Brainstorm Tech video: Katzenberg on the future of movie watching

July 19, 2011: 8:12 PM ET

Dreamworks CEO Jeffrey Katzenberg sat down with Fortune's Andy Serwer to discuss 3D technology, joining the Zynga board, and why movies suck this summer.

Below is an unedited transcript

ANDY SERWER:  Good afternoon, again.  Please join me in welcoming Jeffrey Katzenberg, who is, of course, the co-founder and CEO of DreamWorks Animation SAG.  And you all know Jeffrey as a movie studio executive, but he's actually a lot more than that.  He's a very thoughtful manager.  DreamWorks is constantly at the top of ‑‑ (squelch) ‑‑ me or you?

JEFFREY KATZENBERG:  Maybe it's us together.

ANDY SERWER:  -- constantly at the top of best companies to work for, and Jeffrey is also a keen student, and also user of technology, and an observer and a user, practitioner, I should say, of technology.  Jeffrey, you have also been described by my boss, who is good with a turn of phrase, John Huey, as the Billy Graham of 3D.  And like, hallelujah, 3D is coming, and 3D did come.  But I'm wondering if you think that the bloom is off the rose a little bit with 3D.  Did it kind of go up?  Is it kind of going down?  Where does that particular endeavor ‑‑

JEFFREY KATZENBERG:  Sure.  I mean, well, for sure it came, and for sure the bloom is off the rose for a moment in time, driven by a singular and unique characteristic that only exists in Hollywood, greed.  And, you know, so I think there were, unfortunately, a number of people who thought that they could capitalize on what was a great, genuine excitement by movie goers for a new premium experience, and thought they could just deliver a kind of low-end crappy version of it, and people wouldn't care, or wouldn't know the difference.  And anything ‑‑ you know, nothing could have been further from the truth.

So, I think that it's a ‑‑ I think Hollywood has managed to grasp defeat from the jaws of victory here.  And with time we'll get back there again, but it's only going to come by understanding and embracing this as a creative, storytelling tool, and a way of giving an enhanced movie theater experience, premium experience.  So, our great film makers that are using these tools today, Marty Scorsese, Stephen Spielberg, Peter Jackson, more and more of the really, I think, great users of both technology and great storytelling are now starting to get at it, and they will deliver good experiences to people, and I think it will take us a while, but we'll earn it back.

ANDY SERWER:  So, Hollywood, writ large, seems to be in disarray as well, though, Jeffrey, and I'm wondering if that's sort of a reflection of the smaller problems with 3D, or is it bigger than that?  And what is the problem with Hollywood right now?

JEFFREY KATZENBERG:  Well, there are different parts of Hollywood.  I mean, some parts of it are actually very robust, and doing very, very well, particularly the television business.  You look at the TV business today, cable business in particular, it's on fire.  Really in work being done, great diversity, you know, just ‑‑

ANDY SERWER:  What do you like on television?

JEFFREY KATZENBERG:  Well, I think maybe the best show on TV today is Breaking Bad.  It's just a remarkable show.

ANDY SERWER:  They're meth cookers, huh.

JEFFREY KATZENBERG:  But it's just phenomenal writing, it's interesting storytelling, and it's quirky, and unique, and that's what's exciting about it.  But, frankly, are many, many, many great shows that are television today.  And the marketplace for TV is very strong.

The film business, on the other hand, is extremely challenged right now in ways that I don't think, certainly not in my career in the industry, have we faced.  And it's a sort of perfect storm, if you will, of a number of factors.  The first is that driven by the most stressed economy of our lifetime, you know, this recession made every single person look at and reassess price/value in every aspect of their life.  Proctor & Gamble (PG) deals with it the same way, Wal-Mart (WMT) deals with it, the way movie companies and studios are having to deal with it, which is, is something worth today to me what I'm paying for it.  And people are consciously thinking and making that assessment on a daily basis.  And what happened is, at the moment in time in which they were making those assessments, in particular about owning DVDs, is also the moment in time in which all sorts of new delivery opportunities presented themselves, which, by the way, are still enormously in flux, and you can't ‑‑ anybody that would sit here today and say, okay, well, I kind of understand where this all ends up a year, or 18 months, or two years from now, I think is kind of foolish, to be honest.  There are so many changing aspects about it.  And so we have what is for sure a systemic change in consumer habits with regard to how they consume movies.  And what we haven't yet found is what is that new model.

Now, having said that, more people are actually watching movies today than ever before around the globe.  The question is, how are they going to do that, how are they going to access it, how much of it is going to be through streaming, how much of it is going to be bundled, how much of it is going to be on a per-play basis, how much of it is going to be digital, how much of it is going to exist in the cloud, and we can go on, and on, and on with all of these things, all of which are incredibly real.  And so, right now in the center of that is a change in habits, a change in platform, a change in delivery, and therefore uncertainty and challenges financially.

ANDY SERWER:  Right, and I'm smiling a little bit, because of course it reminds me of another business I know really well.  What about social media and all the incredible success of Facebook and never mind something like LinkedIn, but Zynga, Twitter, don't those take away from people ‑‑ the bandwidth of people going to see movies and being entertained.  Doesn't that hurt you guys, too?

JEFFREY KATZENBERG:  I don't think so, and I actually think that they actually become very valuable allies, if you will, in the world of this.  And a movie experience is a passive experience.  The storytelling narrative is something that I think is still a unique and interesting, and valued experience by people around the world.  And whether it's done in a movie theater or in your home, or on your laptop, or iPad, or whatever the device is, people love that passive experience.  And we see it, again, there's more and more consumption of it.

What all of these devices and social networking things do is they're going to actually force Hollywood to make better products, because today the thing that is probably most askew in Hollywood is the issue of marketability versus playability.  And what that really means is that there is this sort of unholy alliance that has existed forever between art and commerce, show and biz.  And today it's out of balance and it's too much on the biz, and it's too much on the commerce and it's too much on the marketability and the fact is that I'm pretty confident, and let's do it, because this is supposed to be an interactive experience here, which is could we agree?  Let me have a show of hands of people that would say the last seven or eight months of movies is the worst lineup of movies you've experienced in the last five years of your life.

ANDY SERWER:  You know what, I was just talking about that the other day at work.

JEFFREY KATZENBERG:  They suck.  It's unbelievable how bad movies have been, right.  I men, it's just I haven't seen a run of this, a crop of movies ‑‑

ANDY SERWER:  Doesn't that always happen and we always talk about the 1970s, Bonnie and Clyde, I wish we were back then?

JEFFREY KATZENBERG:  Yes, so that's not systemic, that's cyclical.  And it is absolutely there is an ebb and flow that comes on, and there is an action and there's a reaction to it, and yes, they will change and there will be an adjustment that will get made to that.  It's a very entrepreneurial world and I think you will see that right itself with time in it.  But, right now today it's a particularly dreary moment.

ANDY SERWER:  All right.

JEFFREY KATZENBERG:  I'm very upbeat about my business.

ANDY SERWER:  Yes, I know, the Smurfs.  So, listen, you're a grown man, you're a smart guy.  You've been in the business a long time.  The next movie you're putting out is Puss In Boots, okay.  Does it ever strike you as kind of funny that you're sitting here and you seriously talk about Puss In Boots?  Is that weird for you?

JEFFREY KATZENBERG:  Well, no, because I've found something, so here's my little story.  In 1984 I arrived at the Walt Disney Company, 34 years old, I had never been involved in animation in my whole life.  I saw a couple of animated movies as a kid, never studied it, not a student of it, not even particularly a fan of it.  And I have my ‑‑ on the first day I go in and I have a meeting with my boss, Michael Eisner, and I have my list of things to do.  My job is to sort of restart the Walt Disney Studios, which I should say probably start, because there really wasn't much there at that time.

ANDY SERWER:  Animation.

JEFFREY KATZENBERG:  Anything.

ANDY SERWER:  Live action?

JEFFREY KATZENBERG:  Which was the opportunity, by the way, that was what was so interesting to me about it.  So, I go through all my list of things of how to get us going in the movie business, and TV, and animation, and TV animation and all of this.  And I'm walking out the door and Michael says to me one thing before you leave.  I went, okay.  He said, come over here I want to show you something.  And we go over to the corner of his office and he points out his window to a building across the street and he says, do you know what they do there?  And I said, no.  He said, well, that's where they make the animated movies.  I went, oh really?  He said, yes, and that's your problem.  That's my introduction to animation.

ANDY SERWER:  Nice.

JEFFREY KATZENBERG:  So, what went from my problem in a couple of years period of time became my love and my passion, and the thing that is so exciting and so rewarding for me.  It's hard to explain it.  Coming to work for me every day, you've been on our campus, I drive through those gates and honestly I truly believe I am the luckiest person on the planet.  I am surrounded by 2,400 of the most interesting, artistic, creative, state of the art engineering and technology, innovative group of people who thank you for your Fortune acknowledgement in it.

But, the truth is the only way you end up on the Fortune 10 Best List is if people genuinely are passionate and love their work and where they are working.  You can't -- you know this better about this than I do.  I've only come to understand this.  And to have people who -- it's business to me.  If you love your work and you love coming to work, you will do great work.

And so to be surrounded by these -- average age is 29 years old, you know, at the top of their games and their abilities, to be involved in them -- with them in making these stories and making these movies, and using the greatest technology in the world to create visual images that are as rich and complex and interesting that anybody is doing on the planet today, honestly it's thrilling.  When you reduce it down to making a Puss in Boots movie, it maybe doesn't sound so thrilling, but I would like to suggest that you all see the movie when it comes out -- (laughter) -- and you may see why it's so thrilling.

ANDY SERWER:  I heard some good stuff about it.

JEFFREY KATZENBERG:  It's pretty exciting.

ANDY SERWER:  Zynga, you joined the board of Zynga.  Why'd you do that?

JEFFREY KATZENBERG:  Because I want to learn, and I have to say I have found it to be one of the --

ANDY SERWER:  When did you join, by the way?

JEFFREY KATZENBERG:  You know, I've sort of been kind of casually consulting with Mark.  We met about a year or so ago, and then I joined the board in the fall maybe.

And I have to say I have no idea what he's gotten from me, but I can tell you I have gotten so much, I have learned so much from the time that I've spent there.  It's been invaluable to me just in terms of opening my eyes not only to their technology, how they are able to actually interact and engage with their users, you know, where you can see these trends literally as they're going on in front of you, how they're reacting to rollouts of products, things that are engaging them and exciting them, understanding their business model, watching the relationship for how they deal in a world of many competing and fascinating interests that are going on.  You know, when you look at the Google, Microsoft, Facebook models there in terms of what it means, when you look at the potential of mobile and the challenges for them, and it's been thrilling for me, and I have to say he is an incredibly impressive and very, very, very smart guy, and he cares deeply.

ANDY SERWER:  Can I ask one for the lawyers?  Is the stock going to go to the moon?  It just drives me -- this is a pet peeve of mine, because, you know, some people think they -- you know, they file, they're looking to file and they can't talk, and then no one can say anything.  And I just really appreciate the fact that Jeffrey can have a conversation about Zynga and not be scared that the lawyers are going to beat him up, because he can just say, I'm not going to answer that stupid question, Serwer, right?

JEFFREY KATZENBERG:  Yeah, I think maybe to Ajax, the top of Ajax.

ANDY SERWER:  Right, yeah, good!  Oh, careful with that, you'll get yourself in trouble.

I want to throw it open to questions.  We've got a question back here.

QUESTION:  Hi.  Douglas Warshaw, contributing writer, Fortune.

ANDY SERWER:  Uh-oh, alma mater.

QUESTION:  Talking about content, are there things that you use to guide you in terms of what you want a picture -- let's take an animated picture -- to do that -- whether it's one or two things that are always there in your mind and some things that you always want to avoid that you tell the people working for you?

JEFFREY KATZENBERG:  Well, you know, the thing about it is it's a moving target, and that's what's kind of exciting about it is that we're always having -- it still takes us four-plus years, four and a half years to make these movies, and so we will in the next 60 days set our productions for release in 2015.  So, you know, when you think about product development and trying to anticipate, I'm not sure anybody can do that.  I don't think I can, for sure.

So, we're always looking for a great idea, a great story.  You know, people often ask, well, how do you know if something is a great story, and unfortunately I think it's more art than science to that.

I do know that there are some things that just catch people's interest and it doesn't matter, and sort of it works anywhere anyplace in the world.

I have to say every time I ever said the words "Kung Fu Panda" wherever I was in the world somebody would smile and say, "What's that about?"  That to me is a good idea.  Just, I mean, it's not a story, but at least it's something that is going to intrigue people, and it's a place to get started.

ANDY SERWER:  Have you ever had a good idea but bad execution?  There's the two pieces, right, there's the strategy and the execution.

JEFFREY KATZENBERG:  Yeah, you can have a good idea and bad execution and have a success.  I only know of one time that I can think of in the field of animation where somebody had a bad idea and had perfect execution and the movie was breathtaking:  Ratatouille.

So, here's a thing -- the thing is, which is I assure you this is a bad idea.  I'm going to have a semi-realistic rat in a kitchen cooking shit to eat.  (Laughter.)  Now, there's no one in their right mind that's going to say, "Well, that's a good idea."

ANDY SERWER:  Right.  (Laughter.)

JEFFREY KATZENBERG:  It's a bad idea, and it's so beautiful in its execution, it's such a great piece of storytelling, I think one of the great pieces of animation of our time.

So, it's, you know, the home run is when you have a great idea and great execution.

ANDY SERWER:  A question over here.

QUESTION:  Michael Schrage (ph) with MIT.

You were going to launch in the original DreamWorks a videogames outfit, and there was a great deal of conversation about that, and it never really worked out.

Now you're on the board of Zynga, you said you've learned a lot.  Tell us what are the two most important things you've learned from the time you tried, it didn't work out, and now you're really engaged and think you're learning a lot.

JEFFREY KATZENBERG:  I'm not a particularly good gamer, and so I don't -- I have no opinions about the -- you know, I'm good at playing -- I enjoy the product after the fact.

I'm not sure what the second would be.  I will tell you, though, because it's just -- you know, it's one of the really more exciting sort of interesting little tidbits of the genesis of DreamWorks, which is when I got fired from Disney 10 years later in 1994, and after getting the boot I went back to my office, and literally before I had gotten -- because they had put an announcement out about it while I was in the meeting with Michael, so the word had gone out by the time I got back, and even then in the dark ages that kind of news managed to go fast enough out there onto some wire somewhere and some tom-tom drums and somehow or another it got out pretty fast, because when I got back to  my office, I had actually three phone calls.  The first person on the top of my phone list was Bill Gates, who I had actually never met before.  The second person on my phone list was Tom Murphy, who was the CEO of Cap Cities ABC.  And the third person was actually two people on the phone together calling me from vacation in the Bahamas, which were Bob Zemeckis and Steven Spielberg.

So, I got on the phone with Zemeckis and Spielberg, and they were like laughing; they thought this was the funniest thing ever:  "It's great, you're fired, isn't that terrific?"  And I have to say Bob Zemeckis said -- and he doesn't actually -- I don't think I've ever really probably given him enough credit for this.  I have told him this, but I'm not sure he actually -- you know, has like it sunk with him.  Bob Zemeckis said, "Ah, you should just start your own studio," with Spielberg on the phone with me.  "Well, that's a good idea, Bob."

Okay, so -- but the Bill Gates of it was, "Come on up here, love to just have you come hang out up here at Microsoft for a couple days, see what we're doing," which led to us going into the videogame business as an actually joint venture with them 100 years before the Xbox and all of that, and I met Nathan Myhrvold, who hands down is the smartest human being, more degrees of anybody than I know on the planet, and a board member of DreamWorks today.

ANDY SERWER:  Time for one more.

QUESTION:  Michael Caniff (ph), Huffington Post.

Mr.  Katzenberg, a couple years ago, you were just about 100 yards away, and did a great demonstration of 3D.  How soon before it comes in the living room and in the theatre without glasses?

JEFFREY KATZENBERG:  Well, those are two very different things.  It will come into the living room without glasses in an okay way in a very few years.  It will come into the living room in a pretty high quality manner probably in four to six years.  It will probably be the better part of 10 or 15 years before it actually can come into the movie theatres.  It's all about the size of doing it.  Actually, literally the science of being able to deliver a stereo visual experience in that kind of size and quality way is just there are a lot of technical hurdles to doing it, but it will happen in our lifetimes.  Looking around, I think I'm the oldest one in the room, so I think it will happen in my lifetime.

ANDY SERWER:  Great.  All right, we're going to have to leave it at that.  Some great stories, not surprisingly.  Jeffrey Katzenberg.

JEFFREY KATZENBERG:  Thank you.

(Applause.)

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