BUSINESS WEEK MAGAZINE
WILL THIS BE
DREAMWORKS' DREAM SUMMER?
July 13, 1998
Steven Spielberg isn't the only one
hustling on DreamWorks' projects. His partner Jeffrey
Katzenberg has his own four animated films to complete over
the next three years. On a recent June evening, Katzenberg
was huddled with composer Hans Zimmer, trying to work out the
kinks in the soundtrack of El Dorado, DreamWorks'
animated musical about Hernan Cortez and Montezuma. After
trying for more than an hour to patch up a poorly sung
number, the pair threw up their hands and went out to get a
Chinese dinner.
That's DreamWorks in a nutshell, ever since Spielberg,
Katzenberg, and David Geffen launched their ambitious new
studio back in 1994: lots of work and mixed results. So far,
there have been no big hits of the sort envisioned when the
studio was first formed. The studio's first theatrical
release, The Peacemaker, a George Clooney thriller
about a nuclear attack on New York, barely broke even. The
same pattern held for Amistad, the true story of a
slave-ship uprising and Spielberg's first DreamWorks film.
The other two movies DreamWorks has released made only small
profits.
Now, that could be about to change. The betting in
Hollywood is that DreamWorks will have a couple of big hits
by the end of the summer. Over the next two months, the
studio is set to release two new films: Spielberg's Saving
Private Ryan--which some studio execs say is among his
finest work--and Small Soldiers, the Toy Story-gone-bonkers
tale of little action figures who take over a town. Later in
the year, DreamWorks will release the $73 million animated
story of Moses, The Prince of Egypt.
Cranking up the first new Hollywood studio in 65 years has
been a slow and enormously expensive undertaking. So far, the
studio has burned through nearly half the $2.7 billion in
private equity and debt it originally raised. But DreamWorks,
which now employs 1,600 people, has been gradually building
its film, television, and music units. Spielberg is in charge
of feature films and TV animation, while Katzenberg, the
former Walt Disney Co. studio chief, takes on his alma mater
in animated features and television series. Meanwhile, Geffen
is the primary dealmaker and also heads the music business.
Geffen, for one, is predicting that even a modestly
successful crop of movies, TV, and CDs should yield $300
million in positive cash flow by the end of 1999. That's
about what the DreamWorks team expected from the beginning,
they say. ''When we first got started, people wanted
drive-through results from us,'' says Katzenberg. ''They
weren't ready to wait for the food to be cooked. Now, we're
cooking.''
CRAP SHOOT. Already, DreamWorks is getting a hefty
boost from its half-interest in the meteor blockbuster Deep
Impact. In television, the studio stands to make upwards
of $300 million through another Paramount deal to syndicate
its ABC hit, Spin City. As with any Hollywood studio,
the future is a crap shoot. Budgets are skyrocketing, and
competition has never been more intense. Katzenberg is racing
to release the computer-generated insect tale Antz on
Oct. 2, six weeks ahead of Disney's A Bug's Life, for
instance.
DreamWorks is not yet out of the woods. Except for its one
hit show, the television unit under Katzenberg has been a
disappointment. And plans to construct a huge,
state-of-the-art studio near Los Angeles International
Airport are only now getting under way after years of legal
and environmental obstacles. Still, investors don't seem
concerned. ''If they'd sell me more, I'd buy it in an
instant,'' says billionaire Paul Allen, who owns 18.5%.
Spielberg insists he's happy, and in for the long haul. A
good thing, too: Spielberg is DreamWorks' most valuable
asset.
By Ronald Grover in Los Angeles
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