December 19, 2005

Besides learning how to clean homemade ginger tea out of a wireless keyboard, last week was loaded with goings on… almost all of which I am utterly bored by already. King Kong and Munich have both been grotesquely overtalked by too few people who want to have an answer far too quickly.

There have been a few DreamWorks perspective stories floating around, but they all seem to be trying too hard. The problem with DreamWorks existed from the start… it was neither fish nor foul and the three partners were balancing their roles in ways that could not be balanced.

The industry hasn't really changed fundamentally in the last decade. The DVD sell thru business and increased opening weekend marketing obsession has changed the financials and more corporations have changed how tight the reins are held. But at the core, movies people want to see, in whatever format, are good and the ones they don't want to see are bad.

The business of making movies for more than $15 million or so is, has been, and will always be (at least until $15 million = today's $1 million) extremely dangerous. And the idea of being in business to make movies over $50 million without the protection of a significant library, an active television division, a record division, a popular backlot, etc, is virtually impossible for anyone. This is not new information, no matter how many people in town are buzzing about a new anti-indie trend.

(More and more, I notice major reporters reporting what studio executives feel - most live on Planet Freak-Out or have motives in what they tell reporter/friends - and what random members of the public think. This is not news. This is gossip. The first thing I tell anyone interested in box office in L.A. is to avoid thinking that what they see at L.A. theaters has anything to do with the rest of the country. Myopia is the new top edit.)

We have learned that focusing on expensive production with minimal infrastructure is deadly over and over and over again by way of companies with less grand ambitions than DreamWorks but which were equally free with the cash. The comparisons are not Orion and Vestron. The comparisons are to Jerry Weintraub, Revolution Studios, and Carolco. Ironically, one of the great success stories has been Imagine Entertainment, which went public for a few hours before taking itself back private and doing what makes business sense in Hollywood… let someone else pay, take a little less of the upside, and don't put your business in harm's way.

The reason MGM was never successful in its last incarnations is that the film business is a deep pocket, low margin, terribly marketplace-vulnerable business. MGM couldn't make TV work, the library was valuable, but the more it was exploited, the less valuable it would become, and new production was expensive and risky. And the limited number of films being funded, combined with expectations that the company would be a takeover target, limited the opportunities. Much as Elie Samaha built a business on movies that stars wanted to do but no studio really wanted to finance, MGM was, in most cases, the last choice. This is no slight to the various MGM staffs. It wasn't about their work. It was about the work they had the opportunity to do.

The same would be true of Lionsgate if Lionsgate decided to really compete with the majors directly. As is, Lionsgate's budget range is lower than most of the Dependents at the majors, forget about the big distributors. It's been a terrific business model for them and successes like Saw and Crash and Open Water are great. But the competition there is Screen Gems, Dimension, and Rogue, not Searchlight, Focus or even Warner Indie. And even then, Lionsgate is willing to take on much tougher pictures than any studio-owned theatrical distribution entity.

DreamWorks had an advantage over MGM, given the muscle of S, K & G themselves and their ability to attract higher-end talent, but the company also suffered from greater hubris than others in turn.

Who greenlights The Legend of Bagger Vance, a period drama with great actors who were not box office at the time? Really, it makes Cinderella Man look like a can't miss. Who is so artist friendly that they spend $70 million on a Cameron Crowe period dramedy? (I thank them for doing it, since I love the movie, but holy moly!)

It is a great irony that Sinbad and The Island were not the worst calls DreamWorks made, even if they were murderous for the studio. Sinbad was stuck in the same animation tweener dead zone that killed Fox on Titan A.E. and Disney on Treasure Planet. And The Island might have been better as a film, but the fact that it is the first Michael Bay domestic flop tells you that it was not the craziest business risk. It just happened to be the last straw for the DreamWorks camel.

From the beginning, the big question was always, "How does this work for Spielberg?" In the decade before DreamWorks released its first film, Steven Spielberg produced or exec produced the following 16 films, besides films he also directed: The Mask of Zorro, Men in Black, Twister, Balto, Casper, The Flintstones, We're Back, An American Tale 2, Cape Fear, Arachnophobia, Gremlins II, Back to the Future II & III, Joe Vs The Volcano, Dad, The Land Before Time, and Who Framed Roger Rabbit. In addition, Spielberg had creation involvement and ownership in Tiny Toon Adventures, Animaniacs, the not so successful Seaquest DSV, and the cash machine, ER.

Since DreamWorks, the entirety of Spielberg's new non-directed, non-sequel non-DreamWorks-credit projects consist of Band of Brothers for HBO and Memoirs of A Geisha, which DreamWorks passed on being part of when he wanted to direct the film.

I'd be willing to venture that the DreamWorks experience has cost more than $500 million in opportunity losses for Spielberg. And in the end, he had to choose between paying, essentially, $800 million for his own library to keep it or to throw it to the winds of commerce. In other words, he walked away with virtually nothing. Maybe $100 million from the Paramount deal after deducting his original buy-in. His DWA stock may be worth $250 million. You add it up.

Neither Geffen nor Katzenberg has really suffered a course change like Spielberg has. Geffen is still a golden god in his own universe. Katzenberg is head of DreamWorks Animation, has ownership and an ongoing future doing something he loves. The end result was not what they wanted, but it is okay. But in Spielberg's case, he took the biggest risk and he took the biggest loss for having it not work.

The DreamWorks Conundrum is the one that, remarkably, has little to do with The Weinstein Company and everything to do with why they ended up severed from Miramax. Harvey & Bob may be the best schmata storefront bookkeepers ever, but even they couldn't hide the expensive misses, especially the ones we didn't see until late this summer. DreamWorks, in the last five years at least, was on a much tighter rope than The Weinsteins' Miramax. It was the Weinsteins' unwillingness to take a step back to their earlier Disney spending habits that made it impossible for the relationship to continue. And, of course, with private funding, it has been reported that they are committed to a much tighter budget than even the middle Disney days… and their current efforts indicate just that.

Basically, DreamWorks took its big financial hits in the first few years - mostly in television - and then strung it out for more than five years, waiting for the big cash cow. Even when it came in the form of Shrek, the money was already spent. And most of the other box office hits they were involved with were financial splits, so there was never that massive cash influx that eased the pressure. Shrek II was just too late. So they maximized that smash hit by doing the DW Animation IPO and still, it was not enough.

Anyway… lesson learned… don't try to be the middle class in Hollywood… unless you are very, very, very lucky, you will be slaughtered.

E-ME.