The History of DreamWorks

The Men Who Would Be King:
An Almost Epic Tale of Moguls, Movies,
and a Company Called DreamWorks
By Nicole LaPorte
Houghton Mifflin Harcourt; 512 pp; $28

The Men Who Would Be King is a jarring title, but it is entirely appropriate for Nicole LaPorte's exhaustive history of DreamWorks SKG. The Hollywood studio with towering multimedia ambitions was founded in 1994 by three of the entertainment business' most respected—and feared—power players. Director Steven Spielberg, jilted Disney (DIS) executive Jeffrey Katzenberg, and mogul David Geffen were already royalty when they decided to form the company. This book explores why these monarchs tried to become emperors, and how they almost did.

When DreamWorks was founded, Geffen told reporters that for the first time in his career he wanted to work with partners. In LaPorte's view, DreamWorks was really a hydra of "lone wolves who came together" in the face of canceled TV shows or intra-industry rivalries but "who otherwise tended to their separate fiefdoms."

Each brought his own skills and agenda. Despite having created a management firm, built and sold two record companies, and beaten cancer, Geffen "wasn't chemically suited to sitting on the sidelines," writes LaPorte. Katzenberg, a workhorse who would bear the brunt of day-to-day management, came to the company shortly after being ousted at Disney by Chief Executive Officer Michael Eisner. For Katzenberg, it was crucial not only that DreamWorks should succeed but also that Disney should fail.

Geffen and Katzenberg believed Spielberg would be the artistic magnet to draw directors and screenwriters to the company. Why would a man who could direct or produce any project he wanted take on the added stress of a startup? LaPorte suggests Spielberg's motivations were, in part, psychological. A child of divorce, he had grown up with his mother and sister and longed for fraternal bonding. He was also a sentimentalist who wanted to build an artist-friendly studio—a throwback to the early days of United Artists, which was founded and operated by creative people—even though renting existing office space and sound stages was more efficient.

DreamWorks stared down environmental protesters and devoted time and money to build Spielberg's Xanadu, a new studio lot at Playa Vista in Los Angeles' Westside. When the plan was eventually abandoned, after much fanfare and expense, Spielberg was bitterly disappointed. His commitment, however, had always been suspect. In the early years, when DreamWorks was desperate for product and operating income, Spielberg accepted lucrative offers from other studios, such as Universal, and made some of his most commercially successful films, like The Lost World: Jurassic Park, for them.

Katzenberg devoted his energies to running DreamWorks' animation studio, television production arm, and video game division, and to micromanaging "live-action" marketing and distribution efforts. Despite this burden, he refused to concede any territory, and even took on an open development position lower on the org chart than Spielberg's management team. In this position he failed to accomplish the most important task: dramatically increasing the number of films DreamWorks churned out each year. However, DreamWorks' ability to scatter stardust skillfully was immensely useful. Early on, Microsoft (MSFT) co-founder Paul Allen eschewed taking an interest in Pixar and, seduced by Geffen, invested nearly $500 million in DreamWorks in exchange for an 18 percent stake (which he eventually increased to 24 percent).

DreamWorks SKG enjoyed some critical and commercial successes—American Beauty, Saving Private Ryan, Gladiator, Shrek—but as LaPorte chronicles in sometimes wearying detail, as with most studios there were more misses than hits. The company could never produce enough movies to justify its overhead, and expensive bombs like Sinbad and The Road to El Dorado threatened its survival. DreamWorks' multimedia ambitions ultimately came to nothing: the television, video game, Internet, and music divisions were out of sync with the times, and all were eventually shuttered or sold. DreamWorks Animation (DWA) spun off and went public in 2004; it is now run by Katzenberg. Backed by an Indian company, Reliance Entertainment, Spielberg still makes movies under the DreamWorks name, but they are distributed by Universal. Shortly after masterminding the deal with Reliance, in 2008, Geffen left the company for good.

All three principals made a decent profit in the end, cashing out for more than $175 million each after an investment of $33 million apiece. Paul Allen came out ahead, too. LaPorte suggests it was the rank-and-file employees who lost, having waved goodbye to stock options and other perks when they were tempted away from more conventional jobs.

It was a startup without a strategy, a company whose visionary leaders were indulged instead of held accountable. They thought they would be successful simply because of who they were. They were all wrong.

Before it's here, it's on the Bloomberg Terminal.