THE SCOPE AND BREADTH of DreamWorks' ambitions reflected the go-go 1990s—a time when the economy was surging, Bill Clinton was in the White House, and a still mysterious resource known as the World Wide Web was about to change everything. But its expansiveness was also a reflection of its resident rainmaker: Steven Spielberg. It was not because of Jeffrey Katzenberg or David Geffen that DreamWorks was getting into the video-game business or mulling over the creation of entertainment centers where families could chow down on hamburgers and zap Space Invaders (what would be known as GameWorks). The company was molded around the ideas and dreams of its resident man-child, the inspiration for DreamWorks' newly unveiled logo: a little boy sitting on the edge of the crescent moon, casting his fishing line into the stars. Whenever a wish materialized in Spielberg's endlessly imaginative mind, it was up to Geffen and Katzenberg to wave their magic wands and make it come true.
Even when Spielberg's partners did not see eye to eye with him—such as over building a studio at Playa Vista (Geffen in particular was skeptical)—they came through for him, understanding all too well that the star that made DreamWorks SKG shine so brightly, that had the media doing somersaults, the investors lining up for lunch in the Amblin dining room, was not what the K or the G in the company's initials represented but the S. Which is why the S came first.
Whatever the size of their egos, neither Geffen nor Katzenberg had any illusions about the supremacy of Spielberg's agenda. As Geffen put it: "When we first started DreamWorks, I said to Jeffrey, 'We ought to call this new company the Spielberg Brothers. Anything Steven thinks is important, we want to invest in.'"
The tricky part for Katzenberg and Geffen, however, was not just catering to Spielberg but making certain that he stayed focused. According to Bruce Jacobsen, cohead of DreamWorks' video-game division, Katzenberg was often heard saying, in his sports-talk lingo, "This is a town where the batting average is .210 and where you're profitable if you bat .290. I've got like a .410, and Steven bats .667. My mission in life is for Steven to swing as many times as he can and, with all due respect, I should be taking a few swings at bat, too."
Already, this aim had been somewhat derailed, given Spielberg's insistence on directing for other studios. What Steven wanted also determined how DreamWorks' live-action studio would be run and who would run it—which, to the shock of Hollywood, was not going to be Katzenberg, despite his nearly twenty years of studio experience at Paramount and Disney. At the time when the live-action duties were being divvied up at DreamWorks, Katzenberg's Touchstone track record was being assessed more from its back than from its front end. Everyone had witnessed his losing streak during his twilight years at Disney, when the company started forsaking its live-action formula of simple, accessible story lines and reasonable budgets. Not only were there fewer hits toward the end of Katzenberg's tenure, but they were costly ones, such as V.I. Warshawski and Newsies, a musical about a singing newspaper boy in the Depression. Eisner had had concerns about the latter movie, but had let Katzenberg go with his gut, which, in this case, misled him terribly: the film lost $42 million. Katzenberg was blamed for all of them, even flops such as Cabin Boy, which he'd had major doubts about but pushed through for Eisner's sake.
That Spielberg apparently deemed him not ready for prime time must have come as a shock to Katzenberg, too. Already, he'd begun talking to Touchstone executive Donald De Line about coming to DreamWorks, obviously feeling he was in a position to make such decisions. But it soon became evident that Spielberg would be ruling his turf without any input from his new partners. He'd handed the keys to his cherished kingdom to Walter Parkes and Laurie MacDonald, whom he had convinced to sign on to run the live-action studio by promising them that they could continue to produce movies even as they served as studio executives with management responsibilities. For Spielberg, it was a no-brainer: he believed in the couple, trusted them above anyone, and valued their sophistication, class, and taste. Where these qualities were concerned, Katzenberg was at a distinct disadvantage.
Moreover, Parkes had recently brought Spielberg in as an executive producer on a film he was producing at Sony, Men in Black. A sci-fi comedy starring Tommy Lee Jones and Will Smith with a $90 million budget, the film was planned as a summer "tent pole"—a major event movie that is expected to do big box office and sustain the rest of the year's slate—and if all went accordingly, Spielberg would be in for a windfall. As an executive producer—i.e., doing little more than lending his name to the picture—Spielberg was to receive a generous portion of first-dollar grosses, or a percentage of every dollar the movie made at the box office.
"I'm not saying Steven was bought," said one source. "But Walter brought him a very successful franchise that had nothing to do with Steven, at Sony, and he asked Steven to come in on it. That's a good thing."
According to several sources, Katzenberg's exclusion from the live-action studio was mainly about taste, and the perception was that Katzenberg, despite his many strengths, didn't have enough of it to create a pedigreed live-action division that produced both blockbusters and Oscar winners.
"It's hard enough to find fifteen decent movies, of which, you hope, three of them are great," said one insider. "But the idea that both [Touchstone and Hollywood Pictures, Disney's live-action units] were churning out twenty movies a year—and there was nothing but dreck. Jeffrey would probably say it was mandated by their pipelines, but what it really looked like was that Jeffrey had no taste."
Katzenberg's attitude toward moviemaking—cheaper, faster, better—also clashed resoundingly with Geffen's, whose philosophy, a la Wasserman, was to always go for the best. (Even if, when it came to movies, his choices didn't always pay off.) According to one source, Geffen, who prided himself enormously in having refined taste, would cringe when Katzenberg talked about movies in terms of "singles and doubles."
"David doesn't do baseball," this person said. "He likes quality. So David sentenced Jeffrey to animation. He said, 'That's what you're good at.'"
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Katzenberg gave no outward indication of being upset by his exclusion from live action, but according to a longtime friend, he was deeply pained. "He'd never admit it, but absolutely," this person acknowledged.
Another source said: "Jeffrey wanted live action. It was an embarrassment to him when he didn't get it." It was Katzenberg who had gotten the ball rolling on the company, after all, and he idolized Spielberg and trusted Geffen to champion his unlimited ascension. Of course, control of animation was unquestioningly Katzenberg's, but live action was DreamWorks' jewel in the crown.
Whatever Katzenberg may have felt, there was no time for self-pity, even had he been inclined toward introspection, which, friends say, he was decisively not. A studio had to be built and movies needed to be made. But first, DreamWorks needed money, and in raising it, Katzenberg's partners played their respective roles: Geffen made the calls, hosted the lunches, got down to brass tacks; Spielberg was brought in when sizzle was required; when a potential benefactor needed to be charmed into signing on the bottom line. To hear DreamWorks tell it, the moneymen were lining up in droves—or, as Spielberg put it to Time, it was "like stacking hour over Kennedy airport!" Who wouldn't, after all, want a building named after them at Steven Spielberg's new studio, or a "thank-you" in the credits of his next blockbuster? Even just one trip on Geffen's Gulfstream...
Yet the situation wasn't quite as movie-like as the partners were letting on. While it was true that DreamWorks was attracting great interest, tough questions were being asked. One financier who looked at the business plan, which was more of a "book," said, "I remember thinking, Are you kidding me? It was a huge undertaking. It was like, really, you're going to do all this—build a brand-new studio, have thirteen businesses, get into merchandising?"
Prince of Egypt also elicited questions, as in, how was an animated movie based on the Bible going to translate into a blockbuster? And because the company had no immediate revenue stream, such as a library—which provides steady home-video and TV revenue even when theatrical releases fall through—or product ready to release, DreamWorks had to hit it out of the park on the very first pitch, to employ a Katzenbergian metaphor.
There were other reasons for skepticism, or at least an understanding that success was not a fait accompli. A chief concern remained the issue of how three individuals each so powerful in their own right would manage as a team. "People were afraid that all of the air would be sucked out of the room," said one financier.
Such concerns caused some potential investors, such as the California Public Employees' Retirement System, the largest public pension fund in the United States, which had been in talks with DreamWorks to invest almost $300 million, to back out.
The radically different style of each man was apparent at meetings with financiers at Amblin. The event inevitably occasioned a buffet lunch, and a room in which three tables were set up, one for each of the three partners. The bankers would rotate between them in order to have face time with Spielberg, Katzenberg, and Geffen.
Recalled one financier: "You'd sit down with David, and anything you said was wrong. If you said, 'What an incredible career you've had, you've made billions,' he'd say, 'No, it's such a burden. The more money you make, the more you have to invest, and you have to stay on top of those investments.' He seemed like a very lonely, deeply unfulfilled person."
As for Katzenberg, he was "more middle of the road. He's so driven, he obviously feels cheated. But he'll talk to you, look you in the eye. Though you can tell he's champing at the bit to give his opinion. But at least he'll ask. David will never ask.
"When you talk to Steven and tell him you loved E.T., he'll light up: 'Oh, really?'"
Another negotiation that was laden with hurdles was with Microsoft, which DreamWorks was interested in partnering with on a video-game division, even though Microsoft's game unit was considered fairly weak compared to its software business. (Apple was the leader in CD-ROM game titles, which at the time were the dominant game platform.) Still, both sides were eager to get into business together and pair DreamWorks' creative power with Microsoft's tech savvy. Microsoft's chief technology officer, Nathan Myhrvold, even spent a week shadowing Katzenberg to get a better sense of what made his peculiar species run. Myhrvold's findings were recorded in a fourteen-page memo titled "My Week with Jeffrey: Hollywood on a hundred phone calls a day," which was dispersed among Microsoft employees and printed in The New Yorker. An excerpt, as it appeared in that magazine:
He is a master with this particular instrument of communication, which is not surprising given how much he uses it. The stories you read about Jeffrey making 100 to 150 phone calls a day are true ... His three secretaries have headsets and try to fill any free time during the day with calls—they will keep calling people back or try to arrange times and then when they get somebody put them through to Jeffrey with a brief comment about why he's talking to them. All in all it is a very efficient process ... Jeffrey calls to check in with people, and they with him, often regardless of need. These phone calls are like the banter people exchange in the halls at work, and last about as long. Jeffrey cruises these virtual halls, and others cruise his, maintaining the network of personal relationships from which the fabric of the entertainment industry is woven...
Somebody at DreamWorks told me that in Jeffrey's days at Disney his time was so pressed that they found it necessary to actually rehearse the calls that they wanted to make to Jeffrey in front of a mirror until they got enough points packed into the smallest duration ... I couldn't help thinking of all of the people who have pre-meetings to rehearse a review with Bill [Gates]. The big difference is that the message on brevity seems to [have] escaped our folks so far.
But Microsoft, a ruthless dealmaker, had questions about DreamWorks' prospectus. When the software giant performed as thorough a job of due diligence as DreamWorks, with its fortress mentality, would permit, Geffen burst out: "Hey! We're not under DOJ investigation, you know!"
Another issue was trust. A few years earlier, Bill Gates had been approached by Michael Ovitz to drum up a partnership, but Ovitz's game plan had been vague, along the lines of, "Let's just invest money and we'll figure out what we're doing later," according to Bruce Jacobsen, then a member of Microsoft's negotiating team. Gates, perhaps the world's greatest stickler when it comes to detail and strategy, was unmoved by the appeal. He was further turned off, or at least perplexed, when Ovitz took him to dinner at an expensive L.A. restaurant and, in an attempt to impress him, had them seated in the restaurant's kitchen. Not, apparently, Seattle style.
In an effort to convince Microsoft that he was as unslick as any computer nerd, Katzenberg exclaimed, apropos of nothing: "I've been married to my wife for fifteen years!" Despite such proclamations, Microsoft hired its own Hollywood lawyer to level the playing field and address such issues as Spielberg's royalties on video games based on his films; although DreamWorks claimed he always got 35 percent of revenues, Microsoft discovered cases where he had received less.
The cultures of the two companies also collided. During one discussion, Katzenberg was insulted when, after telling Gates that it took four hundred animators to make The Lion King, Gates shot back: "Can't you cut that down to forty people and do the rest on computers?"
"Jeffrey misunderstood Bill," Spielberg told Time. "He wasn't turning his nose up at creativity; he was putting us to the test, asking very tough questions because he wanted to hear how we would answer them. He was manipulating that meeting."
But perhaps Microsoft's greatest concern had to do with the extent of Spielberg's devotion to the new company. "Steven's commitment ultimately was a handshake with DreamWorks, seeing as he could direct movies for other companies," said Jacobsen. "One question from Microsoft was: Is Steven in it? Or is he just dabbling? Steven being in it was really crucial. [Microsoft] was hoping for E.T."
To reassure its suitors, SKG amped up their three-ring circus of seduction. Spielberg assured the Microsoft team that he was absolutely in for the long haul, as he chatted energetically about his love of video games (including Microsoft's Flight Simulator) and waxed knowledgeable about new technology. Katzenberg gave his amped-up spiel about DreamWorks being a home for creative talent and about his own fascination with animation technology born during his Disney days. Geffen, who was still under contract with MCA, played it low-key, limiting his input to asking pointed questions. At the end of one meeting, Spielberg gave the group a tour of the Shoah Foundation, his nonprofit organization that has collected tens of thousands of video testimonials from Holocaust survivors. Patty Stonesifer—then senior VP of Microsoft's Interactive Media Division and one of Gates's right-hand executives—left in tears. Bill Gates would not be going home just yet.
The Koreans, on the other hand, were close to pulling out. When Samsung offered to plow as much as $900 million into DreamWorks, Spielberg and Capshaw hosted a dinner at their home for Samsung chairman Lee Kun-Hee and more than a dozen other guests. But as business was discussed—through an interpreter—over Chilean sea bass and white wine, Spielberg began to get a funny feeling in his stomach, and not because of the fish.
"The word 'semiconductor' must have been used about 20 times during that two-and-a-half-hour encounter," Spielberg said. "I thought to myself, 'How are they going to know anything about the film business when they're so obsessed with semiconductors?' It was another one of those evenings that turned out to be a complete waste of time."
As for the Samsung executives, they were, rightly, skeptical that they would have any say in creative decisions in the new company, and the talks collapsed.
But a deal was not completely off the table. Lee's niece Miky, the Harvard-educated managing director of One World Media Corporation, an offshoot of Samsung, knew Geffen and was interested in an investment, albeit for a lower amount.
The biggest question facing the troika was MCA, and how, or if, the studio would figure into DreamWorks' distribution plans. Spielberg had given Wasserman and Sheinberg his word that, so long as they were still working at MCA, DreamWorks would be bringing its business, but the men's future was looking more uncertain than ever. After Matsushita rebuffed Wasserman and Sheinberg's offer to buy back MCA, the two quarreling factions had met in San Francisco, but nothing was resolved. In January, another meeting had taken place, this time at the Matsushita headquarters in Osaka, but again, Wasserman and Sheinberg left feeling anxious.
The worst of it was that Ovitz was now in a front-and-center role with the Japanese, who had hired him as a consultant to assess the worth of MCA. No one in Hollywood had any doubts that Ovitz would try to parlay this role into a far more prominent one and make a play for running MCA. When Wasserman heard that Ovitz had been summoned to the meeting in Osaka, he'd shouted: "I've been in this business for sixty years and I'm not going to stand and have my performance evaluated by Michael Ovitz!" With that, he walked out of the room.
If ascension is what Ovitz had in mind, he faced a threat named David Geffen, who would, presumably, do whatever was called for to waylay his bitterest rival. According to The Operator, when Geffen sold Geffen Records in 1989, the fact that Wasserman was aging and would soon be in need of a successor had affected his decision to select MCA as a suitor. Now that Matsushita was planning its next move—rumor was, a sale was ahead—Wasserman's place would very likely be vacant. Geffen possessed the golden carrot that could affect MCA's future: Spielberg. DreamWorks' distribution arrangement with MCA was a handshake deal. To firm it up and keep the most successful filmmaker in history (no more so than right now, in the wake of Jurassic Park's $900 million worldwide grosses) from straying, Geffen could, and surely would, use Spielberg to influence negotiations. Geffen's other valuable card was Geffen Records, which MCA owned and which Geffen had been running, though his contract was about to expire. The label was coming off its most profitable year to date, a fact that Geffen was making sure to publicize. The message to MCA was clear: this was not the moment to anger Mr. Geffen.