Biz plan seems iffy, but B.O. is boffo

Heavy lies the head that wears the crown — and DreamWorks is indisputably wearing the box office crown.

The $29.7 million weekend bow of “What Lies Beneath” underlines the fact that the six-year-old company has achieved something that long-established studios can’t match: Virtually every one of its pictures has not only “opened,” but opened bigtime.

But the title “What Lies Beneath” could also serve as a metaphor for DreamWorks itself: Under the successful surface lies a complex tangle of fiscal and philosophical questions.

While “Beneath” looks like a big hit, it’s a question mark how much the studio will earn, thanks to the film’s cost structure, gross participations and the fact that it’s a co-production with 20th Century Fox (which distributes it overseas).

And, beneath DreamWorks’ sunny achievements are deeper questions.

The company leaves many observers wondering about its business plan — or guessing if it even has a business plan. And speculation continues about overall profitability, which isn’t made public because DreamWorks — founded in 1994 by David Geffen, Jeffrey Katzenberg and Steven Spielberg — is privately owned.

The company strategy so far raises the questions: Is there room in the crowded showbiz landscape for a company that’s a pure content play? In an era of mega-mergers, is there a future for a movie company that lacks its own global distribution apparatus?

DreamWorks, being repped by David Geffen, is about to start discussions with Universal Studios about renewing its international film and homevideo distribution arrangement, since current pacts end after next year.

Since its creation, DreamWorks has enjoyed a strategic relationship with U and held preliminary merger talks with Universal-owner Seagram in early 1999.

Industry speculation is buzzing that DreamWorks, which distributes its films domestically, may be looking elsewhere for its business pairings, such as Warner Bros. (which shares in rights to Spielberg’s next directing project, “A.I.”)

While other studios would undoubtedly be interested in a matchup, DreamWorks sources say that the company hasn’t talked with anyone else, despite the rumors.

“Universal would do anything in its power to save what is a very important relationship,” said a well-placed source. “But things can’t get any better for DreamWorks than they’ve been at the box-office this summer, so I think DreamWorks is in a great position to cut a state-of-the-art deal with somebody.”

There’s wide agreement that DreamWorks would find solid interest from entertainment congloms if the studio were to put itself on the block.

Spielberg’s personal ties to U pre-date the current regime of Seagram chief Edgar Bronfman Jr., dating back to his close relationship with former U boss Sid Sheinberg.

While Vivendi, which is set to acquire Seagram and U, may shake things up, it seems doubtful that the French-based media group would not recognize the value of the DreamWorks deal.

DreamWorks and U officials declined comment on any of the speculation.

Earlier this year, the studio huddled with Imagine Entertainment and Joe Roth’s new Revolution Studios — an apparent sign that DreamWorks acknowledges its need for expansion if the opportunity comes along.

However, those talks ended without deals being made, and DreamWorks toppers asserted that the huddles were driven by the desire to be in business with Imagine and Roth, not by a financial need for more product.

And the product this year has been stellar. Those working at DreamWorks have faith that their company is now in the arena with the other big studios for good; and that its culture — and the freedom from quarter-to-quarter profit frenzy DreamWorks enjoys because of private ownership — will continue to produce distinctive films.

A key to this year’s success is that DreamWorks has scaled back or shed its flirtations with side businesses such as computer games and is now fully focused on its entertainment product.

After five years of growing pains, and releasing a handful of by-the-numbers efforts like “The Love Letter” and “The Haunting,” DreamWorks has made a remarkable turnaround in the last 12 months.

The company chalked up five Oscars and $336 million for “American Beauty” and had strong hits with the risky “Gladiator” and quirky “Chicken Run.” It had a $16 million “Road Trip” that’s paid off to the tune of $67 million domestically, and a $30 million opening weekend for Robert Zemeckis’ “What Lies Beneath.”

The contribution of its talented marketing director, Terry Press, can’t be underestimated. DreamWorks throws a lot of know-how — and money — into the marketing of its pics, and it gets results.

This year, releases have passed $475 million at the domestic B.O., already topping the company-best total of $473 million for the 12 months of 1998.

The 2000 release sked totals 11 movies (including two animated pics), up from six last year, and a list of some of this year’s directors tells the new story: Ridley Scott, Woody Allen, Robert Zemeckis. Cameron Crowe, Robert Redford and Barry Levinson have pics rolling out this year.

Though the company only has one picture for 2001 that has finished shooting (the Brad Pitt/Julia Roberts-starrer “The Mexican”), the live-action division is building steam for next year:

  • The studio has half of the Spielberg film “A.I.” (with Warner Bros.), shooting this year, and “Minority Report” (with Fox) skedded for production in 2001.

  • Ivan Reitman’s “Evolution” is expected to shoot in the fall.

  • The animated films “Shrek” and “Sprit” are expected next year.

  • Woody Allen’s new film is about to begin production.

  • “The Time Machine,” a live-action adaptation of the H.G. Wells’ novel from animation helmer Simon Wells (who’s also H.G.’s great-grandson) and a script from John Logan (“Gladiator”).

  • DreamWorks’ deal with Aardman Animations calls for three more pictures, with the next one in theaters in 2002.

But Spielberg’s role is still baffling to Hollywood, as the director continues to pursue projects developed at other studios, with DreamWorks acting as a partner rather than fully backing upcoming pics “A.I.” (with WB) and “Minority Report” (with Fox).

Even the hit “Saving Private Ryan” was a co-production with Paramount, which developed it from scratch. But then, DreamWorks is sharing many high-profile releases, such as “What Lies Beneath” with Fox, and “Gladiator” with Universal.

When the studio was unveiled in ’94, Spielberg praised film studios of old, which were “driven by point of view and personalities,” vowing to make DreamWorks similarly defined.

While the studio hasn’t established a brand as potent or recognizable as, say, Disney’s golden toon reputation, this year’s slate of pics has clearly made a mark for DreamWorks as a purveyor of intelligent mainstream entertainment.

Of all its film product, only the animated “The Road to El Dorado” has been a disappointment this year for the studio. Nevertheless, amidst the troubles other studios such as Fox and Warners Bros. have run into in animation, DreamWorks has emerged from the fray as the only true challenger to Disney’s grip on the marketplace.

DreamWorks’ commitment to animation seems firm; the studio is hatching plans to expand its production with a computer animation outfit in L.A. — the first such operation making features in Hollywood rather than the Northern California nexus of computer toonhouses. It also just hired a young writing staff to serve as a sounding board for animation story ideas.

And the company is working to shed its reputation among producers and agents in Hollywood as a particularly difficult and confusing place to do business.

Walter Parkes, a gifted writer by trade who co-heads the movie division with his wife, Laurie McDonald, said at a press event a few weeks back, “This whole studio thing is a learning experience for us. It’s taken longer than we hoped, but it’s been worth the wait.”

“It’s a dysfunctional studio,” says one producer who’s done business there. “But if you look at the product,” he concedes, “you’ve got to say it’s a dysfunctional studio that works very well.”

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