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The CalPERS alliance also needs a massage. The pension fund's board of directors was to vote last week on DreamWorks' proposal; that didn't happen. "We did not go on the agenda of CalPERS," Katzenberg explains, "because we were not able to agree on a term sheet by the deadline. CalPERS is continuing to pursue this with us, as we are with them. But it's not set yet."
There may be a reason for this. Dale Hanson, head of the venture firm American Partners Capital Group and, until last year, ceo of CalPERS, offers a couple of caveats: "You have to ask yourself who will monitor the investment. The motion-picture industry has its own unique system of accounting. And it has big ideas on how to work with 'other people's money.'" Hanson mentions the experience of Massachusetts' state-employees pension fund: it lost money investing in Weintraub Entertainment, the short-lived studio that produced such epics as My Stepmother Is an Alien.
The notion of studio is at the heart of Spielberg's dream for DreamWorks. Since he sneaked onto the Universal lot 27 years ago, Spielberg has rented studio space. Now he wants to own. While Geffen and Katzenberg attended to the salesmanship, Spielberg designed his dream movie studio. It looks more like a campus than the mass of Brobdingnagian barracks that is the typical film-production center, and it would cost about $200 million. Spielberg's partners would rather wait to build a studio after some movie and TV revenue has come in, but they have deferred to the director. They know he needs his ideal home of the future.
The company means to be forward-looking in every respect, from the fantastic toys Spielberg plans to create ("I want them to drive parents crazy") to the method of getting its movies to the public. "DreamWorks has the opportunity to create a whole new distribution system that may be a vast improvement over the old one," says George Lucas, who might be persuaded to allow the new company to distribute his next Star Wars adventure, due out in 1998. "But it's still a high-risk game. If you want to head off in this new direction, you have to be light enough on your feet so you can make faster moves. Aligning yourself with companies like Microsoft may help, but if Microsoft can't jump fast enough, you may have just tied an anchor around your feet." . "On a lot of fronts, especially delivery systems, it's going to be a big, intense and probably very bloody battle over the next six years."
Today's media industry--which produces movies, music and TV shows, delivered in stores and theaters, over the air and cable and via cassettes--is basically the same as a decade ago, when Spielberg's mentors, Sheinberg and Steve Ross, ran their empires at Universal and Warner and when Michael Eisner was leaving Paramount for Disney and taking the faithful Katzenberg along with him. But a decade from now, who knows what the formats and delivery systems will be? Crystal-ball companies like DreamWorks and Microsoft have to bet billions on guesswork, have to figure out how to divide the territory in a land yet to be charted.