"People want to see great stories, and while you have to adapt to changes, I think they are opportunities, not liabilities"
Few people know Hollywood better than Jeffrey Katzenberg, the onetime wunderkind who by the time he was in his thirties had already been an executive at Paramount Pictures (VIAB) and was running the motion picture studio at Walt Disney (DIS). After a much publicized falling out with then-Disney CEO Michael Eisner and a subsequent court settlement that made him a very wealthy man, Katzenberg started DreamWorks SKG (DWA) with Steven Spielberg and David Geffen. DreamWorks Animation was spun off from its parent in a 2004 IPO, and Katzenberg became CEO. On Oct. 27, after DreamWorks Animation reported earnings—beating Street estimates for the fourteenth out of the past 15 quarters—I talked with the man who, from The Little Mermaid to Shrek, has been behind some of the most acclaimed children's movies in history.
You've been a student of the entertainment business for years. Where is Hollywood headed?
I think a real seismic shift is occurring. Anytime you're in the center of these shifts, it's maybe not the wisest thing to try and be predictive of where it all is going. But in the pastplus or minus—and I'm referring to the last 30 or 40 years—every time a new platform has come along, the motion picture industry as a whole has usually done a fantastic job of transitioning to it and ultimately gaining revenue. And many different platforms have come along, whether it was free TV or pay TV or VHS or DVDs. Clearly, the next major transformation is going to be from hard goods to digital. There's a lot of uncertainty and caution as to how best to get there. Moving from analog to digital has been disastrous for the music industry. Hopefully our industry has learned from the music business.
Are movies an endangered species?
No. I think just the opposite. There's nothing like being in a movie theater with a couple of hundred other people, laughing or being scared or being moved to tears. Those are among the most wonderful social experiences we're all able to have with one another. All these other things are fine and good, but I don't think they are a replacement for movies. I was just in India a week ago, and people are watching movies on their cell phones. They have 450 million people who have cell phones, and [the business is] growing at the rate of 8 million a month. People want to see great stories, and while you have to adapt to these changes, I think they are opportunities, not liabilities.
Isn't the DVD business weakening?
Yes, the market as a whole has been pretty challenged in the past 12 months. People are moving from purchase to rental, and there's been a tremendous spurt in the growth of both Netflix (NFLX) and Redbox. But our CG [computer-generated] animated movies are really different from the rest. We are primarily a mom purchase, more analogous to a toy than to a movie.
Shrek The Musical is scheduled to close in January after just over a yearlong run. There are reports that it will not break even. More important, The New York Times suggested that this first effort by DreamWorks Animation to compete with Disney on Broadway is essentially a defeat. Is the closing of Shrek a defeat?
No. I think that is a little harsh. First of all, I have to say we couldn't be more proud of the show itself. We've had a respectable, albeit disappointing, run on Broadway. But we have tremendous opportunities to get value out of the asset in the coming years. We have a touring company that will begin in Chicago next summer. We actually filmed the show about 10 days or so ago. And at some point to be determined, we will release it as a DVD. We think there'll be some nice profits.
Will DreamWorks go back to Broadway?
With the right creative group and the right property, for sure. [Broadway] has enormous potential.
Speaking of Disney, Bob Iger in a recent interview bemoaned the excesses of Hollywood spending, much as your famous 1991 memo to the industry did when you were at Disney. Is Hollywood addicted to over-the-top production and marketing costs?
I would have to say I think we [at DreamWorks] are very strategic and thoughtful about where and how we spend our resources to market our films. Maybe we are so focused because we have only three movies a year. Bob is overseeing a $50 billion enterprise that's got so many moving parts, he sort of looks at it from 10,000 feet. I look at it from 10 inches.
I read a report that DreamWorks has banned the stars of the upcoming Shrek sequel from twittering about the movie. Is that true?
Not true. Somebody twittered that, and it wasn't true.
So you're allowing the stars to twitter?
They haven't asked. Let me just say, we have a great cast. They've been partners with us for a decade in this franchise and are free to support the movie in any way they think is good. I have that much trust in them.
You were one of President Obama's most ardent campaign supporters in Hollywood. How would you rate his performance, and has he disappointed you in any way?
No, he has not. I think he inherited probably one of the most difficult and challenging agendas of any President in history—certainly in modern history. I think he continues to do a good job of facing unprecedented challenges. I don't know how he does it.