Tinseltown's new dream team

Three wise Hollywood moguls, Spielberg, Katzenberg and Geffen, have started their own fantasy factory. But can it produce the goods? As the rhetoric fades, Hollywood is starting to wonder how viable their plans are Their success will be judged by the u...

As the planet's most commercially successful film director, Steven Spielberg is not a man much in need of reassurance. But if ever there was a moment when he must have felt he had reached the peak of his career, the absolute pinnacle of his power and influence, then it was surely on the Sunday before last.

As he sat in his home in Los Angeles's Pacific Palisades, his wife, the actress Kate Capshaw, was jogging along the beach with the President of the United States. The night before, Spielberg had obliged the world's most powerful man by rustling up a couple of million dollars in political contributions with a dinner for Hollywood's serious players, those who could afford his asking price of $50,000 per couple.

Several miles away, on the other side of the Santa Monica mountains, the stack of offers, begging letters, business plans, strategies, bids, proposed alliances, offers of land, was still flowing in to his office on the MCA/Universal lot. He had hundreds of millions of dollars of his own and, more importantly, access to several billion more.

Never before had the maker of such commercial blockbusters as ET and Jurassic Park, and masterpieces such as Schindler's List, been considered so important, so popular, and so bankable. As the US president padded heavily along the sand, with his customary secret service escort, the director must have wondered whose training shoes he would rather occupy. And they were probably not Mr Clinton's.

Spielberg's activities have always commanded great public attention, but this has risen by several notches over the past six months. Last October, it was announced he was setting up DreamWorks SKG, a new entertainment conglomerate with the billionaire music potentate, David Geffen, and Jeffrey Katzenberg, the former Disney studio executive who brought the world The Lion King and Beauty and the Beast.

It was, the Hollywood press trumpeted excitedly, the most formidable marriage of talent since Charlie Chaplin, Mary Pickford, Douglas Fairbanks and DW Griffith combined to form the United Artists movie empire in 1919. Since then, the trio's every pronouncement has been a headline story, their every deal the subject of tireless speculation. All this fuss, over a company that has no premises and, so far, released no products.

Is it hype or history in the making? There was a similar hue and cry over the launch of First Artists 25 years ago by Sidney Poitier, Barbra Streisand, and Paul Newman. But it, too, eventually folded in disarray. And even United Artists had a horribly rocky passage, although it struggled on for decades. Chaplin only made a handful of films for it, and Mary Pickford retired not long after it was founded.

As the rhetoric that greeted their launch begins to fade, Hollywood is wondering how viable their plans really are. Over the years the industry has seen plenty of film-makers branch out on their own - from Preston Sturges's disastrous association with Howard Hughes in the Forties to Francis Ford Coppola's production company, American Zeotrope in the Seventies - only to fall flat on their faces.

"Our factories come and go," one leading Hollywood director says wearily, "and their owners come and go. Are these three really any different? I don't think so." Will the Dream Team meet the same fate?

The prophets of doom (and they are easily found in this jealous town) predict that one of the biggest hurdles facing the triumvirate is simply the business of getting on together. The three men have juggernaut-sized egos. And they have not always been quite so friendly as they appear today. In her tell-all book You'll Never Eat Lunch in This Town Again, the producer Julia Phillips claimed that Geffen once told her that Spielberg was "selfish, self-centred, egomaniacal - and worst of all - greedy."

It is a statement Geffen denies. But the decision to build Chinese walls dividing their fiefdom was none the less wise: Spielberg will run the live-action film unit, with several lieutenants from his production company, Amblin Films; Geffen will run DreamWorks' music division, and Katzenberg will be in charge of the animation and television companies.

Not everyone has been impressed by what they have heard about DreamWorks' financing. According to Fortune magazine, which has examined a copy of its terms for equity investments, the trio has put up 10 per cent of the firm's capital - $33m each, a relative pittance for the vastly wealthy Geffen and Spielberg, but a stretch for Katzenberg, who is said to have mortgaged almost everything he owns to play with the big boys. Yet their combined $100m gives them two-thirds of the profits, and 100 per cent of the voting stock. Major potential investors have said they want no part of it, the magazine claims.

This is unlikely to worry Messrs S, K, and G, who have so far had no problem raising investment. (Spielberg told one journalist that investors were queuing up "like stacking time at Kennedy airport"). Their biggest financial coup was the decision by Paul Allen, co-founder of the software giant, Microsoft, to invest $500m of his estimated $3.9bn fortune in return for a 20 per cent stake.

Allen's involvement has surprised some analysts, not least because it remains unclear exactly what he has bought. We know that DreamWorks hopes to be an integrated multi-media empire, which will crank out movies, television programmes videos, CDs and tapes, interactive toys and games, CD-roms, and more. We know its founders aim to position themselves to cash in on every conceivable opportunity the multi-channel 21st century may offer - retaining as much control as possible of their products wend their way down the Information Highway.

But that's about it. The rest still lies in the realm of crystal ball gazing. "You are dealing in the arena of the unknowable, that's why when you talk about these things you have to believe," says Peter Dekom, a Hollywood entertainment attorney and analyst. "If you don't believe, you have no business investing in this deal. And if you do believe, then you understand, and you are in for a very, very interesting ride."

Hollywood hates this; it hates not knowing what is going on. So it is hardly surprising there are suggestions that it is already getting impatient with the lack of action, although much of its criticism is delivered anonymously ("even enemies of Spielberg won't admit to being enemies these days," one source told me). Not that the conglomerate has been idle: there has already been a $200m deal with Capital Cities/ABC to create a new television studio; it has sold TV rights to all its movies for 10 years to Home Box Office, a US cable channel, and it has announced the formation of a $30m interactive media company with Microsoft, the software giant.

And more developments are in the offing. There's talk of some form of a relationship with George Lucas, maker of Star Wars. John Malone, America's largest cable TV operator, has expressed an interest in becoming involved in the enterprise. The team has made clear it is intending to release eight to 14 feature films a year (compared with the 23 to 30 from the larger studios). There is widespread speculation about a distribution alliance with MCA (although this is less probable now following its recent sale to Seagram) or Warner Bros.

But Tinseltown has more waiting to do before it sees any tangible results. There will be no DreamWorks movies this year, although plans have been laid for its first animated film The Prince of Egypt, a story about the Ten Commandments which is due for release in time for Christmas 1998.

As the movie industry frets and fidgets, speculation is growing over whether DreamWorks will do much to change the landscape. When the trio announced that it was setting up a major studio/entertainment conglomerate, Spielberg talked optimistically of creating a playground for film-makers, implying that there would at last be a departure from the era in which the movie business was controlled by corporate big cheeses in New York and Japan. Not everyone believes him.

"In truth, DreamWorks is answering to Wall Street, just like everyone else," says one film-maker, "You can't raise $2bn and not be answerable to the international markets. This is big business, and it is disingenuous to pretend otherwise."

But for the many freelances who hawk their wares from studio to studio, the prospect of a new door to knock on, a new market that could help to push up prices, can only be good news. "The fact is they really have money," says Michael Tolkin, who wrote The Player, Robert Altman's brilliant satire on Hollywood. "That means they can really make movies. As long as there's an entertainment company with money, no one looks askance ... Everyone expects DreamWorks will get the first look at a lot of screenplays for a while."

There are, however, many in Tinseltown who remain unconvinced that the new company will automatically succeed, or that it will necessarily constitute much of a threat to the major studios, even though it seems inevitable that it will poach talent, particularly from its founders' old stomping grounds, Disney (Katzenberg) and MCA/Universal (Spielberg and Geffen).

It has excellent prospects - talent, money, and big names. But, ultimately, its success will be determined by the same rules that have governed Hollywood since film-makers first moved to the Pacific coast before the First World War, attracted by the perfect movie-making conditions provided by wide blue skies and glorious sunshine. Can they produce hits?

"You know what?" says a senior studio executive and former Spielberg colleague. "It is always a crap shoot. Launching a studio is hard, very hard. Not very many people have pulled it off. The jury is definitely out. But if anyone is going to succeed, it's gotta be these three guys."

Profile: Edward Bronfman, page 24