Can decade-old DreamWorks live happily ever after?

By John Horn
Los Angeles Times

HOLLYWOOD — "It's time," the fairy godmother cruelly informs "Shrek 2's" green ogre, "you stop living in a fairy tale." Can the same now be said to DreamWorks?

Tom Cruise stars as a contract killer who hijacks a taxicab and its driver, played by Jamie Foxx, for a job in "Collateral," a DreamWorks film scheduled to open Aug. 6. Frank Connor

But like all once-upon-a-time stories, there have been many surprise turns for DreamWorks to get this far. Just as "Shrek" has proved to be much more of a phenomenon than anyone possibly could have envisioned, DreamWorks itself has become much less of a studio than initially projected and hyped. By the studio's own admission, this summer represents a critical juncture in the company's history. Yet no matter how well DreamWorks' next several movies perform, the studio's future is as much an industry guessing game as the budget for "Spider-Man 2."

Conceived as a fully integrated multimedia enterprise to include a record label, a publishing arm, a TV studio, interactive movies, live entertainment and a video game division — all housed in a state-of-the-art digital campus in west Los Angeles — DreamWorks now stands primarily with just two core businesses: animated and live-action movies, and both divisions are coming off disastrous years.

The studio's live-action duds include "Biker Boyz," "Anything Else," "Win a Date With Tad Hamilton!" and the Ben Stiller-Jack Black disappointment, "Envy." In animation, the studio's last film, 2003's "Sinbad: Legend of the Seven Seas," barely grossed $26 million.

In addition to DreamWorks' abandoning several businesses, the studio's production chief, Michael De Luca, recently left and is now at Sony, replaced by longtime DreamWorks executive Adam Goodman.

"There have been huge disappointments along the way," says Jeffrey Katzenberg, the former Disney studio chief who along with Spielberg and music mogul David Geffen announced the partnership in October 1994.

"It's been hard, but it's also been rewarding. I kind of feel like we are coming to another watershed moment for us," Katzenberg says in a meeting at the company's Glendale headquarters (the West Los Angeles plan was abandoned). "When I look at what DreamWorks is today, I think it's a very exciting business going forward. And it is in fact a very different business from where we started 10 years ago, or where we imagined we would be today."

More dramatic changes could lie ahead. Geffen's ongoing role in the studio is ambiguous since DreamWorks no longer owns a record label, and the studio's biggest investor, software billionaire Paul Allen, soon will be able to start cashing out some of his $660 million DreamWorks investment. Among the options the privately held DreamWorks is considering to help pay Allen and other investors: An initial public stock offering of the studio's animated division, with the ambition of attracting a multibillion-dollar market capitalization like that of Pixar Animation Studios.

But before DreamWorks can contemplate securities filings and quarterly earnings, it first needs to turn out a string of hits. And that's why no other studio is as eager for summer to begin.

Hopes for 'Shrek 2'

"Shrek 2," the sequel to the monstrously successful animated film from 2001, opens Wednesday with the hopes of its studio, DreamWorks, riding on its large shoulders. DreamWorks

From its inception, the studio's animated movies were designed to veer away from Disney's narrative model, which Katzenberg closely shaped while he ran the studio. The one thing DreamWorks did hope to emulate, though, was the animation profit Disney collected in the early 1990s. In an initial DreamWorks business plan, the studio confidently projected that, thanks largely to animation, DreamWorks would generate earnings of more than $600 million by 2003.

It hasn't come close. One person who has seen DreamWorks' books says that despite annual revenues exceeding $2 billion, the studio has never managed to make a material cash profit. Katzenberg says the company has been profitable but won't discuss numbers. (The studio also won't disclose "Shrek 2's" costs, which rival studios estimate at as much as $120 million.)

Settling on a distinct DreamWorks filmmaking approach proved as elusive as earnings. "The Prince of Egypt" was a grown-up Old Testament tale, "Antz" was essentially a Woody Allen comedy, while "Sinbad" was an "Indiana Jones" swashbuckler. None of the early movies was a runaway success, while others, including "Sinbad" and the mock Hope-Crosby comedy "The Road to El Dorado," were busts. Not until "Shrek" did DreamWorks hit upon a winning formula: Rather than make movies that appealed to the child in all of us, DreamWorks found a way to reach the adult inside all children.

Even though it accelerated DreamWorks' exit from traditional, two-dimensional animation, "Shrek" stood apart from other animated movies not because it was drawn inside a computer but because it married an old-fashioned plot with a sophisticated sense of humor. Thanks to its irreverent comedy, teens flocked to the film as steadily as families, and it grossed more than $267 million in domestic theaters and sold countless videos.

The sequel, which opens Wednesday and has been invited to the Cannes Film Festival, might be even more accomplished than its predecessor. The same principal characters are back, as Shrek (voiced by Mike Myers), Princess Fiona (Cameron Diaz) and Donkey (Eddie Murphy) travel to Far Far Away to meet Fiona's disapproving parents (John Cleese and Julie Andrews). The most notable addition to the cast is the raffish but occasionally hairball-choking cat Puss-in-Boots (Antonio Banderas).

For all its contemporary gags and inversions of fairy tale conventions, "Shrek 2" endeavors to be heartfelt. The first movie, says Andrew Adamson, who co-wrote and co-directed both films, "is about two characters who are losers who find each other and accept each other for who they are. To some degree, it's about Shrek learning that he was lovable.

"This next story is about Shrek learning how to love. ... These are two ogres, and they've gotten married. They have an idea of what happily ever after is going to look like. But everyone around them has expectations of what they think Shrek and Fiona's happily-ever-after is meant to be. That's the theme of the movie to me: You can make your own happily-ever-after regardless of parental or societal expectations."

As the country argues whether gay and lesbian couples can enjoy the same legal rights as straight couples, "Shrek 2" suggests ogre love isn't totally unrelated to the debate. "I wasn't trying to make any kind of political statement so much as a personal statement," Adamson says from his native New Zealand, where he is preparing to direct his next film, Disney's "The Lion, the Witch & the Wardrobe." "You should be able to love whomever you want to love."

Focus on live-action films

Its record label has been unloaded to Vivendi Universal, its video game division sold, its short-film Web site closed, and its TV studio has been transformed into a production company, letting networks shoulder series programming costs (the company's ambitious animated Siegfried & Roy comedy "Father of the Pride" is on NBC's fall schedule).

One of the few original DreamWorks plans that continues to be central to the studio is live-action filmmaking. Unlike traditional studios that crank out as many as 20 movies a year, DreamWorks' live-action division has been content from the beginning to turn out eight or so a year. The thinking has been that with a comparatively small number of films DreamWorks could control quality, but few recent studios have thrived with such a limited output.

The DreamWorks strategy hasn't always been as fruitful as its Oscar-winning windfalls "Saving Private Ryan," "American Beauty" and the co-production "Gladiator." The live-action division has not seen one of its films gross more than $40 million since February 2003's "Old School," last fall's "House of Sand and Fog" didn't collect any Academy Awards despite three nominations, and DreamWorks released only three movies (all of which fizzled) in the first four months of 2004.

Agents, producers and executives who do regular business with DreamWorks say the studio in the past several weeks has been picking up its sometimes sluggish pace. Spielberg, who works closely with the live-action division, has a variety of movies he may direct next. "They seem to be very aggressive in putting movies together," says Jim Wiatt, president of the William Morris Agency. "They're acting differently. They do want to go out and make a lot of movies."

DreamWorks nonetheless has catching up to do.