BUSINESS WEEK MAGAZINE

STEVEN SPIELBERG:
THE STORYTELLER
How Hollywood's most successful director sustains his creative empire
July 13, 1998

Steven Spielberg is a busy guy these days. Just back from New York, where he was doing advance promotion for his latest movie, Saving Private Ryan, he is knee-deep in last-minute details. Although the film is to be released in late July, Spielberg is still spending his mornings holed up at the film lab, determined not to sign off on the movie until the World War II epic has the adequately faded look of a 1940s-era documentary.

Spielberg is consumed with making Saving Private Ryan a critical as well as a commercial success. DreamWorks SKG, the studio he created with entertainment moguls Jeffrey Katzenberg and David Geffen, has so far released a spate of unimpressive films, including Spielberg's Amistad. That disappointment has raised anew the question of whether Spielberg can consistently turn out top-notch serious fare along the lines of Schindler's List, which is now five years old. Never a fan of opening nights, Spielberg has drastically cut back the number of people he will allow to see the new film before it is released and has no intention of sitting through the preview himself. ''It's flop sweat,'' he says. ''My stomach can't take it.''

If that were not enough pressure, Spielberg's days are also packed with meetings on the more than 60 other projects he has in development at DreamWorks. On any given day, three conference rooms within steps of his office are filled with studio execs, movie stars, and scriptwriters, all anxiously awaiting Spielberg's arrival. Projects on the boards cover everything from a computer-animated version of The Cat in the Hat children's book to a biography of Charles Lindbergh.

Waiting for Spielberg to walk through the door, as anyone in Hollywood will tell you, is itself considered a privilege. He is easily Hollywood's most successful director and producer, with credits that read like guideposts to an entire generation's pop culture. Beginning with his 1975 summer horror-adventure, Jaws, Spielberg has directed 6 of the 25 top-grossing films, including Jurassic Park, Raiders of the Lost Ark, and E.T., the Extraterrestrial. In an industry where only 3 out of every 10 movies make money, 13 of the 16 films he's directed have been in the black. All told, they've pulled in an astounding $5 billion worldwide. As a producer, Spielberg has brought in another $4 billion.

His talents aren't limited to the movie set. Spielberg has also proven to be one of Hollywood's most nimble entrepreneurs, amassing a business empire that includes video games, toys, even restaurants. It is a measure of his importance to DreamWorks that his partners have given him unusual independence, allowing him to direct and even produce films for other studios. To satisfy his near-obsessive interest in video arcades, DreamWorks created a joint venture with Sega and Universal Studios so that he could provide creative input. ''When we first started DreamWorks, I said to Jeffrey, 'We ought to call this new company the Spielberg Brothers,''' jokes Geffen. ''Anything Steven thinks is important, we want to invest in.''

And invest they have. This summer, DreamWorks will have three films that are expected to do serious box office business (page 102). One, the meteor film Deep Impact that Paramount Pictures Corp. and DreamWorks share, has already passed $240 million. Spielberg is also the creative spark behind six animated TV shows, including five being made by Warner Brothers. On the side, Spielberg is producing another potential blockbuster, The Mask of Zorro, for Sony's TriStar Pictures unit. And he is helping Universal Studios Inc. design theme park rides at its Hollywood and Orlando parks.

His various interests and considerable successes have made Spielberg a vastly wealthy man, with a fortune estimated at close to $2 billion: about $1 billion in studio and other holdings and nearly as much from movie profits. But what keeps someone that wealthy, that powerful, that successful going? How does he sustain his boundless creative energy? Like many artists, he has a gift for tapping his rich inner life. But while his fellow creators are often felled by the knotty problems of the real world, Spielberg has also mastered the art of management. Like the best CEOs, he knows how to inspire, motivate, and delegate. He's even good at managing money.

EARLY START. Spielberg has done all this in pursuit of one overriding goal: to tell as many great stories to as many people as will listen. And that's what he has always been about. The son of a computer scientist and a gifted pianist, Spielberg spent his early childhood in New Jersey and, later, Arizona. From the very beginning, his fertile imagination went into overdrive, filling his young mind with images that would later inspire his filmmaking.

Even decades later, Spielberg says he has vivid memories of his earliest years, which are the origins of some of his biggest hits: He attributes E.T. to the unsettling years leading up to his parent's 1966 divorce, saying: ''It is really about a young boy who was in search of some stability in his life.'' Close Encounters of the Third Kind was inspired by early morning meteor-gazing with his father, a sci-fi fanatic, when he was four years old. ''He was scared of just about everything,'' recalls his mother, Leah Adler. ''When trees brushed against the house, he would head into my bed. And that's just the kind of scary stuff he would put in films like Poltergeist.'' To this day, Spielberg's wife, actress Kate Capshaw, says her husband remains terrified of airplane and elevator rides and closed-in places.

In high school, Spielberg experienced another kind of terror, which would one day help him understand the subject of his film Schindler's List. It was his senior year, and the family had just moved from Phoenix to Saratoga, Calif., an affluent San Francisco suburb. There, Spielberg says, he was tormented by anti-Semitic remarks from his classmates, who would sneeze ''Hah-Jew'' when he passed in the halls. After school, jocks often beat him up. With his parents' divorce looming, Spielberg's grades sank. He barely graduated from high school and was rejected from both UCLA and USC film schools. Settling for California State University at Long Beach because it was close to Hollywood, Spielberg got a C in his television production course. He dropped out in his senior year.

It was all very sobering, especially since Spielberg had long since made up his mind to be a director. The homemade movies he started making as a young boy gave Spielberg a powerful escape from his fears. He was 11 when he first got his hands on his dad's 8-millimeter Bell & Howell wind-up camera and began shooting short flicks about flying saucers and World War II battles. Before long, the entire family was selling tickets and making lemonade for living-room showings. ''It cost me about $50 to make the movie, and I would charge a quarter a ticket, and at the end of the summer I might have $55,'' he recalls today. ''That's kind of the way Hollywood works today, small margins.''

Spielberg's knack for scary storytelling enabled him effortlessly to torture his three younger sisters and made it easier for him to forge friendships. On Boy Scout camping trips, ''I always thought he was a little flighty,'' recalls Richard Y. Hoffman Jr., leader of Troop 294. ''He'd go off in the woods and find a couple of twigs to cook his marshmallows and weenies, and then run off looking at something or another, and his fire would go out.'' But when night fell, Spielberg became the center of attention. ''Stevie would start telling his ghost stories,'' says Hoffman, ''and everyone would suddenly get quiet so that they could all hear it.''

Now 51, Spielberg is still telling stories with as much passion as the kid in the tent. He is ''much more in touch with his subconscious than most people,'' says Joseph McBride, author of the unauthorized biography Steven Spielberg. ''He remembers what went on and its significance to him, and he has an outlet--making movies--that not too many other people have.''

Ask him where he gets his ideas, and Spielberg shrugs. ''The process for me is mostly intuitive,'' he says. ''There are films that I feel that I need to make, for a variety of reasons, for personal reasons, for reasons that I want to have fun, that the subject matter is cool, that I think my kids will like it. And sometimes I just think that it will make a lot of money, like the sequel to Jurassic Park.''

DINNER DRAMAS. Increasingly, rather than living off the fragments of his own subconscious, Spielberg is drawing inspiration from the seven children, aged 18 months to 21 years, who live with him: three from his marriage to Capshaw, one each from previous marriages, and two he and Capshaw have adopted, both of whom are African American.

Like others, Spielberg has changed dramatically as he has settled into fatherhood. As part of his deal with DreamWorks, he leaves each night in time for dinner. There, he presides over a family storytelling ritual: Spielberg throws out the kernel of an idea, then hands it over to one of his kids, who adds a few lines and passes it on to the next. After about 20 minutes and several turns around the table, Spielberg often brings the story to a crescendo. ''Sometimes it ends up funny, sometimes you're crying it is so sad,'' says Capshaw, his wife of seven years. ''But it's never uninteresting.''

None of these tales has made it onto the screen yet, but Spielberg's decision to make Schindler's List, which had been sitting on his shelf for nearly 10 years after he bought the rights, came in large part because of the family. ''He rediscovered his Judaism when he had a family and realized he had something to pass on to them,'' says his wife, who converted to Judaism shortly before marrying Spielberg. ''I think it happens that way in many people when they have families.''

Spielberg continues to make TV cartoons, he says, ''because my kids think I'm cool when I do it.... Maybe when Destry--she's only 18 months old--gets past the cartoon stage, I'll stop.'' Often, he brings home pilots of upcoming shows, movies, and video games to try out on his built-in audience. DreamWorks' first interactive product, the modest-selling Someone's in the Kitchen, was modeled after his daily morning routine of making pancakes and waffles for the family.

Even Spielberg's home office is set up for time with his kids. Along with his parrots, Buddy and Oliver, his snakes, and a fish tank, the home office features a large playhouse in the corner. ''I'll come in, and he'll be crawling around down there with one of the kids, when I know he went in there to try to do some work,'' says Capshaw. Spielberg is the first to concede he has decidedly un-grown-up passions: ''I have a case of arrested adolescence with occasional bouts of existential maturity.''

Of course, when those bouts of maturity do strike, as they clearly did in Schindler's List, the results can be overpowering. Spielberg took three years off after completing the film, just to recover. But sustaining his steady stream of storytelling takes more than just enforced relaxation and family support. There are the headaches that plague any business executive--the financial, logistical, and managerial problems that are all the more daunting because of the gargantuan projects Spielberg often tackles.

Spielberg depends on a small, tightly knit group. The DreamWorks film unit is run by husband-and-wife team Walter Parkes and Laurie MacDonald, both accomplished filmmakers and longtime Spielberg friends. Their job interview? While visiting Spielberg's vacation home in East Hampton, they watched The Apartment, the 1960 Jack Lemmon film. ''Walter began analyzing it, how it worked as a film, and he broke down the characters and the structure,'' says Spielberg. ''And I said, 'My God, you should be running my company.'''

On Thursday mornings when he's not on location, they present Spielberg with their best crop of new ideas and update him on the progress of dozens of other projects already in production. What follows is a brainstorming free-for-all. Spielberg starts off by listening politely, then abruptly interrupts with a series of rapid-fire questions as he gobbles down low-fat cookies. Then he tends to launch into a monologue about where he sees the story going. '''Let me get back to you' isn't in his vocabulary,'' says Parkes. ''He has succeeded for so long on his instincts that he is not afraid to tell you exactly what he thinks.''

When Spielberg likes a project, he sometimes green-lights it on the spot. Although he alone has the authority to commit money to an idea, once he does, things move quickly. Spielberg has a cast of collaborators ready to jump into action. ''There is something special that happens when Steven signs onto a project,'' says Columbia TriStar Vice-Chairman Lucy Fischer, who made 14 films with Spielberg while she was at Warner Brothers and Columbia. ''You know you're going to get the best special effects, the best directors, everything.''

As a director, Spielberg has a reputation for coaxing the best performances out of everyone from small children to stars. ''It's Spielberg, so you work that much harder to please him,'' says Tom Hanks, who plays the lead role in Saving Private Ryan. As a producer, when Spielberg senses the director is on the right track, he stays in the background. ''You can't dictate creativity to someone else, and if you do, the project fails. Steven understands that, which is why we all want to work with him,'' says Robert Zemeckis, who has made such hits as Back to the Future and Who Framed Roger Rabbit? for Spielberg.

For less proven talent, Spielberg pitches in, immersing himself in casting, reworking a script, or devising some special effect. While he often invites comment, even dissent, in the end, his gut rules. On the soon-to-be-released The Mask of Zorro, Spielberg sent in five single-spaced pages of script changes the day after Christmas, even though the studio was shut down. When one of the young screenwriters, Ted Elliot, disagreed with some of Spielberg's prescriptions, Spielberg listened attentively, then overruled him. ''He sent me a memo a couple of days later that in essence said, 'Look, this is Hollywood, this is how it is done.' O.K., so we did it that way,'' he says.

FLOUR POWER. He also gets deeply involved with money matters--especially budgets. That's rare in an industry where $100 million bombs are becoming commonplace and talented directors such as Francis Ford Coppola and Michael Cimino have severely damaged their careers with profligate spending.

As a boy, Spielberg learned that if he wanted to make movies, he had to watch the bottom line. Movie film was expensive, forcing him to edit in his head to save footage, a practice he still employs. To simulate explosions, Spielberg relied on bags of flour hurled into the air.

To this day, Spielberg is always on the lookout for ways to hold costs down. On Saving Private Ryan, the construction crew built a radar facility facing in the wrong direction--straight into the sun. ''A lot of directors might have torn the thing down and started over again, costing someone a heck of a lot of money,'' says Hanks. But Spielberg quickly adjusted the shot he needed, making do with what he had. ''I have never been around a director who works so fast,'' adds Hanks. ''You set up, and he shoots the scene and goes on to the next one. A bunch of us on this movie had directed our own movies, and we all stood around amazed.''

No saving is too small for Spielberg. When he showed up on a set for Amistad, a refrigerator wasn't working, and Spielberg told producer Debbie Allen not to pay for it. But that was the least of Allen's problems. Just weeks before shooting was to begin, Spielberg called up demanding that she cut $20 million out of the already trimmed-down $56 million budget. ''He told me, 'Honey, that film isn't getting made until it has a '3' in front of its budget, so get cutting.'' So Allen scrambled to change most of the shooting from Africa to the Caribbean, and the movie came in on budget.

Spielberg, of course, isn't immune to cost overruns. Jaws, his first big hit, was budgeted at $3.5 million and ended up costing $9.8 million. And both Hook and 1941, two of his less successful films, were vastly over budget. Even so, over the course of his long career he has been on target far more often than most.

Spielberg isn't just good at saving money, he's good at minting it--primarily by cutting ever-smarter deals for himself. Early in his career, he was content to earn a lump-sum fee on each picture he directed--$1 million for Close Encounters, for instance. Then, in 1981, when he directed Raiders of the Lost Ark for George Lucas, he learned to forgo big fees in favor of a percentage of gross revenues. Since then, for each film he directs, he gets close to 20 cents for every $1 that the studio gets. For those he produces, the split is 50-50, after the studio covers its production, marketing, and distribution costs. And then there are the profits from video sales and royalties on merchandise. In the case of Jurassic Park, the movie grossed more than $950 million and Spielberg's take was $294 million.

KINDLY MONSTERS. These days, Spielberg's attentions are drawn to far more than just movie ideas and feature-length films. Thanks again to his clan of kids, Spielberg has assigned two members of DreamWorks' consumer-products unit to report directly to him on new toys for him to turn into animated films or cartoon shows. One, called Igor, was the inspiration for Toonsylvania, a cartoon show about kindly monsters that is now spawning its own toy line.

An even stronger interest for Spielberg is Sega GameWorks, a DreamWorks partnership with Sega Enterprises and Universal to build futuristic video arcades and rides across the country. It was he who designed the dark, warehouse-style interiors of the arcades, and the games and rides that clang away in the cavernous space.

Although he is generally a conservative investor, with roughly 80% of his holdings in cash or other liquid assets, Spielberg is dipping a toe in the raging online world with a 15% stake, or about $10 million, in idealab!, a Pasadena Internet-content company and several associated operations. He also serves as the creative funnel in a joint venture with Microsoft Corp., called DreamWorks Interactive, to make online games. And to sate his appetite for fast food, an affliction he shares with Katzenberg, the two have started two submarine-themed restaurants called Dive!

The last few years have also kindled in Spielberg a philanthropic urge that has him spending big chunks of money and time on issues he cares deeply about. After making Schindler's List, he spent $85 million to support Jewish culture and education. One project: recording video histories of more than 41,000 Holocaust survivors. Spielberg often watches the videos as they're being recorded via a high-speed hookup from his office. As chairman of the Starbright Foundation, which provides online links to children's wards in hospitals, Spielberg has enlisted his Hollywood friends to help raise $40 million. He often visits hospitals, helping ailing children explore new media.

Whatever else he does, Spielberg will always find time for fun. He is an avid skeet shooter, even threatening to take on General Norman Schwartzkopf, who chairs Starbright's capital campaign. And ever the kid, he stops by nearly every day at DreamWorks Interactive to play some of its new video games. Often, he brings one of his kids along for a second opinion. Does he ever worry that he will run out of ideas? ''I don't have enough time in a lifetime to tell all the stories I want to tell,'' says Spielberg. It sounds like the master storyteller is going to be busy for a long time to come.

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