Why DreamWorks’ Jeffrey Katzenberg Sold His ‘Baby’

by
Michal Lev-Ram

@FortuneMagazine

September 14, 2016, 8:20 AM EDT

It’s hard selling your baby—and by that I mean a company you founded, not an actual baby.

Take Jeffrey Katzenberg, the former CEO of DreamWorks Animation dwa . He started the studio back in 1994 (it was originally part of DreamWorks SKG, which he founded with famed director Steven Spielberg and music mogul David Geffen). The animation studio went on to produce 32 films, including Shrek and How to Train Your Dragon. There were also some duds along the way, but the end result was a fruitful one: Last month, the company sold to Comcast for $3.8 billion. Katzenberg, meanwhile, walked away from the deal with an estimated $400 million. The only catch? He says it wasn’t his plan to leave—a condition of Comcast’s cmcsa .

I profiled the longtime studio exec in the most recent issue of Fortune. “Of course,” he told me when I asked if selling his company was hard. “It’s my baby, and I’ve spent 22 years here. My work is my happiness and my happiness is being here at DreamWorks.”

The $400 million or so that he received should help soften the blow. But for many CEOs—especially those who start and stick with their offspring well past infancy—walking away can still be tough. Katzenberg’s recipe for reinventing himself now that the longest-running chapter of his career is over? Speed. He has already thrown himself into the next venture: running his own investment firm, which he says will focus on the convergence of media and technology. And while the transition isn’t pain-free, he doesn’t look back, and wastes no time being nostalgic or remorseful.

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Letting go and moving on is an important lesson for all CEOs. Of course it’s easier if you’re driving away in a white Tesla Model S, like Katzenberg. Or leaving with a massive golden parachute. But even some of those privileged execs take way too long to exit. Silicon Valley is no different. Yes, founder CEOs who are still running the show are revered for a reason. But sometimes, the best thing you can do—for yourself as well—is to walk away. Go start another baby.

Here’s Why Hasbro Just Bought An Animation Studio

by
Michal Lev-Ram

@FortuneMagazine

July 13, 2016, 4:56 PM EDT

Hasbro has been drawn into animation.

On Wednesday, Hasbro has announced it had acquired a 16-year-old Irish animation studio called Boulder Media. The deal, which will give the toy maker its first in-house animation studio, has already closed, though terms of the transaction weren’t disclosed. Boulder produces a variety of series for Cartoon Network, Viacom’s viab Nickelodeon, Disney dis , and BBC.

“With Boulder, we will deliver the highest quality animation that will engage our audiences with deep storytelling and great characters in a very cost-efficient manner,” said Hasbro President and Chief Executive Brian Goldner.

The acquisition makes sense. Goldner has steered Hasbro has , which owns dozens of well-known brands including Transformers, My Little Pony, and the Monopoly board game, more toward Hollywood, since becoming CEO in 2008. Goldner has sought to ink deals with major studios to bring those properties to the screen, albeit with mixed results. Transformers films have performed well, but movies based on the G.I. Joe and Battleship properties did not bring in big audiences.

Still, Hasbro is pressing ahead. It’s angling to release films based on Candy Land and Monopoly board games to the big screen.

On the animation front, Hasbro could perhaps lean on Boulder to internally produce animation series where it has had more success, in particular for My Little Pony.

All of these investments in content is important for Hasbro to sell the goods it manufactures, as hit TV shows and movies help fuel sales in the toy aisle. Just in the past two years the toy industry’s sales were propelled by two hit movies: Frozen and Star Wars. Investing in content is critical.

Hasbro had previously angled to buy a larger studio, DreamWorks Animation dwa . But that deal was nixed in large part because of Hasbro’s closer ties to Disney, which is a rival to DreamWorks. That property ended up selling to NBCUniversal for $3.8 billion.

Hasbro on Wednesday said Boulder would retain its brand and report to Stephen Davis, who leads Hasbro’s entertainment and consumer products licensing division. Davis said the deal would allow Hasbro to “expand our animation and storytelling capabilities even further.”

Comcast Confirms It’s Buying DreamWorks Animation

by
Michal Lev-Ram

@FortuneMagazine

April 28, 2016, 10:35 AM EDT

A day after declining to discuss deal “rumors or speculation,” Comcast on Thursday confirmed reports that it is buying DreamWorks Animation in a deal that values the animation studio at $3.8 billion.

Under the agreement, Comcast CMCSA will pay $41 per share in cash for DreamWorks DWA , representing a premium of more than 51% over the studio’s closing price on Tuesday, the day before reports first surfaced that Comcast’s NBCUniversal division was in deal talks with DreamWorks.

Hollywood executives Jeffrey Katzenberg and David Geffen, along with director Steven Spielberg, founded DreamWorks in 1994, and the animation studio was spun off in 2004. Katzenberg now serves as CEO of DreamWorks Animation, which is best known for massively successful animated franchises such as the Shrek, Madagascar, Kung Fu Panda, and How to Train Your Dragon. DreamWorks also has a large library of television content and recently expanded a deal to create content for Netflix NFLX .

In a statement, NBCUniversal chief Steve Burke called DreamWorks Animation “a great addition” to Comcast’s studio division. “DreamWorks will help us grow our film, television, theme parks and consumer products businesses for years to come,” he said.

Merging DreamWorks’ animation properties with Universal’s existing film and television operations is expected to help the combined company better compete with larger animation rivals— namely Walt Disney DIS . As Fortune reported yesterday, Comcast’s NBCUniversal division reported a rough quarter for its film and broadcast units in terms of operating cash flow, with movies like Ride Along 2 and Hail, Caesar! disappointing at the box office.

The deal is expected to close by the end of the year, at which point Katzenberg will stay on as chairman of a new division focused on tech and digital video, DreamWorks New Media, and as a consultant to NBCUniversal. In a statement, Katzenberg called NBCUniveral “the perfect home” for DreamWorks. “This agreement not only delivers significant value for our shareholders, but also supports NBCUniversal’s growing family entertainment business,” Katzenberg said.

Prior to the Comcast deal, DreamWorks had reportedly been in talks with potential buyers in China, where the animation studio has expanded its presence in recent years. DreamWorks also reportedly discussed deals with Japan’s SoftBank and toy company Hasbro two years ago. During Comcast’s quarterly earnings conference call on Wednesday, Burke called the Chinese entertainment market “a big, big opportunity.”

Universal also recently signed a multiyear distribution deal with Amblin Partners, Spielberg’s live-action film production company that houses the original DreamWorks brand, which is separate from DreamWorks Animation. DreamWorks SKG had a distribution deal with Disney that expires this year.

DreamWorks Shares Climb After Beating Analyst Estimates

by
Michal Lev-Ram

@FortuneMagazine

February 23, 2016, 6:26 PM EDT

Hollywood studio DreamWorks Animation dwa reported a better-than-expected 36.3% jump in quarterly revenue, boosted by the television release of its movie “Home” and higher licensing fees.

Shares of the company, which made the popular “Shrek” and “Kung Fu Panda” movies, rose 10.4% to $23.25 in after-hours trading on Tuesday.

DreamWorks has been reducing its dependence on the volatile feature films business to concentrate on increasing revenue from licensing its original content to media houses and video streaming companies such as Netflix nflx and Verizon Communications’ Go90 vz .

Revenue from its television series and specials business more than doubled to $104.9 million in the fourth quarter ended Dec. 31.

Revenue from its feature film business rose 11.5% to $146.4 million, helped by “Home” worldwide pay television release.

Net income attributable to DreamWorks was $42.1 million, or 48 cents per share, in the quarter, compared with a loss of $263.2 million, or $3.08 per share, a year earlier.

The company took a pre-tax charge of about $210 million in the year-earlier quarter.

Excluding items, the company earned 55 cents per share.

Revenue rose to $319.3 million from $234.2 million.

Analysts on average had estimated revenue of $274 million, according to Thomson Reuters I/B/E/S.

The Makers of ‘Shrek’ Are Getting Into Television

by
Michal Lev-Ram

@FortuneMagazine

December 9, 2015, 4:42 PM EDT

DreamWorks Animation, the creator of Shrek, is looking to move beyond theaters and get into live-action television.

The company is starting a new division in order to find alternative ways to boost revenue, the Wall Street Journal reported.

The move comes as DreamWorks has released a series of films that failed to make a splash at the box office, according to the publication.

“There is an age when animation taps out,” Ann Daly, the DreamWorks president, said Tuesday at a media business conference, according to the Journal. It “would give us the opportunity to run from preschool all the way up to adults.”

Daly added that the investment in the new television division will be less than $10 million. Additionally, she said that DreamWorks is not planning to launch a video-on-demand service.

Fortune has reached out to DreamWorks for comment.

In April, DreamWorks partnered with fast food chain Denny’s to create an app for children looking to color during their family’s meal.

5 more things you didn’t know about Lucasfilm head Kathleen Kennedy

by
Michal Lev-Ram

@FortuneMagazine

September 11, 2015, 2:37 PM EDT

This year’s Fortune Most Powerful Women issue features a profile on one of Hollywood’s most prolific (yet largely unknown) producers: Kathleen Kennedy. The power player has 77 movies under her belt, including some of the biggest blockbusters in recent decades—Jurassic Park, the Indiana Jones series and Schindler’s List, to name a few—but is not a known entity outside of moviemaking’s inner rings. Now, as the head of Lucasfilm and the producer of one of the most anticipated movies in years—Star Wars: The Force Awakens—Kennedy’s own star is rising. But even those who have heard her name probably haven’t heard all of the interesting back stories of Kennedy’s life, from her days as a camera operator to working with director Steven Spielberg to taking over Lucasfilm. Here are five fun anecdotes, uncovered during a lengthy reporting process, that didn’t make it into the profile:

1. Kennedy was once tackled by a Minnesota Vikings linebacker. Back in her days as a camera operator for a San Diego-based TV network (her first job, in the 1970s), she was shooting a football game and running with the camera in order to get live footage of a pass. She didn’t see the linebacker coming. Before she knew it, he hit her right at the ankles and she went flying through the air. “I ended up on national television,” she says. “Luckily I didn’t get killed.”

2. Kennedy and her husband, producer Frank Marshall, initially kept their relationship secret. Why? Spielberg, who had known Marshall for years, had tapped Kennedy to co-produce E.T. the Extra-Terrestrial in the early 1980s. Marshall didn’t want anyone to think that his romantic involvement with Kennedy had anything to do with her getting the job. They were eventually “outed” by none other than Lucasfilm founder George Lucas, who ran into them together at an oyster bar in Palm Springs.

3. Kennedy brought the idea for the movie Munich to Spielberg’s attention. “She’s got great sonar,” says the legendary director, who calls the 2005 flick about the aftermath of the massacre at the 1972 Summer Olympics one of his “favorites.” Kennedy produced the film, which turned out to be a relatively low-grossing but critically acclaimed project for the duo.

4. Lucas’s wife helped convince Kennedy to take the job at Lucasfilm. It was Mellody Hobson, president of Ariel Investments and Lucas’s wife, who helped seal the deal for Kennedy. Shortly after Lucas asked the long-time producer to be his successor at Lucasfilm, the friends were all out at dinner in Chicago. “I had left the table to go to the restroom and she followed me,” says Kennedy. “I turned around and she grabs my arm and goes, ‘Kathy, you have to do this.'” Shortly after, Kennedy officially agreed to take the job. Hobson, who is on the board of DreamWorks Animation, has been an unofficial advisor to Kennedy.

5. Kennedy met The Force Awakens director J.J. Abrams when he was just a teenager. In fact, she brought him in as an intern while she was working with Spielberg in the 1980s. Abrams, now in his late 40s, had won a student film competition. Kennedy hired him on to help transfer some of Spielberg’s old footage onto new tapes, and kept up with his career over the years. When it came time to hire on a director for the new Star Wars flick, she asked Abrams—who was planning to take some time off—to take the job. He said yes.

Toshiba scandal and Apple’s earnings–five things to know today

by
Michal Lev-Ram

@FortuneMagazine

July 21, 2015, 6:23 AM EDT

Hello friends and Fortune readers.

Wall Street stock futures are mixed this morning, while commodity prices remain under pressure after Monday’s ‘flash crash’ in gold.

Today’s must-read story is by Airbnb executive Nathan Blecharczyk on what Cuba’s economy needs most now. On Monday, the American flag will stand on Cuban soil for the first time since 1961, and Blecharczyk looks at what we can do to support local entrepreneurs on the island.

Here’s what else you need to know today.

1. Toshiba’s CEO steps down after accounting scandal

One of the biggest corporate governance scandals in Japan’s history claimed the scalp of CEO and president Hisao Tanaka. Tanaka said he would step down after a report into the company’s accounting found it had overstated profits by over $1 billion over the last six years.

2. How well is the Apple Watch selling?

Apple AAPL reports its third-quarter earnings today after the market close. Professional and amateur analysts alike foresee a positive result for the tech giant, despite a recent report from research firm Slice Intelligence that said sales of the Apple Watch have slipped since its April launch. Though, another analysis showed that customer satisfaction with the gadget is off the charts. The device was the first all-new product launched since Tim Cook took over as CEO. According to a consensus estimate from nearly 450 mostly anonymous amateur Apple analysts, the company is expected to report earnings of $1.86 a share last quarter, up 45% year-over-year.

3. A Microsoft update.

The world’s largest software company will also reveal its quarterly earnings, though it likely won’t leave its investors as thrilled as Apple’s shareholders. Microsoft MSFT is expected to post a drop in fiscal fourth-quarter sales given declining demand for its operating system as PC users wait for the release of Windows 10 in late July. The company has been shifting its focus to its cloud-related offerings under CEO Satya Nadella, while also looking to turn the tide on its core Windows business which has faced waning sales. Microsoft also announced another round of massive layoffs in early July–the second since Nadella took over the top post in February 2014.

4. Verizon’s new media push.

Verizon Communications VZ , a Dow component, is also up to report quarterly earnings today. Look out for more information on its new push into mobile video and targeted advertising on the eve of its new online video service launch in partnership with AwesomenessTV and DreamWorks Animation DWA . The new media for the telecommunications giant are meant to unlock new revenue streams, though investors will keep a keen eye out for what this is costing Verizon as competition heats up in the wireless industry. Also, listen for more details on its recent $4.4 billion purchase of AOL in June.

5. Yahoo’s Alibaba plan.

Yahoo YHOO rounds out a full-day of tech company earnings when it reports its second-quarter earnings after the market close. The online search and advertising company is expected to show earnings of 18 cents a share, down from 37 cents a share a year earlier. Yahoo has been struggling to keep up with competitors like Google GOOG and Facebook FB by pursuing acquisitions and product revamps, though those efforts haven’t reversed its fortunes. Yahoo’s stock is down more than 20% so far this year. Investors will be searching for more answers as to how the company plans to spin off its $30 billion stake in Alibaba BABA , which is responsible for nearly three-quarters of Yahoo’s market value.

Even in bad years, media CEOs get a raise

by
Michal Lev-Ram

@FortuneMagazine

May 7, 2015, 5:57 PM EDT

It’s no secret that executive compensation doesn’t always reflect company performance. CEOs often wind up with a pay raise even when their company’s annual results weren’t so stellar.

On Thursday, The Hollywood Reporter looked at nine large media companies and found that six of them saw their share prices fall in 2014. Of the six companies with slumping shareholder returns last year, only two had CEOs that took a pay cut: Les Moonves, of CBS Corp. CBS , and Jeffrey Katzenberg, of DreamWorks Animation DWA .

THR‘s report pulls from the companies’ own publicly-disclosed executive compensation figures, which include base salary as well as stock, other options, and bonuses. CBS’ Moonves saw a 15% decline in his annual compensation in 2014, to $57.2 million, while CBS’s shares lost 12% of their value last year. Katzenberg’s 2014 compensation, meanwhile, dropped 53% as DreamWorks’ stock fell 37%.

THR also noted that Discovery Communications DISCA Chief Executive David Zaslav received the highest 2014 compensation from a group of CEOs at nine companies that also includes AMC Networks AMCX , Netflix NFLX , Comcast CMCSA unit NBCUniversal, Time Warner TWX , Viacom VIA and The Walt Disney Company DIS .’

Zaslav earned $156.1 million last year — more than triple his compensation from a year earlier — including a $3 million base salary, with the rest coming in the form of stock and options. Meanwhile, Discovery, which runs cable channels such as Animal Planet and The Discovery Channel, saw its share price plummet in 2014 even though full-year revenue increased 13%, as domestic ad sales dropped.

Earlier this year, 21st Century Fox FOX denied reports that it held negotiations with Discovery for a potential takeover.

Another media CEO with a big payday last year was AMC chief Josh Sapan, whose compensation more than tripled to $40.3 million while AMC’s stock was down nearly 5% for the year. AMC’s full-year revenue jumped by more than $2 billion last year, but profits were down 10%.

For more about negotiating salaries, watch this Fortune video:

Here’s how much it costs to put your name on a New York City building

by
Michal Lev-Ram

@FortuneMagazine

March 5, 2015, 3:59 PM EDT

Ever wonder what the price tag is to have your name splashed across a building? In New York City, it’ll set you back about $100 million.

Entertainment mogul David Geffen will get to rename Lincoln Center’s Avery Fisher Hall after donating that figure to help renovate the facility—home of the New York Philharmonic—the New York Times reports. While the $500-million renovation isn’t scheduled until 2019, the building will be renamed David Geffen Hall later this year.

“It was a quick yes for me,” Geffen recalled of learning his contribution made him eligible to rename the auditorium. The Fisher family gave up its naming rights to the facility last November, the Times reports.

Geffen and two others founded DreamWorks studios in 1994. Prior to the film business, he was involved in creating several record labels.

Jeffrey Katzenberg: ‘Do Good—Just Don’t Do Too Good’

by
Michal Lev-Ram

@FortuneMagazine

September 3, 2014, 5:21 PM EDT

DreamWorks Animation CEO Jeffrey Katzenberg recalls the summer of 1994 like it was yesterday.

Katzenberg was chairman of The Walt Disney Studios DIS , a role that included reviving its animated film business. And revive it he did. Come 1994, Walt Disney Studios was back on top: “The Lion King” was the No. 1 movie, the top-selling soundtrack with 25 million albums sold, and a blockbuster video game developed by Sega. Oh, and the No. 1 TV show — a half-hour family sitcom called “Home Improvement,” with Tim Allen—belonged to Disney, too. But all that success did little to stop ex-CEO Michael Eisner from firing him over irreconcilable differences.

The lesson learned? “Do good—just don’t do too good,” quipped the 63-year-old Hollywood exec onstage at a conference hosted by online file-sharing startup Box on Wednesday. Katzenberg is now CEO of DreamWorks Animation DWA , the Glendale, Calif.—animation studio he co-founded with media moguls Steven Spielberg and David Geffen in 2004. Not every film has performed well at the box office—this March’s flop, “Mr. Peabody & Sherman,” cost the studio $57 million in the first quarter—but the studio has also produced blockbusters like “Shrek 2” and “Shrek the Third.” And its most recent film, “How to Train Your Dragon 2,” crossed the $600 million mark in ticket sales this weekend.

The process by which Katzenberg and his studio go about making movies follows a general philosophy he’s followed for decades. “The one thing I always tried to do a little bit better than what I was expected to do,” he said. “When I go into a situation, whether it was an assignment I had, whether it was as a gopher [years ago], retrieving a danish for someone, or when I come into a staff meeting, I think about how I can exceed expectations and have people walk out of those engagements thinking, ‘well, that was a little bit better. I didn’t expect that.’ When people walk into any product or movie of ours, we want it to be a little bit more than what they were expecting. We don’t always succeed, but we really try hard.”

Case in point: Katzenberg’s 40th wedding anniversary with wife Marilyn isn’t until early next year, but the exec is already plotting a surprise for her. “I’m already working on how in the hell am I going to exceed her expectations,” he mused. “So, if you can you exceed the expectations of those people you’re in business with, almost every single time you will win.”

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