The Katzenberg Memo [Part 5]

January 13th, 2012 by

In January 1991, Jeffrey Katzenberg, then the head of Disney’s motion picture divisions, wrote a memo that ended up being circulated throughout Hollywood. Even though it is 21 years old, it is remarkably relevant to the current movie business. For example, the United States was in a recession as we are today. The movie industry was confronted by numerous financial challenges tied to technological advances and cultural shifts, also as we are today.

Over the next few weeks, I will be posting the entire memo. If you have any interest in screenwriting or working in the film business, you should read it. Why? Because it gives you a wide-open view of how studio executives think. After all, any script you write and circulate in Hollywood doesn’t exist in a vacuum, rather it funnels through a system, one that operates based upon the business principles and practices of studio heads like Katzenberg.

Today: Tracy, Tracy, Tracy

Tracy, Tracy, Tracy

So, what about “Dick Tracy?” By every rational measure, it was a success. It topped $100 million in domestic box office, sold millions of dollars of merchandise and was by all accounts a cultural event. Nevertheless, having tried and succeeded, we should now look long and hard at the blockbuster business… and get out of it.

As profitable as it was, “Dick Tracy” made demands on our time, talent and treasury that, upon reflection, may not have been worth it. The number of hours it required, the amount of anxiety it generated and the amount of dollars that needed to be expended were disproportionate to the amount of success achieved. As a company trying to bring to market 25 to 30 films a year, we simply can’t afford to indulge in the blockbuster mentality, even as a sidelight, even as a hobby.

Even if one accepts the homerun approach to moviemaking as valid, consider what it does to the other films on the agenda — the singles and doubles. When there is so much at stake with the $40-$60 million films, an inordinate amount of time must be lavished on them in an effort to protect the massive investment. But, with a finite number of development, production, distribution and marketing people, this time has to come from somewhere else and it inevitably must come from the less costly projects.

The result is a few mega-budget projects that have to do well and a bunch of smaller projects whose full potential may be jeopardized because the big projects drained away the executive attention the smaller ones needed and deserved.

This is why, when Warren Beatty comes to us to pitch his next movie — a big period action film, costing $40 million, with huge talent participation, directed by the man who is arguably the most brilliant filmmaker today at making movies that are successful commercially and artistically, owned and controlled by Beatty and Levinson — we must hear what they have to say, allow ourselves to get very excited over what will likely be a spectacular film event, then slap ourselves a few times, throw cold water on our faces and soberly conclude that it’s not a project we should choose to get involved in.

Does this mean we abandon big, event movies altogether? Definitely not. But, we should approach them in as intelligent a manner as possible.

One way to do this is represented by our Cinergi deal. Under the terms of the agreement, for five years, we will be associated with Andy Vajna, who has a very good track record in the big budget action movie business. But our relationship is merely as a distributor, allowing us to enjoy considerable upside potential with minimal downside risk. Cinergi will continue to produce big action films featuring major stars and geared toward an international market. In this hemisphere, they will go out under the Hollywood banner, thereby adding to our library and maintaining us as a player in the Big Movie market. In this way, we should be able to profit from a business we don’t want to directly be in ourselves, while still devoting most of our energy to smaller movies, many of which will still have breakthrough potential.

Another alliance we are currently working on is with Don Simpson and Jerry Bruckheimer. Some might think that this effort runs counter to the sentiments being expressed in this memo. Nothing could be further from the truth. Don and Jerry are among the best and most responsible producers in the business. I know that the “conventional wisdom” holds that they can only make giant big budget movies. As usual, the “conventional wisdom” is wrong. I worked with Don for ten years and helped bring him together with Jerry. They understand the supremacy of the idea and they know what it means to get value for the production dollar. When talented people like this are available, we should be smart enough to try and find a way to bring them on under terms that make sense to us. If a deal is signed, it will be entirely unlike their Paramount contract. It will be structured so that they will be extremely well rewarded in success. But they will also be at substantial risk, along with us, in failure.

Of course, we still have some Big Movies of our own already on our plate. “Scenes From a Mall,” “Billy Bathgate” and “What About Bob?” are all outstanding projects. But there are too many of them. In varying degrees, each of them will require a disproportionate amount of energy on our part to achieve the level of revenues such films require. We’ll get them done, and we’ll do them right, but in the future we’ll have to do a better job of controlling our appetite.

There’s a fourth Big Movie underway that should be instructive as to the kind of event film I feel we must continue to make. “Rocketeer” is, to be sure, a high-risk film at over $35 million. But all the money will be up on the screen. And, if the film succeeds, most of the rewards will be ours. There are no giant stars, no big gross participants, we own the rights, we control the licensing and we have talent contracts covering sequels in the event it works.

“Dick Tracy” was a great experience. It was a solid hit and an outstanding accomplishment that was remarkable for making Variety’s list of ten biggest grosser and The New York Times’ list of ten best films. But, as much as “Dick Tracy” was about successful filmmaking, it was also about losing control of our own destiny. And that’s too high a price to pay for any movie.

For the record per Box Office Mojo, Dick Tracy had a production budget of $47M. Figure half again that amount for P&A. Revenues: $103M domestic, $59M international for a total of $162M. Throw in the “millions of dollars of merchandise” and it’s hard to see why Katzenberg took the position he did with the film. But there’s that word: “anxiety.” Movies do not get made in a vacuum and the studio’s involvement is not only shelling out cash to produce them. Since it’s their investment, they have to be involved in all aspects of oversight. Dick Tracy was, for the time, an expensive, time-consuming and tricky project to make involving lots of big names and their accompanying egos.

Hence the deal Katzenberg trumpets with Cinergi, whereby Disney simply distributed their movies for a percentage of the distribution fees. Studios will veer toward this strategy from time to time, but inevitably move away from it because (A) the distribution fees are a low percentage of income and (B) it forces the studio to ask a fundamental question: Are we in the business of making movies or not?

Adroit writers will recognize the primary subtext of this ‘dialogue’ and that is fear. And fear, as I noted in this post way back in June 2009 is a base operating principle for movie studios.

So as a screenwriter, especially one trying to break into the business, to write a script that is easy for the studio to say “yes” to. Low-budget. No stars. Simple shoot. A straight-ahead genre piece.

To read Part 1 of the Katzenberg memo, go here.

For Part 2, go here.

Part 3, go here.

Part 4, go here.

To read the entire memo, go here.

4 thoughts on “The Katzenberg Memo [Part 5]

  1. da says:

    Sounds like the he’s using the same principals of Moneyball. Stop throwing millions at big sticks and instead find the movies with good on base percentages.

    Ironic that he got into the slugger business over at DWA.

  2. C. S. Cyr says:

    This has been a great read and learning experience so far. I sometimes tend to gloss over the columns about the business side, as I’m not there yet, but this has been eye-opening and makes me realize that I can’t ‘just write’ but have to really want to be a team player.

  3. It’s been a really fascinating read, Scott. It’s eerie how 1991 and 2011/12 are in terms of the market, studio thinking, etc. And yet, the more things change…

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