theme park rides at its Hollywood and
His various interests and considerable successes have made
Spielberg a vastly wealthy man, with a fortune estimated at
close to $2 billion: about $1 billion in studio and other
holdings and nearly as much from movie profits. But what
keeps someone that wealthy, that powerful, that successful
going? How does he sustain his boundless creative energy?
Like many artists, he has a gift for tapping his rich inner
life. But while his fellow creators are often felled by the
knotty problems of the real world, Spielberg has also
mastered the art of management. Like the best CEOs, he knows
how to inspire, motivate, and delegate. He's even good at
EARLY START. Spielberg has done all this in pursuit
of one overriding goal: to tell as many great stories to as
many people as will listen. And that's what he has always
been about. The son of a computer scientist and a gifted
pianist, Spielberg spent his early childhood in New Jersey
and, later, Arizona. From the very beginning, his fertile
imagination went into overdrive, filling his young mind with
images that would later inspire his filmmaking.
Even decades later, Spielberg says he has vivid memories
of his earliest years, which are the origins of some of his
biggest hits: He attributes E.T. to the unsettling
years leading up to his parent's 1966 divorce, saying: ''It
is really about a young boy who was in search of some
stability in his life.'' Close Encounters of the Third
Kind was inspired by early morning meteor-gazing with his
father, a sci-fi fanatic, when he was four years old. ''He
was scared of just about everything,'' recalls his mother,
Leah Adler. ''When trees brushed against the house, he would
head into my bed. And that's just the kind of scary stuff he
would put in films like Poltergeist.'' To this day,
Spielberg's wife, actress Kate Capshaw, says her husband
remains terrified of airplane and elevator rides and
In high school, Spielberg experienced another kind of
terror, which would one day help him understand the subject
of his film Schindler's List. It was his senior year, and the
family had just moved from Phoenix to Saratoga, Calif., an
affluent San Francisco suburb. There, Spielberg says, he was
tormented by anti-Semitic remarks from his classmates, who
would sneeze ''Hah-Jew'' when he passed in the halls. After
school, jocks often beat him up. With his parents' divorce
looming, Spielberg's grades sank. He barely graduated from
high school and was rejected from both UCLA and USC film
schools. Settling for California State University at Long
Beach because it was close to Hollywood, Spielberg got a C in
his television production course. He dropped out in his
It was all very sobering, especially since Spielberg had
long since made up his mind to be a director. The homemade
movies he started making as a young boy gave Spielberg a
powerful escape from his fears. He was 11 when he first got
his hands on his dad's 8-millimeter Bell & Howell wind-up
camera and began shooting short flicks about flying saucers
and World War II battles. Before long, the entire family was
selling tickets and making lemonade for living-room showings.
''It cost me about $50 to make the movie, and I would charge
a quarter a ticket, and at the end of the summer I might have
$55,'' he recalls today. ''That's kind of the way Hollywood
works today, small margins.''
Spielberg's knack for scary storytelling enabled him
effortlessly to torture his three younger sisters and made it
easier for him to forge friendships. On Boy Scout camping
trips, ''I always thought he was a little flighty,'' recalls
Richard Y. Hoffman Jr., leader of Troop 294. ''He'd go off in
the woods and find a couple of twigs to cook his marshmallows
and weenies, and then run off looking at something or
another, and his fire would go out.'' But when night fell,
Spielberg became the center of attention. ''Stevie would
start telling his ghost stories,'' says Hoffman, ''and
everyone would suddenly get quiet so that they could all hear
Now 51, Spielberg is still telling stories with as much
passion as the kid in the tent. He is ''much more in touch
with his subconscious than most people,'' says Joseph
McBride, author of the unauthorized biography Steven
Spielberg. ''He remembers what went on and its significance
to him, and he has an outlet--making movies--that not too
many other people have.''
Ask him where he gets his ideas, and Spielberg shrugs.
''The process for me is mostly intuitive,'' he says. ''There
are films that I feel that I need to make, for a variety of
reasons, for personal reasons, for reasons that I want to
have fun, that the subject matter is cool, that I think my
kids will like it. And sometimes I just think that it will
make a lot of money, like the sequel to Jurassic Park.''
DINNER DRAMAS. Increasingly, rather than living off
the fragments of his own subconscious, Spielberg is drawing
inspiration from the seven children, aged 18 months to 21
years, who live with him: three from his marriage to Capshaw,
one each from previous marriages, and two he and Capshaw have
adopted, both of whom are African American.
Like others, Spielberg has changed dramatically as he has
settled into fatherhood. As part of his deal with DreamWorks,
he leaves each night in time for dinner. There, he presides
over a family storytelling ritual: Spielberg throws out the
kernel of an idea, then hands it over to one of his kids, who
adds a few lines and passes it on to the next. After about 20
minutes and several turns around the table, Spielberg often
brings the story to a crescendo. ''Sometimes it ends up
funny, sometimes you're crying it is so sad,'' says Capshaw,
his wife of seven years. ''But it's never uninteresting.''
None of these tales has made it onto the screen yet, but
Spielberg's decision to make Schindler's List, which
had been sitting on his shelf for nearly 10 years after he
bought the rights, came in large part because of the family.
''He rediscovered his Judaism when he had a family and
realized he had something to pass on to them,'' says his
wife, who converted to Judaism shortly before marrying
Spielberg. ''I think it happens that way in many people when
they have families.''
Spielberg continues to make TV cartoons, he says,
''because my kids think I'm cool when I do it.... Maybe when
Destry--she's only 18 months old--gets past the cartoon
stage, I'll stop.'' Often, he brings home pilots of upcoming
shows, movies, and video games to try out on his built-in
audience. DreamWorks' first interactive product, the
modest-selling Someone's in the Kitchen, was modeled
after his daily morning routine of making pancakes and
waffles for the family.
Even Spielberg's home office is set up for time with his
kids. Along with his parrots, Buddy and Oliver, his snakes,
and a fish tank, the home office features a large playhouse
in the corner. ''I'll come in, and he'll be crawling around
down there with one of the kids, when I know he went in there
to try to do some work,'' says Capshaw. Spielberg is the
first to concede he has decidedly un-grown-up passions: ''I
have a case of arrested adolescence with occasional bouts of
Of course, when those bouts of maturity do strike, as they
clearly did in Schindler's List, the results can be
overpowering. Spielberg took three years off after completing
the film, just to recover. But sustaining his steady stream
of storytelling takes more than just enforced relaxation and
family support. There are the headaches that plague any
business executive--the financial, logistical, and managerial
problems that are all the more daunting because of the
gargantuan projects Spielberg often tackles.
Spielberg depends on a small, tightly knit group. The
DreamWorks film unit is run by husband-and-wife team Walter
Parkes and Laurie MacDonald, both accomplished filmmakers and
longtime Spielberg friends. Their job interview? While
visiting Spielberg's vacation home in East Hampton, they
watched The Apartment, the 1960 Jack Lemmon film.
''Walter began analyzing it, how it worked as a film, and he
broke down the characters and the structure,'' says
Spielberg. ''And I said, 'My God, you should be running my
On Thursday mornings when he's not on location, they
present Spielberg with their best crop of new ideas and
update him on the progress of dozens of other projects
already in production. What follows is a brainstorming
free-for-all. Spielberg starts off by listening politely,
then abruptly interrupts with a series of rapid-fire
questions as he gobbles down low-fat cookies. Then he tends
to launch into a monologue about where he sees the story
going. '''Let me get back to you' isn't in his vocabulary,''
says Parkes. ''He has succeeded for so long on his instincts
that he is not afraid to tell you exactly what he thinks.''
When Spielberg likes a project, he sometimes green-lights
it on the spot. Although he alone has the authority to commit
money to an idea, once he does, things move quickly.
Spielberg has a cast of collaborators ready to jump into
action. ''There is something special that happens when Steven
signs onto a project,'' says Columbia TriStar Vice-Chairman
Lucy Fischer, who made 14 films with Spielberg while she was
at Warner Brothers and Columbia. ''You know you're going to
get the best special effects, the best directors,
As a director, Spielberg has a reputation for coaxing the
best performances out of everyone from small children to
stars. ''It's Spielberg, so you work that much harder to
please him,'' says Tom Hanks, who plays the lead role in Saving
Private Ryan. As a producer, when Spielberg senses the
director is on the right track, he stays in the background.
''You can't dictate creativity to someone else, and if you
do, the project fails. Steven understands that, which is why
we all want to work with him,'' says Robert Zemeckis, who has
made such hits as Back to the Future and Who Framed
Roger Rabbit? for Spielberg.
For less proven talent, Spielberg pitches in, immersing
himself in casting, reworking a script, or devising some
special effect. While he often invites comment, even dissent,
in the end, his gut rules. On the soon-to-be-released The
Mask of Zorro, Spielberg sent in five single-spaced pages
of script changes the day after Christmas, even though the
studio was shut down. When one of the young screenwriters,
Ted Elliot, disagreed with some of Spielberg's prescriptions,
Spielberg listened attentively, then overruled him. ''He sent
me a memo a couple of days later that in essence said, 'Look,
this is Hollywood, this is how it is done.' O.K., so we did
it that way,'' he says.
FLOUR POWER. He also gets deeply involved with
money matters--especially budgets. That's rare in an industry
where $100 million bombs are becoming commonplace and
talented directors such as Francis Ford Coppola and Michael
Cimino have severely damaged their careers with profligate
As a boy, Spielberg learned that if he wanted to make
movies, he had to watch the bottom line. Movie film was
expensive, forcing him to edit in his head to save footage, a
practice he still employs. To simulate explosions, Spielberg
relied on bags of flour hurled into the air.
To this day, Spielberg is always on the lookout for ways
to hold costs down. On Saving Private Ryan, the
construction crew built a radar facility facing in the wrong
direction--straight into the sun. ''A lot of directors might
have torn the thing down and started over again, costing
someone a heck of a lot of money,'' says Hanks. But Spielberg
quickly adjusted the shot he needed, making do with what he
had. ''I have never been around a director who works so
fast,'' adds Hanks. ''You set up, and he shoots the scene and
goes on to the next one. A bunch of us on this movie had
directed our own movies, and we all stood around amazed.''
No saving is too small for Spielberg. When he showed up on
a set for Amistad, a refrigerator wasn't working, and
Spielberg told producer Debbie Allen not to pay for it. But
that was the least of Allen's problems. Just weeks before
shooting was to begin, Spielberg called up demanding that she
cut $20 million out of the already trimmed-down $56 million
budget. ''He told me, 'Honey, that film isn't getting made
until it has a '3' in front of its budget, so get cutting.''
So Allen scrambled to change most of the shooting from Africa
to the Caribbean, and the movie came in on budget.
Spielberg, of course, isn't immune to cost overruns. Jaws,
his first big hit, was budgeted at $3.5 million and ended up
costing $9.8 million. And both Hook and 1941,
two of his less successful films, were vastly over budget.
Even so, over the course of his long career he has been on
target far more often than most.
Spielberg isn't just good at saving money, he's good at
minting it--primarily by cutting ever-smarter deals for
himself. Early in his career, he was content to earn a
lump-sum fee on each picture he directed--$1 million for Close
Encounters, for instance. Then, in 1981, when he directed
Raiders of the Lost Ark for George Lucas, he learned
to forgo big fees in favor of a percentage of gross revenues.
Since then, for each film he directs, he gets close to 20
cents for every $1 that the studio gets. For those he
produces, the split is 50-50, after the studio covers its
production, marketing, and distribution costs. And then there
are the profits from video sales and royalties on
merchandise. In the case of Jurassic Park, the movie
grossed more than $950 million and Spielberg's take was $294
KINDLY MONSTERS. These days, Spielberg's attentions
are drawn to far more than just movie ideas and
feature-length films. Thanks again to his clan of kids,
Spielberg has assigned two members of DreamWorks'
consumer-products unit to report directly to him on new toys
for him to turn into animated films or cartoon shows. One,
called Igor, was the inspiration for Toonsylvania, a
cartoon show about kindly monsters that is now spawning its
own toy line.
An even stronger interest for Spielberg is Sega GameWorks,
a DreamWorks partnership with Sega Enterprises and Universal
to build futuristic video arcades and rides across the
country. It was he who designed the dark, warehouse-style
interiors of the arcades, and the games and rides that clang
away in the cavernous space.
Although he is generally a conservative investor, with
roughly 80% of his holdings in cash or other liquid assets,
Spielberg is dipping a toe in the raging online world with a
15% stake, or about $10 million, in idealab!, a Pasadena
Internet-content company and several associated operations.
He also serves as the creative funnel in a joint venture with
Microsoft Corp., called DreamWorks Interactive, to make
online games. And to sate his appetite for fast food, an
affliction he shares with Katzenberg, the two have started
two submarine-themed restaurants called Dive!
The last few years have also kindled in Spielberg a
philanthropic urge that has him spending big chunks of money
and time on issues he cares deeply about. After making Schindler's
List, he spent $85 million to support Jewish culture and
education. One project: recording video histories of more
than 41,000 Holocaust survivors. Spielberg often watches the
videos as they're being recorded via a high-speed hookup from
his office. As chairman of the Starbright Foundation, which
provides online links to children's wards in hospitals,
Spielberg has enlisted his Hollywood friends to help raise
$40 million. He often visits hospitals, helping ailing
children explore new media.
Whatever else he does, Spielberg will always find time for
fun. He is an avid skeet shooter, even threatening to take on
General Norman Schwartzkopf, who chairs Starbright's capital
campaign. And ever the kid, he stops by nearly every day at
DreamWorks Interactive to play some of its new video games.
Often, he brings one of his kids along for a second opinion.
Does he ever worry that he will run out of ideas? ''I don't
have enough time in a lifetime to tell all the stories I want
to tell,'' says Spielberg. It sounds like the master
storyteller is going to be busy for a long time to come.
By Ronald Grover in Los Angeles