Dream Works SKG

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Dream Works SKG

founded: 1994

Contact Information:

headquarters: 100 universal plz., lakeside bldg.
universal city, ca 91608 phone: (818)733-7000 fax: (818)733-6153 url: http://www.dreamworksrec.com/

OVERVIEW

Founded in 1994 by three of the entertainment world's biggest names, DreamWorks SKG is a huge multimedia conglomerate with interests in motion pictures, interactive game software, music, toys, and television programming. Given the resumes of the Hollywood giants who launched it, it is hardly surprising that the expectations for DreamWorks have been inordinately—perhaps unrealistically—high. The founding partners are Steven Spielberg, Jeffrey Katzenberg, and David Geffen. Spielberg, the extremely successful director of such blockbuster films as Schindler's List, Jurassic Park, and E.T., is charged with managing DreamWorks' motion picture operations. Katzenberg, who is credited with Walt Disney's successful return to the animated features that first gave it fame, is responsible for DreamWorks' animation and television divisions. Long a powerhouse in the music industry, Geffen leads DreamWorks Records, the fledgling company's music division.

It was nearly three years after the founding of DreamWorks before the company rolled out its first motion picture. The film, The Peacemaker, was followed in quick succession by Amistad and Mouse Hunt, all of which were released in 1997. Perhaps because such big things were expected from DreamWorks, the three films' lukewarm reception at the box office was considered a major disappointment. In 1998, DreamWorks released Deep Impact, a story of a giant comet on a collision course with Earth. Early box office returns indicated the company's fourth film was likely to be fairly successful, if not a blockbuster, but again, it didn't quite fulfill the company's expectations.

DreamWorks was still without a studio in 1998, so it operated out of offices and facilities scattered over greater Los Angeles. The huge Playa Vista land development on the west side of Los Angeles, where Dream-Works had indicated it might wish to build a studio, seemed likely to get a green light in mid-1998 after years of delay.

COMPANY FINANCES

DreamWorks is a privately owned company and is not required to disclose details of its financial operations.

ANALYSTS' OPINIONS

Perhaps out of envy, or perhaps out of a genuine conviction that a better performance could be expected, many in Hollywood have enjoyed criticizing Dream-Works during its relatively short life. According to Entertainment Weekly, one Hollywood agent said of Dream-Works, "Based on a billion dollars and those three minds, what a completely unimpressive start." Another lamented that, "This studio was supposed to be talent-driven. This looks like a very suit-driven [company] so far."

Others have urged critics to give the DreamWorks team some time to get its act together. Arnold Rifkin, president of the William Morris Agency, was quoted by Entertainment Weekly as saying, "Given who [the founders] are, there was a level of expectation far greater than anyone could have achieved. But they are capable of achieving that." Further, others contended that Spielberg, Katzenberg, and Geffen have done quite well, considering that a major new Hollywood studio had not been launched in decades. Entertainment Weekly quoted Harold Vogel, an entertainment analyst with Cowen and Co., as saying, "To do what they've done in three years is remarkable."

HISTORY

The 1994 announcement that Steven Spielberg, one of Hollywood's most successful film directors, was teaming with Jeffrey Katzenberg, former Walt Disney executive, and music guru David Geffen to launch the first new studio in decades stunned and excited Hollywood. It was almost inevitable that the expectations generated by this announcement would be difficult to achieve.

Spielberg, Katzenberg, and Geffen each put up about $33 million to get the company started, but even more was needed. Fortunately, there was no shortage of investors willing to take a chance on DreamWorks. Paul Allen, cofounder of Microsoft, chipped in half a billion dollars, and Microsoft Corp. itself invested at least $30 million. Additionally, South Korea's One World Media came through with $300 million.

Three years passed before the company released its first film, The Peacemaker. The film, starring George Clooney and Nicole Kidman, was a disappointment at the box office, giving rise to more criticism. Amistad, which was critically acclaimed, failed to catch on at the box office, and Mouse Hunt followed. All three films were released without much success in the final months of 1997. The public seemed much more receptive to Deep Impact, the story of a comet hurtling toward Earth, and Paulie, the story of a slick-talking parrot. Both were released in the spring of 1998. Saving Private Ryan and The Prince of Egypt, both slated for late 1998 release, held even higher hopes for DreamWorks.

FAST FACTS: About DreamWorks SKG

Ownership: DreamWorks SKG is a privately held company.

Officers: David Geffen, Partner; Jeffrey Katzenberg, Partner; Steven Spielberg, Partner; Ronald L. Nelson, CFO

Employees: 1,700

Chief Competitors: DreamWorks' major competitors include: Activision; All American Communications; Carsey-Werner; CBS; Creative Technology; Electronic Arts; Film Roman; KingWorld; LucasArts; NBC; News Corp.; Nintendo; PolyGram; Rank; Sony; Spelling Entertainment; Time Warner; Viacom; and Walt Disney.

Although DreamWorks started slowly on the film front, a good deal was accomplished in other areas. DreamWorks and Microsoft set up a joint venture to develop interactive entertainment software, and Dream-Works and Silicon Graphics cofounded a $50 million animation studio. In addition, the company negotiated a television programming partnership with ABC, as well as a 10-year licensing agreement with Home Box Office, which was estimated to be worth $1 billion. The acquisition of ABC by Disney in 1996, however, cast some doubt on the viability of DreamWorks' partnership with ABC. Further complicating the ABC deal was a $250 million suit filed against Disney by Jeffrey Katzenberg, one of the founders of DreamWorks.

The company's early offerings for television failed to generate much excitement. Among DreamWorks' failed TV series were Champs, Ink, Arsenio, and High Incident. One sitcom that managed to survive beyond a single season was Spin City, starring Michael J. Fox.

On the music front, DreamWorks was also a slow starter. Two of the company's top recording artists were Randy Travis and George Michael, performers considered by many to be past their prime. Michael's debut album on the SKG label was far less successful than some of his earlier releases. One of the music division's hottest releases was comedian Chris Rock's Roll with the New. Despite the success of this release, many observers said the company's music division was out of step with the times and needed to get in touch with current trends in the business.

STRATEGY

The basic concept behind DreamWorks, according to cofounder Jeffrey Katzenberg, is storytelling, which is distinct from the rationale behind the movie studios of the past. Katzenberg said these other studios were driven first and foremost by production for a single outlet, movie theaters. In an interview Katzenberg said, "Contrast that with the studio of today, which is engaged in a host of different enterprises. They all revolve around storytelling, but the stories are made, distributed, and exhibited in different formats. On top of that, the technological revolution of the last decade has had a profound effect on each and every one of the disciplines. What does it mean? That in many respects companies that were built out of bricks and mortar 65 years ago are hobbled in their ability to embrace and/or catch up with the opportunities being offered by today's new tools and technologies."

The cofounders feel comfortable with the strategy they adopted when launching DreamWorks in 1994, according to Katzenberg. Each one brings to the company his individual strength, and the company has endeavored to put these strengths to the best possible use. For example, Spielberg, who has amassed a long list of successful film credits, is concentrating on motion picture production. Geffen, already a major force in the music business, is looking after that end of DreamWorks' operations. He is also, Katzenberg said, "sort of the guiding business leader, and he makes sure the entrepreneurial instinct remains our overriding spirit." Geffen acts as a liaison with the company's investors and monitors DreamWorks' strategic alliances with other companies and groups.

INFLUENCES

Among the influences that have helped shape Dream-Works' strategy is the growing appetite of the American public for well-produced, feature-length animated films. Katzenberg, who brings to DreamWorks years of experience with animation at Disney, is spearheading the development of animated features for the company. The first of these features, The Prince of Egypt, was scheduled for release during the 1998 Christmas season.

Another trend, successfully exploited by many Hollywood film studios, is the growing market for spin-off products from successful film projects. DreamWorks is certainly not overlooking such marketing opportunities. Of the market for spin-off products, Katzenberg told IBM's Think Leadership, "When great properties are created these days, the enterprises are surrounded by very valuable, very compelling, and equally creative ancillary opportunities. When a Jurassic Park comes along, there is a Jurassic Park the movie, the video game, and the soundtrack. There's Jurassic Park publishing, t-shirts, toys, and other types of merchandise."

LET US ENTERTAIN YOU

The idea was simple. Take three talented and rich people and combine forces to create a mega-company called DreamWorks, the first new major Hollywood studio to appear in some time. Is this an original idea? Not really. Long before Steven Spielberg, Jeffrey Katzenberg, and David Geffen formed DreamWorks, silent film stars Charlie Chaplin, Mary Pickford, and Douglas Fairbanks founded United Artists with a similar philosophy: to create a talent-friendly movie company. With the recent folding of companies such as Carolco, Cinergi, and Savoy Pictures, there appears to be a need for organizations that have the ability to buy, produce, and distribute entertainment products. DreamWorks has the talent and the money to fulfill all those functions.

CURRENT TRENDS

All three cofounders of DreamWorks are dedicated to keeping the company small enough to ensure that all parties are always operating on the same wavelength. It is large enough to be able to demand full market value for its product and for the creativity of the people who put out that product. It is also important, according to Katzenberg, that the company be, "smart enough to make sure we all synergistically feed on one another and create values for each other. To make it all work takes state-of-the-art technology that allows us to take advantage of the opportunities that exist."

PRODUCTS

DreamWorks is involved with a wide variety of products, including the production of live and animated motion pictures, television programming, music recording, and interactive entertainment software. In addition to its own product lines, the company has entered into joint venture agreements with several other companies. These include the production of computer-animated films with Pacific Data Images, digital film recorders with Kodak, interactive CD-ROMs with Microsoft, and toys and games with Hasbro.

GLOBAL PRESENCE

Although DreamWorks' headquarters and its production facilities are all located within the United States, the entertainment business has become increasingly international in nature. Many of the industry's motion pictures are filmed at overseas locations, and the international distribution of a film often produces a large percentage of its overall revenue. Additionally, the talent that goes into these film projects is drawn from all around the world.

SOURCES OF INFORMATION

Bibliography

bates, james, and patrice apodaca. "stalking the king of animation." los angeles times, 20 june 1996.

"dreamworks." morning edition (national public radio, 20 november 1997.

"dreamworks skg." hoover's online, 11 june 1998. available at: http://www.hoovers.com.

"dreamworks signs dennis leary." business wire, 29 april 1998.

"how the dream works." think leadership. ibm corporation, 1997.

pringle, paul. "mouse hunt: after decades of ruling the movie-'toon roost, disney faces an animated flock of competitors." dallas morning news, 16 november 1997.

young, josh, and willman, chris. "needs improvement: a special dreamworks report card: dreamworks created by holly-wood's best and brightest." entertainment weekly, 17 october 1997.