Jeffrey Katzenberg’s notorious memo: How does it hold up 20 years later?

This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.

In late January 1991, fax machines were humming all across Hollywood, spreading the news that Jeffrey Katzenberg, then head of production at Disney, had written a scalding, often self-critical 28-page memo blasting the movie industry’s “tidal wave of runaway costs and mindless competition.” Hollywood’s “blockbuster” mentality, he lamented, had turned films into assembly-line products with a shelf life “somewhat shorter than a supermarket tomato.”

Sound familiar?

Back then, studio chiefs were still relatively discreet about the inner workings of their business, so Katzenberg’s memo (read it here) was particularly shocking because he named names — not only calling out other studios’ flops but also complaining about the excessive time and energy Disney had put into “Dick Tracy,” the Warren Beatty film whose swollen budget ate up nearly all its profits. Though Beatty was still one of the biggest stars in town, Katzenberg said that the next time Beatty came to the studio with a project, we “should 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.”

The memo, intended only for internal consumption, ended up being printed in full in Variety. The rest of the media quickly leaped in, with the New York Times noting that the memo inspired months of “anger, resentment, debate and jokes within Hollywood.” Bill Murray, appearing on “Larry King Live” to promote Disney’s “What About Bob?,” complained about the memo’s dismissive attitude toward stars. Mike Medavoy, then chairman of Tri-Star Pictures, called the memo “self-serving palaver.” Beatty, who’d been a close friend of Katzenberg’s, stopped speaking to him. Disney Chairman Michael Eisner privately fumed about the leak.

Twenty years later, the memo makes for fascinating reading. It’s clearly one of Katzenberg’s first efforts to transform himself from a dogged production executive best known for a punishing work ethic into an industry strategist and spokesman, a role he has assumed in recent years as the leading proponent for 3-D movies. But what’s even more compelling is how prophetic the memo looks today, especially in the way that it offers an early glimpse into the kind of risk-averse managerial thinking that has come to dominate today’s movie industry.

When I called Katzenberg to ask if he’d discuss the memo, he politely declined, saying that as someone who never watches any of his old films, he viewed it as an unrewarding exercise. “Wild horses couldn’t get me to do it,” he said with a laugh. “I couldn’t get past the first paragraph without breaking into a cold sweat.”

At the time, the part of the memo that received the most attention was its scathing assessment of “Dick Tracy,” which cost nearly $50 million to make, more to market and sucked up hundreds of hours of Katzenberg’s time in dealing with the famously indecisive Beatty, who had dinner with Katzenberg virtually every night during the film’s extended production. The film barely covered its costs while “Pretty Woman,” which starred the then-unheralded (and inexpensive) Julia Roberts, was a breakout hit. It cost a modest $14 million, yet it grossed an astounding $463 million worldwide, then a record for Disney.

Katzenberg and Eisner’s original model for Disney had been to make movies with low-cost stars, so it’s little wonder, after “Dick Tracy,” that Katzenberg advocated reviving that strategy, warning that the studio’s initial success was based on “the ability to tell good stories well,” not on “big stars and name directors.” Katzenberg stressed that the studio should be in control of its own destiny, focusing more on “stories that make us care” than on stars or production values.

Movie stars were bad for business. As Katzenberg put it: “Unreasonable salaries coupled with giant participations comprise a win/win situation for the talent and a lose/lose situation for us. It results in us getting punished for failure and having no upside in success.” His blunt assessment of the “celebrity surcharge” of dealing with movie stars has been adopted today by many studios, most notably at the fanatically disciplined 20th Century Fox.

The memo anticipates some of the biggest changes in studio thinking about making family-oriented movies, especially when you realize that the most successful family movies are animated. But Katzenberg’s memo, for all its prophetic thinking, is laced with a bitter irony: He repeatedly stresses the importance of hiring a stable of in-house writers who felt they had a stake in the studio’s success and could transform Disney into a quality-driven idea factory. But if you were to point to a company that exemplifies that vision of a studio, it would be Pixar.

Pixar has always been three steps ahead of the company Katzenberg went on to found, DreamWorks Animation, both in terms of commercial consistency and awards-season plaudits. And Pixar was such a creative behemoth that Disney ended up buying it for more than $7 billion.

Pixar operates much as Katzenberg envisioned his ideal studio, propelled by a collaborative cadre of brilliant creative minds, including Pete Docter (“Up”), Andrew Stanton (“Wall-E”) and Lee Unkrich (“Toy Story 3”), who’ve served in every capacity at the studio, from story artists, animators and voice actors to writers and directors.

DreamWorks Animation had lots of success, especially with its “Shrek” franchise, but its films are still marketed on the voices of celebrities like Eddie Murphy who, while they don’t get the salaries they earn in live-action films, still often receive back-end payments. Pixar’s films are sold via strong concepts. They cast to character — you rarely see a marquee actor doing a voice in a movie like “Ratatouille” and “Wall-E.”

That’s not to take anything away from Katzenberg, whose thinking has ended up being a big influence on much of present-day Hollywood. But maybe he should consider re-reading the memo after all. Some of DreamWorks’ recent films, notably “Monsters vs. Aliens” and “Megamind,” have felt all too much like “Dick Tracy” when it comes to a focused story and character. What Katzenberg said in 1991 is still true now — for all the appeal of new technology and special effects, the original idea is king.

--Patrick Goldstein