DreamWorks SKG

views updated May 18 2018

DreamWorks SKG

1000 Flower Street
Glendale, California 91201
U.S.A.
Telephone: (818) 733-7000
Fax: (818) 733-9918
Web site:http://www.dreamworks.com

Private Company
Incorporated: 1994
Employees: 1,500 (2000)
Sales: $1,242 million (est.2000)
NAIC: 512110 Motion Picture and Video Production; 512120 Motion Picture and Video Distribution; 512240 Sound Recording Studios; 512220 Integrated Record Production/Distribution

Founded in 1994 by entertainment moguls Steven Spielberg, Jeffrey Katzenberg, and David Geffen, DreamWorks SKG is a private entertainment company that produces and distributes popular films, music, and television shows. The acclaimed film director and producer Spielberg mainly oversees the live-action movies for DreamWorks (which has included Saving Private Ryan and Gladiator), while former Disney-executive and animation guru Katzenberg focuses on the company’s animated film efforts (which includes The Prince of Egypt and Shrek), and recording industry maven Geffen produces DreamWorks’ film soundtracks and albums for popular artists (including Nelly Furtado and Henry Rollins). The prime-time Spin City and The Job are among the many television shows that the company also produces. The company initially aimed to develop an even broader entertainment offering, with its short-lived DreamWorks Interactive division, to include PC and console-based games (The Lost World: Jurassic Park and Medal of Honor, among others), a chain of cutting-edge video game centers (the now-Sega/Universal-run Game Works), and an interactive Web site to showcase and exchange new and emerging digital entertainment (the now-less-impressive Pop.com). Since pulling out of those ventures, DreamWorks SKG has focused on its core strengths and has proven to be a major player in the entertainment business, especially amid the 2001 success of the computer-animated feature film, Shrek, which is arguably on a par with similar efforts by archrival The Walt Disney Company.

Three Entertainment Moguls Unite

It was no coincidence that the “S,” “K,” and “G” in DreamWorks SKG are the first letters of the last names of the company’s chief partners. One of the most powerful people in entertainment, Spielberg is responsible for many of the most successful films in history, as director of Jaws (1975), Close Encounters of the Third Kind (1977), Raiders of the Lost Ark (1981), E.T., The Extra-Terrestrial (1982), Jurassic Park (1993), Schindler’s List (1993), Twister (1996), and Saving Private Ryan (1998). He also was a producer or executive producer for dozens of other blockbuster live-action and animated films, including Back to the Future (1985), Who Framed Roger Rabbit (1988), An American Tail: Fievel Goes West (1991), Men in Black (1997), and Deep Impact (1998). Spielberg’s live-action and animation talents also traveled to network, cable, and syndicated television shows, producing and directing several shows including the Tiny Toon Adventures animated series (1990-current) and Amazing Stories (1985-1987).

Before co-founding DreamWorks, Katzenberg made a name for himself as an executive in the entertainment business, most notably as Chairman of The Walt Disney Studios from 1984 to 1994. He was responsible for the production, marketing, and distribution of all Disney filmed entertainment including motion pictures, television, cable, syndication, home video and interactive entertainment. Under his direction, Disney’s studios created some of its most successful films, including Good Morning Vietnam, Pretty Woman, The Little Mermaid, Beauty and the Beast (the first animated feature to be nominated for the Best Picture Oscar), Aladdin, and The Lion King (the highest domestic grossing animated film of all time at $313 million). Citing differences with then fellow Disney executive Michael Eisner, Katzenberg left the Magic Kingdom and almost immediately joined Spielberg and Geffen to found DreamWorks. The departure would later prove to be an unclean break, as Katzenberg would find himself to be in a long, high-profile battle to cash in on a bonus he held was owed to him by Disney.

By the time Geffen helped found DreamWorks, he was already head of his own empire in the music business. Geffen Records was one of the largest record labels in the industry, the crowning achievement of his three decades in the corporate rock world. He is credited with guiding the careers of 1970s big-name acts including Crosby, Stills, Nash and Young; Jackson Browne; and the Eagles. When he founded Geffen Records in 1980, he was able to immediately sign Elton John, Donna Summer, and Neil Young, the first in a long list of notable popular music artists, which also included Guns N’ Roses, Aerosmith, Cher, Sonic Youth, and Nirvana.

The Early Years, A Shaky Start: 1994-97

Spielberg, Katzenberg, and Geffen each brought their unique strengths, experiences and talent to DreamWorks, and each would appropriately head the company’s core businesses: live-action movies, animated movies, and music, respectively. With $2 billion to start with, and a host of impressive high-tech partnerships, DreamWorks was one of the most exciting companies to watch from the outset. By 1995, Microsoft had invested $30 million in DreamWorks to co-develop interactive games, which spawned a new division, DreamWorks Interactive. Paul Allen showed even greater interest, investing about $500 million for a stake in the new company. Even though Spielberg, Katzenberg, and Geffen would bring so much to their shared “Dream,” many initially wondered whether it would be true to its name and actually “Work.” Indeed, industry insiders were baffled by the company’s shaky start.

In 1997, DreamWorks turned out its first movie, The Peacemaker, with George Clooney and Nicole Kidman, but it was considered to be far from a success, reaching only $12 million during its opening weekend. But, what followed was a string of much more successful movies: Mouse Hunt (Nathan Lane), Amistad (with Morgan Freeman and Anthony Hopkins), Small Soldiers (with the voice of Tommy Lee Jones), Paulie (with Gena Rowlands, Cheech Marin, and Buddy Hackett), and Deep Impact (with Robert Duvall and Morgan Freeman). Amistad, which came out in 1996, was Spielberg’s first directorial project for DreamWorks. On the animated film front, DreamWorks joined with PDI in 1996 to co-produce original computer-Generaled feature films, including Antz, which was completed in 1998, just weeks ahead of Disney’s own insect-themed animation film, A Bug’s Life. Katzenberg also landed for DreamWorks the rights to Chicken Run, a promising Clayma-tion project that was in development by Oscar-winning Aaardman Animations. The film would later become a hit in 2000.

DreamWorks’s music subsidiary was originally named DreamWorks SKG Music, with DreamWorks Records and SKG Records as separate labels—the first, for soundtracks and specialty recordings, and the second, for individual recording artists and bands. The first artist signed to SKG Records was George Michael, whose album in 1996 turned out to be much less successful than expected. But, when DreamWorks struck an unusual joint-venture pact with Rykodisc to cover two of Morphine’s next albums, it seemed the company’s music business was headed in the right direction. The band was already playing in college radio stations all over, heading top-10 lists, and winning prestigious awards such as the Boston Music Awards in 1995 and 1996.

Aside from its movie and music core, DreamWorks explored other entertainment channels. DreamWorks TV turned out its first shows for ABC, High Incident and Champs. These two turned out to be unsuccessful, but the studio followed up in 1996 with the high-profile Ink for CBS, starring Ted Danson, which lasted one full season. In September 1996, DreamWorks also debuted Spin City for ABC, starring Michael J. Fox, which turned out to be DreamWorks’ most successful television show. At the time, however, DreamWorks was still stunned when their plans for a syndicated show with Maury Povich and Connie Chung fell through.

In April 1996, DreamWorks, Sega, and Universal founded Sega Game Works, a chain of electronic game centers in Seattle, Las Vegas, Ontario, California, and other cities. It was no surprise that Spielberg would get into the game business, being an avid gamer himself. With cutting-edge games, a club-like atmosphere, and slick merchandising, the chain was well received amid lots of initial fanfare. That same year, DreamWorks’ biggest-selling game was Goosebumps: Escape from Horrorland, a first-person perspective, animated adventure game based on the R.L. Stine children’s books and TV series.

A Turning Point: 1998

DreamWorks began to outgrow its shaky start and turn out critically acclaimed, successful films. Deep Impact was released in early 1998, and was DreamWorks’ highest-grossing film, at an impressive $350.9 million worldwide, which was split with co-producer Paramount Pictures. Later, Saving Private Ryan would not only become the year’s highest grossing film, at $216 million, but it would also bring in several Oscar awards, including Best Picture and Best Director for Spielberg. Even though the opening weekend sales for Antz was about half of the Disney film, the DreamWorks project, headed by Katzenberg, would be the first one of many to seriously challenge Disney’s position as head of the animation kingdom. Not only did Antz open in theaters weeks before Disney’s A Bug’s Life, it also managed to make $70 million, making it the most successful non-Disney animated film at the time.

Company Perspectives:

Steven Spielberg, Jeffrey Katzenberg, and David Geffen launched DreamWorks SKG in October 1994. Their vision was to create an artist-friendly studio to develop, produce, and distribute superior film and music entertainment that would inspire and delight audiences worldwide. DreamWorks SKG is now a leading producer of live-action motion pictures, animated feature films, network, syndicated and cable television programming, home video and DVD entertainment, and consumer products.

Released during the holiday season, The Prince of Egypt proved to be a blockbuster as well. It was DreamWorks’ first animation film that was created completely in-house. To help promote its new Biblical movie, DreamWorks landed a unique deal with Wal-Mart, in which the retailer would sell special gift packs that included commemorative tickets (good at any theater in the country), a collector’s edition book, a limited edition lithograph, and a collector’s edition CD set. Even Small Soldiers earned the studio in the neighborhood of $10 million dollars, despite its disappointing $46 million gross. Every bit helped, as it turned out that DreamWorks finished the year with the highest average gross per film of all the major studios. The company’s total box office gross for the year reached a high of $473 million.

Chaos Amid Continued Success: 1999

Spielberg, Katzenberg, and Geffen had been planning for years to build a state-of-the-art studio to serve as the central home for the company, which was scattered all over the Los Angeles area. By November 1998, they bought about 47 acres of land just west of Los Angeles for $20 million, the focal point for a larger 1,100-acre development for high-tech companies, new housing, and a man-made lake. The entertainment moguls were surely not the only ones excited about this prospect. At least 50,000 new jobs were forecasted around this development project, reason enough for the local government to pledge tens of millions of dollars in tax breaks. The proposed studio would have been the first new studio built in the Los Angeles area in the 70 years since Warner Brothers built their Burbank studio, but it wasn’t meant to be.

The Wetlands Action Network, Southwest Center, and Cal-PIRG filed a lawsuit against DreamWorks, citing their concerns about the studio’s plans to develop on the last significant wetland in the Los Angeles basin. The media-savvy protestors also arranged sit-ins and demonstrations at movie premieres, proving to be a significant problem for DreamWorks. Later in 1999, DreamWorks pulled out of the development project, which they claim was due to financial reasons. DreamWorks has since remained a decentralized network of facilities around Los Angeles, with even the Glendale animation studios located too cozily next to studios of rival Disney.

Despite the company’s inability to find a new home, 1999 proved to be another good year for DreamWorks, with Oscar-winning Best Picture of 1999, American Beauty (with Kevin Spacey), Galaxy Quest (with Tim Allen), Forces of Nature (with Sandra Bullock and Ben Affleck), The Haunting (with Liam Neeson), and What Lies Beneath (with Harrison Ford and Michelle Pfeifer). The home video rental release of Saving Private Ryan, released mid-year, became 1999’s most successful rental release. Still riding high on the wave of the war film’s success, DreamWorks secured a deal with NBC to launch the animated Semper Fi, which would draw from resources used in making Saving Private Ryan, including Spielberg as executive producer. DreamWorks closed its television animation unit, however. The company would instead look to possible partnerships with Fox and Nickelodeon for future animated shows for television.

The company celebrated its fifth anniversary in October 1999, looking back at an impressive series of projects, including fourteen feature films, several television shows, and more than 40 record releases. That same month, DreamWorks joined forces with Imagine Entertainment to create the Internet entertainment company, Pop.com. Funded by Paul Allen’s Vulcan Ventures, Inc., the ambitious equal partnership was set up to develop a Web site that would produce and broadcast original Internet-only programming. It was hoped to offer a mix of live action and animation shorts, video-on-demand and live events, and non-linear interactive features and games. Unfortunately, the site folded 11 months later, amid the dot-com shakeout and failed attempts to sell the site to Atom Films or to merge it with IFILM.

Films Remain Priority: 2000

In early 2000, DreamWorks moved to refocus its efforts on live-action and animated films. DreamWorks Interactive was sold to Electronic Arts, a company that was fast on the move to become the leader of Internet-based gaming. (It had just partnered with America Online to create and deliver online games and interactive entertainment for AOL properties). DreamWorks then purchased a majority stake in the special effects and animation leader PDI. The company also stepped up its television program development efforts, to include two new, half-hour shows—one called The Job, starring Denis Leary, and the other called Freaks and Geeks. Also in the television line-up were 12 hours of miniseries programming for the HBO Band of Brothers, and the 20-hour Taken for Sci-Fi Channel. The Emmy award-winning Spin City continued to be a major success for DreamWorks, even after Michael J. Fox left and was replaced by Charlie Sheen. The show entered syndication in the fall, having brought in an estimated $2.5 to $3 million per segment. According to Katzenberg and Fox executive Dan McDermott, it was enough to cover the division’s operating costs and ensure profitability.

Key Dates:

1994:: DreamWorks SKG is founded.
1995:: Company joins with Microsoft to create DreamWorks Interactive.
1996:: Company forms special-effects venture PDI/DreamWorks.
1997:: The Peacemaker debuts as DreamWorks’ first feature film.
1998:: Saving Private Ryan and The Prince of Egypt become the company’s first major successes.
1999:: Company pulls out of Playa Vista studio development.
2000:: DreamWorks Interactive sold to Electronic Arts. DreamWorks purchases a majority stake in PDI.
2001:: Computer-animated feature film Shrek puts company’s animation on par with Disney’s.

In an effort to jumpstart another of DreamWorks’ non-film ventures, this time the music division, DreamWorks Records began offering a new service on its Web site to attract new talent to the label. With the new service, unsigned music artists could submit their music clips to the label via the Web site. Geffen’s part of the DreamWorks empire could have probably used the extra momentum. Despite having an impressive array of critically acclaimed artists signed to the label, DreamWorks Records had not managed to Generale impressive record sales. In 1999, the label had only three albums that earned industry distinctions for sales. One artist, Papa Roach, made the top-10 charts in 2000, which to industry analysts, was not enough. But, the label’s head of new media, Jed Simon insisted, “The rest of the industry is more of a singles-driven business. We still believe in artist development and feel that ultimately will be the winning strategy.”

By mid-2000, DreamWorks already managed to top its 1998 total gross of $473 million, with $475 million. This was also a year marked with 5 Oscar awards and $336 million for American Beauty, strong box office debuts for Gladiator (at $32.7 million) and the claymation film Chicken Run ($17.5 million), $67 million from Road Trip, and a $30 million opening weekend for What Lies Beneath. Three of DreamWorks’ year-2000 films grossed more than $100 million for the year {American Beauty, Gladiator, and Chicken Run).

2001 and Beyond

Despite Spielberg’s personal zeal for gaming, DreamWorks shed its stake in the GameWorks business, further honing in on its core film strengths. In another strategic move, DreamWorks secured a five-year extension on its distribution deal with Universal Studios. The pact granted Universal the enviable international distribution rights to live action and animated DreamWorks features and worldwide home video, as well as music distribution rights. “This is an extremely important and significant milestone for DreamWorks,” Katzenberg said. “With this deal we have very much secured DreamWorks’ future capital needs for the next two to three years in what is going to be a difficult, demanding and turbulent debt marketplace.” Days after the lucrative deal, DreamWorks struck yet another one, this time with Turner Broadcasting Systems. The precedent-setting theatrical output deal, combined with an earlier 1998 syndication agreement between the two companies, gave TBS access to nearly all of DreamWorks’ titles released from 1997 to 2007, and rights to titles as far out as 2015. In exchange, DreamWorks would get $350 to $450 million dollars, depending on the final box office revenue.

But, if it seemed that DreamWorks was wrestling with financial troubles, the additional blockbuster successes of Gladiator and Shrek would put such worries to rest. In March, Oscar awards went to yet another DreamWorks project—this time, for Gladiator. The film won for Best Picture, Best Actor (Russell Crowe), and other categories, for a total of five awards. By the end of the 2001 summer, DreamWorks’ new animated feature film reached an estimated $261 million gross, dwarfing all other releases earlier in the year, including Disney’s animated movie, Atlantis, and even DreamWorks’ Spielberg co-production with Warner Brothers Studios, A.I. The Oscar-worthy Shrek firmly established DreamWorks’ position as a major force in the feature animation business.

Principal Competitors

Alliance Atlantis Communications; AOL Time Warner; Artisan Entertainment; Carsey-Werner; Fox Entertainment; Lions Gate Entertainment; Lucasfilm; MGM; Pixar; Sony; Universal Studios; Viacom; The Walt Disney Company.

Principal Subsidiaries

DreamWorks Records; DreamWorks Digital.

DreamWorks SKG

views updated May 29 2018

DreamWorks SKG

1000 Flower Street
Glendale, CA 91201
(818) 733-7500
www.DreamWorks.com

In 1994, three of the most influential people in the entertainment world joined forces to form DreamWorks SKG. The best known was director Steven Spielberg, creator of some of the most popular films of all time. From the Walt Disney Company (see entry) came Jeffrey Katzenberg, the executive who revitalized that studio's famous animated film department. And from the music world came David Geffen. The self-made billionaire had launched several successful record companies and also produced films.

With the creation of DreamWorks, Spielberg, Katzenberg, and Geffen became the first people in sixty years to start a new film studio. But DreamWorks did not stop with films. The three men planned to produce TV shows, record music, and create video games. The boldness of their move—and the power of their personalities—caught the attention of the media and other entertainment firms. Although the company struggled at times, DreamWorks became a major force in the entertainment industry.

Building the "Dream Team"

DreamWorks may never have happened if Jeffrey Katzenberg had gotten the position he craved at Walt Disney. He had worked with Disney chief executive officer (CEO) Michael Eisner (1942-) at Paramount Pictures, then followed Eisner to Disney in 1984. At Disney, Katzenberg ran the company's movie studios; he paid particular attention to animated films.

Disney had pioneered animation in Hollywood, but by the time Katzenberg joined the company, it had not had a major animated film in years. Katzenberg helped Disney create new animated classics, including Beauty and the Beast (1991), Aladdin (1992), and Lion King (1994). Those successes, as well as good profits from live-action films, helped Disney grow tremendously under Eisner. In April 1994, Kaztenberg thought he deserved to be named company president after the untimely death of then-president Frank Wells. Instead, Eisner took on the title. An upset Katzenberg left Disney and began considering new opportunities.

Katzenberg was already a friend and business partner of Steven Spielberg. The pair owned a popular Los Angeles restaurant, Dive! Katzenberg was also close with Geffen. The two men had first met during Katzenberg's days at Paramount. Katzenberg asked the two if they were interested in forming a new entertainment company. At first, Spielberg was reluctant to end his relationship with Universal (then owned by MCA), the studio he had worked with for more than twenty years. In addition, he and Geffen had not always gotten along in the past. Geffen, who was worth more than $1 billion at the time, wondered if it was worth the trouble to start a new company and take on business partners.

DreamWorks at a Glance

Employees: 1,500
Principal Executives: Steven Spielberg, Jeffrey Katzenberg, and David Geffen
Subsidiaries: DreamWorks Records; PDI/DreamWorks
Major Competitors: Vivendi Universal; Viacom; AOL Time Warner; Walt Disney Company
Notable Movies: Shrek; Gladiator; American Beauty; Cast Away; A Beautiful Mind; Prince of Egypt; Antz

But Katzenberg convinced his two friends the deal made sense, and on October 12, 1994, Spielberg, Katzenberg, and Geffen announced the creation of their new, still-unnamed company. Katzenberg said the three represented a "dream team" of talent. That name, plus the idea that creative people bring dreams to life, led to the name DreamWorks, followed by the first initial of each man's last name. Each one put up $33 million to start the company, and then began searching for investors and partners.

Paul Allen (1953-), one of the founders of Microsoft Corporation (see entry), invested the largest single chunk of money—$500 million. A South Korean chemical company added another $300 million. In 1995, DreamWorks and Microsoft formed a new company, DreamWorks Interactive, to make video games. Microsoft also invested directly in DreamWorks SKG.

Timeline

1994:: Jeffrey Katzenberg leaves the Watt Disney Company and convinces Steven Spielberg and David Geffen to help him form a new entertainment company, DreamWorks SKG.
1995:: Microsoft partners with DreamWorks to create the video game company DreamWorks Interactive.
1996:: Older, by George Michael, is DreamWorks's first musical release.
1997:: DreamWorks releases its first film, The Peacemaker.
1998:: Antz and Prince of Egypt are DreamWorks's first animated films.
1999:: Steven Spielberg wins his second Academy Award as Best Director for Saving Private Ryan, a DreamWorks co-production.
2000:: DreamWorks wins the first of three consecutive Academy Awards for Best Picture with American Beauty.
2001:: Shrek, a computer-generated film, is DreamWorks's most successful animated feature to date.
2002:: The ABC television network announces it will not renew Spin City, DreamWorks's only hit television program.

Bad Dream?

DreamWorks announced it would not have titles for its executives, and it promised to share profits with its staff. Katzenberg took control of the animation division, hoping to recreate the success he had at Disney—and end his former company's dominance of the market. Katzenberg also planned to handle Dream Works's TV operations. He was the most visible member of the trio.

Geffen focused on the company's music efforts, but also used his film industry contacts to work out deals with other studios (some Dream Works's films were co-productions with other companies). Spielberg turned over the assets of his production company, Amblin Entertainment, to DreamWorks. He planned to make films and hire other directors to make films. He also, however, reserved the right to make movies for other studios.

Starting a new studio took time and money, and one year after Spielberg, Katzenberg, and Geffen formed DreamWorks, the company still did not have any products to sell. Finally, it produced several TV shows for the ABC network, but the first two, Champs and Ink, were quickly cancelled. The first DreamWorks record came in 1996, from George Michael (1963-), a singer who had not released a song in three years. Although Michael had been popular in the late 1980s and early 1990s, his DreamWorks release, Older, did not sell as well as the company hoped.

Filmmaking always seemed to be Dream Works's strongest area, and Hollywood eagerly awaited its first pictures. That release, however, did not come until the fall of 1997, with The Peacemaker. An action film starring Nicole Kidman (c. 1967-) and George Clooney (1961-), The Peacemaker cost $50 million to make, and made only $41 million in U.S. ticket sales. Spielberg's first film for DreamWorks, Amistad, was also a disappointment at the box office. During 1997, a joke in Hollywood described "the DreamWorks doll": Wind it up and it does nothing. Still, some people in the entertainment business were willing to give DreamWorks some credit. Harold Vogel, an analyst of entertainment companies, told Entertainment Weekly, "To do what they've done in three years is remarkable."

First Successes

In 1998, DreamWorks finally saw positive results on several fronts. Its TV show Spin City was a hit, and its successful films included the science-fiction thriller Deep Impact, and the computer-animated film Antz. DreamWorks also shared in the profits—and the glory—of Spielberg's Saving Private Ryan. The movie, set during World War II (1939-45) was co-produced with Paramount. Ryan earned more than $200 million in the United States and was nominated for eleven Academy Awards, the film industry's highest honor.

The DreamWorks logo shows a young boy fishing while sitting on a crescent moon. Steven Spielberg designed the logo, wanting to represent the idea of a simple company where dreams come to life.

In 1998, DreamWorks also released its first traditional (hand-drawn) animated film, The Prince of Egypt. Reviews were mixed, but the film made money and helped create a new direction in animated film. The movie offered a serious look at the biblical figure Moses. Katzenberg was actively involved in shaping the film. As he described it to the Los Angeles Times, "There's a seventy-year tradition … called fairy tales for toddlers told in cartooning. What's 180 degrees to the other side of that? I believe that's what we made."

Although the record label and TV productions continued to struggle, DreamWorks had found its place with films. Still, the company was not profitable. As a privately held company, DreamWorks did not have to release its finances. The Los Angeles Times, however, reported in July 1999 that the company had lost $200 million the year before on revenues of more than $ 1 billion. But the loss, the paper pointed out, did not reflect future earnings from the hit films produced that year. And in 1999, DreamWorks continued to have success with movies. The drama American Beauty was one of the top films of the year and won the Academy Award for Best Picture. The next year, the company duplicated the achievement when Gladiator (co-produced with Universal Studios) won Best Picture along with several other Academy Awards.

No Clockwork at DreamWorks

Despite the creative and business talents of Spielberg, Katzenberg, and Geffen, DreamWorks could not guarantee that every venture it tried would work. In October 1999, the company announced a deal with Imagine Entertainment to create Pop.com, a Web site that would feature short films. One of the creative partners in the new deal was director Ron Howard (1954-), who planned to help create content for the site. But Pop.com never reached the Web, as DreamWorks killed the idea the next fall. The company also got out of the video game business, selling DreamWorks Interactive to game maker Electronic Arts in April 2000.

The Studio with No Studio

In the motion picture industry, "studio" is another name for a company that makes and distributes films. The leading studios include 20th Century Fox, Universal, and Warner Brothers. A studio is also the physical series of buildings and outdoor areas, called backlots, where films are made. When DreamWorks SKG formed, the company planned to build its own studio. Steven Spielberg was the driving force behind the idea. He hoped to construct a state-of-the-art facility for making films. David Geffen, however, was never convinced the company should pay the estimated $250 million it would cost to build a new studio.

Spielberg's plan was to build on a 47-acre lot in a new development called Playa Vista. The site once belonged to billionaire Howard Hughes (1905-1976), who built the world's largest plane, the Spruce Goose, in a hangar there. The total Playa Vista project was supposed to include stores, office space, and housing. The development, however, faced opposition from environmentalists, since Playa Vista bordered one of the last remaining wetlands in California.

Some environmentalists singled out DreamWorks for criticism, since it was the most visible company considering moving to Playa Vista. That protest, as well as rising costs for the planned studio, led DreamWorks to drop the project in July 1999. Jeffrey Katzenberg told the Los Angeles Times, "It was a very grand, exciting idea four-and-a-half, five years ago. And maybe it was just a little too grand in the end." DreamWorks remained split up between Universal Studios, offices in Beverly Hills, and its new animation studios in Glendale.

Producing popular films also continued to be a hit-or-miss business, although some of the hits were spectacular. In 2000, in addition to Gladiator, DreamWorks made or co-released three films that made more than $200 million in U.S. and overseas sales. The next year, the company had its biggest animated film to date, the computer-generated Shrek, which would go on to win the first Academy Award presented for best animated feature. Katzenberg, however, was still looking for his first blockbuster animated film not created on computers. DreamWorks had some success with the 2002 release Spirit: Stallion of Cimarron, which received generally favorable reviews.

In the summer of 2001, DreamWorks released a new Spielberg film, A.I.: Artificial Intelligence. The movie had disappointing sales in the United States, failing to back its production costs. But another DreamWorks release, A Beautiful Mind, did much better at the box office and gave the studio its third straight Academy Award for Best Picture. The next year, DreamWorks finally had a summer blockbuster on its hands with the release of Minority Report, a science-fiction thriller with Tom Cruise (c. 1962-).

The original deal between Spielberg, Katzenberg, and Geffen, was scheduled to last ten years. DreamWorks's future as an independent company was uncertain, but the bold experiment to build a new entertainment company led to some of the most memorable films of the last few decades.

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