Dreamworks Skg Business Information, Profile, and History

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.

History of Dream Works Skg

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 GameWorks), 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-generated 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 Claymation 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 GameWorks, 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.

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.

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 generate 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.

Chronology

• 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.