The 1991 memo that predicted Hollywood’s future

In 1991, Jeffrey Katzenberg penned a legendary memo that called the future of Hollywood - and inspired Jerry Maguire. But what did it say?

On 11th January 1991, the-then head of The Walt Disney Company’s motion picture division, Jeffrey Katzenberg, sent out a memo. Running to over 10,000 words, he sent this document to key higher-ups at the studio, noting that “it is meant for internal use only”. Naturally, the memo leaked, and was widely ridiculed in the Hollywood trade press as a consequence. Thanks to the wonderful Letters Of Note, you can read it in full here.

If parts of this sound familiar, then it should: Cameron Crowe used Katzenberg’s memo, entitled ‘The World Is Changing: Some Thoughts On Our Business’ as the basis for his 1996 hit, Jerry Maguire.

But re-reading Katzenberg’s memo, over 20 years later, the now head of DreamWorks Animation called a lot of things right. In fact, given that as he wrote it, Disney was in the business of releasing over 40 pictures a year into cinemas, an awful lot has changed. So what did he predict, and what actually happened? Glad you asked…

It’s worth noting before we get going that Katzenberg wrote his memo in the aftermath of 1990, when Disney topped the box office charts, but at a cost. It spent heavily on Dick Tracy, which just about recouped its costs, but as Katzenberg noted, “our number one status was far from a sign of robust health. Instead, it merely underscored the fact that our studio did the least badly in a year of steady decline for Hollywood”.

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The “Yes, But” Strategy

Katzenberg lamented the fact that Disney’s strategy had moved between 1984 (when the new management team joined the studio) and 1990 from ‘singles and doubles’ to a ‘yes, but’ philosophy. Singles and doubles was the old way, with a focus on lots of smaller projects that do reasonably well with the occasional home run, rather than big ones that need to be huge hits to bring in profit. However, ‘yes, but’ will sound extremely familiar.

Specific examples that Katzenberg cites? “Yes, he’s expensive, but it’s a great opportunity for us”, “yes, that’s a lot to spend on marketing, but we have too much at stake not to” and “yes, the sequel will require a big budget, but it’s a potential franchise”. “There should always be room for exceptions to the rules, but of late the expectations seem to be the rule”, he noted. Ironically enough, Katzenberg now presides over DreamWorks Animation, which – along with the Hollywood majors – primarily seems to work on a ‘yes, but’ approach. In fact, particularly for those following the Hollywood trendsetters, ‘yes, but’ appears to be the main driving idea.

When Budget Trumped Storytelling

Moving on, you can’t help but nod your head when Katzenberg looks back to his arrival at Disney in 1984, and the challenges that financial constraints put on the studio. “We substituted dollars with creativity and big stars with talent we believed in. Success ensued”, he wrote, which led to the moment where “we found ourselves attracting the calibre of talent with which event movies could be made. And, more and more, we began making them”. It’s hard not to read this as a specific nod to Dick Tracy, but in truth, it covers Disney’s output from 1998’s Armageddon onwards too.

“Others will scramble for higher and higher ground, spending feverishly to keep their noses above water”, he argued, in an impassioned plea for trying things a different way. “We, on the other hand, have the internal talent, creativity and absolute ability to control our own destiny. With this strength, we can plunge in and successfully find our way no matter how strong the current”.

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Over 20 years later, that particular battle seems all but lost. The majority of tentpole pictures have price tags closer to $200m than Dick Tracy‘s of a now-economical $46m.

A Need To Return To Roots

It wasn’t just Dick Tracy that had proven expensive in the year leading up to this particular memo. In the year before, other studios had had expensive disappointments, and Katzenberg cited films such as Havana, The Two Jakes, Air America, The Bonfire Of The Vanities and Another 48 HRS as examples. In the light of those, he noted that “if a return to our roots will entail the risk of acceptable failure… if we remain on our present course, there will be the certainty of calamitous failure”.

Katzenberg certainly did his damnedest, but too often, he struggled to buy a hit. Whilst Disney’s animated delivered throughout most of the 1990s, big live action breakout hits were in short supply. It wasn’t until the second half of the 90s, and mainly with the help of Jerry Bruckheimer, that it started to score a few. By the end of the 1990s, it was firmly back in the movie star game, although it also nurtured the massive breakout success of The Sixth Sense.

Cheaper family films such as Jungle 2 Jungle, Black Check and Operating Dumbo Drop would drop down the priority list as the decade wore on, with the big hits coming with the likes of Con Air, The Rock and Scream from subsidiary labels. The studio would steer more toward such projects throughout the 2000s, with Miramax providing the more prestige fare.

Roots, it would be fair to say, were not ultimately returned to.

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The Decimation Of Home Entertainment Prices

Interesting one, this. Written with the economy in downturn, Katzenberg said that “when there is fear and uncertainty, the people have craved bargain entertainment”. He underlined and italicised the word bargain. “Today, a ticket to the movies costs the equivalent of six or seven loaves of bread… on the other hand, that same family can go to the local video store and rent a videotape for a mere $2.00… less than the cost of a loaf of bread”.

His solution, which wasn’t taken up, was to pump up the price for high profile rental titles. In fact what happened, powered by DVD, is that the rental window disappeared within ten years. Online retailing brought in huge discounting, and it’s now routinely possible to pick up high profile titles for three or four pounds, to buy, within a year of release.

What he got wrong here though was his assertion that “the shelf life of many movies has come to be somewhat shorter than a supermarket tomato”. In terms of cinema, he’s bang on, but with the boom in home entertainment, along with streaming services and such like, movies have a much longer shelf life, even if Hollywood studios’ accounting doesn’t really allow for that.

The First Weekend

On a similar point, Katzenberg decried the reliance on a big opening weekend. He called this correctly, and the situation as he outlined it would only get worse.

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“It used to be there was a reliable criterion for a film’s success – whether or not it had ‘legs'”, he wrote. Yet, “with such a make or break emphasis on the first weekend’s numbers, studios have been cranking out highly promoted, big budget films. The logic is that this kind of film is the surest bet for attracting a big turnout for the picture’s opening weekend”. He mourned that the end result of this has been “a paradox”, where “Hollywood has been willing to put tens of millions of dollars on the line with each major release”.

Now? It’s more like hundreds of millions of dollars, and a bad opening weekend for one movie can do serious damage to a studio’s share price.

Using Dick Tracy as an example, Katzenberg argued that the film had done “very well”, but that it was being “savagely disparaged as having failed to achieve Batman-like success at the box office”. This habit of comparing films continues: just last week, Paramount issued a press release about the box office numbers of Transformers: Age Of Extinction. It barely talked about the reaction to the film, aside from the phrase “the fan favorite movie”, and instead spent several paragraphs talking about money, and how it’s compared to the other Transformers films.

In instances like this, the art has long gone, the Excel spreadsheet is king. And it’s getting worse.

Star Salaries

The 1990s were boom and bust as far as movie stars and star salaries went. There are still examples of stars getting very rich from one role, such as Sandra Bullock’s reported $50m+ earnings from Gravity. But this is now down to sacrificing up front salary for back end points, gambling on riskier projects, or simply cutting a fee so it can get made. In the 1990s, Arnold Schwarzenegger would routinely ask for, and get, both a big salary and a back end cut.

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“If a leading star who received $6 million for his last film reads that another star is getting $10 million for a picture, he immediately calls his agent insisting on nothing less than $12 million for his next movie”, Katzenberg noted. This topped out at the $20m club, with the notorious story of John Travolta demanding $20,000,001 to appear in the film Michael (a move that reportedly cost him an Oscar nomination from his fellow actors for Get Shorty).

Later on in the memo, he wrote that “in 1984, we paid Bette [Midler] only for her considerable talent. Now, we must also pay her for her considerable and well-earned celebrity”. Katzenberg coined the term the ‘celebrity surcharge’ to describe this. It’s surprising it never caught on.

“It seems that, like lemmings, we are all racing faster and faster into the sea, each of us trying to outrun and outspend and out-earn the other in a mad sprint toward the mirage of making the next blockbuster”, Katzenberg said.

Eventually, in this instance, something had to give and it did. The movie star model of the 80s and 90s feels, as a consequence, firmly consigned to history, with the stars now being special effects. The irony? Special effects are proving far more expensive than a movie star ever was…

The Idea Is King

The bulk of Katzenberg’s memo is spent on solutions rather than problems, and his thinking does resonate. Because he called for movies where “the idea is king”. In the era where we now sit, of blockbusters that generally make decreasingly story sense, it’s hard not to warm to his call.

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He called for “the courage to search out authentic, great ideas… and then have the steadfastness to control the material that is subsequently developed”. This being Katzenberg, financial concerns were inevitably paramount, as he added that “if the idea and the screenplay are strong, then it is possible to hire a less established star and a less established director and as a result be less of a hostage to the marketplace”, or that big stars and talent who are then drawn tot he material “will agree to terms that are acceptable to us” (translation: work for less).

Yet he wrote this at a time when screenwriters were becoming heavily paid stars in their own right (at least in some quarters), and when named directors were attracting higher and higher salaries. Just over two years later, for instance, Steven Spielberg would tens of millions of dollars richer, just off the back of Jurassic Park (a star-less production). Money saved in one area usually managed to leak out of another.

The temptation is to kick back and spend our hard-won profits on a Basic Instinct or a Richard Donner in the hope that their mere acquisition will lead to continued success. It’s a temptation we’ll keep having to resist”, he wrote.

Disney, ultimately, did not, although it did not make its subsequent changes on Katzenberg’s watch. Katzenberg, at the point where he was overseeing some (not all) of DreamWorks’ live action output, did try to follow the philosophy he’d outlined a decade before, The occasional hit, such as Old School, was very much the standout of a bunch of generally underperforming movies. DreamWorks is now all but out of the live action movie business, save for a couple of titles here and there.

Defining High Concept

“The real meaning of high concept”, argued Katzenberg, “is that ingenuity is more important than production values. This is why we should constantly be looking for creative solutions, not financial ones”.

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Only Katzenberg, as it turned out, ever really believed this, not helped by him tying it to the bottom line again. High concept is routinely regarded, as it was then in fairness, as a film that could be summed up – and thus sold – in a line or two. The most infamous example remains ‘Schwarzenegger. DeVito. Twins’.

Abandoning The Blockbuster Business

This is where Katzenberg effectively nailed the business that Disney – and rival studios – would become, a good decade before they all did. In analysing Dick Tracy, he wrote that “having tried and succeeded, we should now look long and hard at the blockbuster business… and get out of it”.

His argument holds water. Dick Tracy didn’t just cost a lot of money, it also “made demands on our time, talent and treasury that, upon reflection, may not have been worth it”. Effectively he argued that the hidden impact – the stress, the risk, the effort – hurt the studio as much as the final financial bill.

Furthermore, he talked of the impact on the studio’s other films. When so much effort goes into the big films, what hope do the smaller ones have? “This time has to come from somewhere else and it inevitably must come from the less costly projects”, he said.

And he was right. Studios heeded this call too, although they came up with a different answer: they made fewer less costly projects, and kept ploughing on with the big ones. In fact, the landscape today sees most major studios with a ’boutique’ arm through which to shoehorn smaller, cheaper projects, and more often than not aim for an awards run with them. The main machinations of a movie studio are then focussed on eight to ten insanely expensive films a year.

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Katzenberg was prescient too in describing the deal he inked with Cinergi, to co-produce films and co-finance them over a five year period. Ironically, as he said in his memo, Disney at this point was on the verge of signing an alliance (that would prove to be far more successful than the Cinergi tie-up) with Don Simpson and Jerry Bruckheimer, that would deliver some of Disney’s biggest hits of the decade to follow, and some smaller breakthroughs (Dangerous Minds, for one). Now, we have companies like Legendary and Relativity, whose name goes on the poster next to the studio logo. Village Roadshow too. An insurance policy, to protect the ultimate bottom line. But an insurance policy that’s allowing the likes of Legendary to climb ever closer to studio status in its own right.

The big movie that Katzenberg committed to, that “I feel we must continue to make”, had no stars, no gross participants and fully owned, giving it the rights to sequels that it would own. That film, The Rocketeer, proved to be a much loved financial disappointment in 1991. No sequel was ever forthcoming.

Affirming And Uplifting

The point that Katzenberg keeps returning to – aside from cold, hard cash – is that the story should be king. In particular, he called for more stories that were “affirmative and uplifting”, citing Disney hits such as The Little Mermaid, Dead Poets Society and Good Morning, Vietnam.

Interestingly, he contrasted that with the relatively basic story underpinning two 1990 releases, Dick Tracy and The Rescuers Down Under. The story in both, he argued, was “uninvolving”. In fact, he distilled both films down to films about “how these two characters came to make their marriage proposals”. It’s sharp, harsh analysis, but on reflection, there’s a firm ring of truth to it.

Ryan wrote recently about Independence Day, arguing that it ushered in an era where special effects took precedent over logic in a story. Katzenberg pulls it back further. “To compensate for the lack of an emotionally driving core story, the two films showered the audience with dazzling and inventive ‘business’. But much of this failed another test of storytelling – i.e., the movies would still have made sense had many of these scenes been cut”.

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Again, this is a trend that would not go the way Katzenberg wanted, and it makes the moment when you see such a story driven blockbuster as Dawn Of The Planet Of The Apes such a special one. It’s a shame that Apes is the increasingly rare exception.

Pinning Down Writers

If story is king, then studios need writers. Katzenberg saw this, and tried to address it. His ulterior motive also seemed to be to avoid the script bidding wars of the time, though, as he regretted that “agents won’t let their clients sign long-term contracts because the spec script market is too lucrative”. His answer? “We need to somehow find the writers and convince them that an association here is in their interests”, arguing that “the speculative bubble will quickly pop and long-term contracts at a stable studio will regain some of their lost luster”.

They didn’t really, though, and if anything, there’s a culture of celebrity around some movie screenwriters. As ever, the high profile cases shield eyes from the far lower paid scribes struggling to get noticed. Television at least seems to offer some more security, as that’s where the longer term contracts are likely to be found. But even so, the day Hollywood started paying $1m+ for spec scripts burnt a proverbial bridge to the old days that’s never been fully rebuilt.

Cheap Talent

As Katzenberg’s memo headed for its final pages, he returned to his push for talent. “Since we’re not willing to offer talent top dollar”, he wrote, “we can offer something no less tangible – a genuine concern for their careers”.

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It’s hard not to read that sentence and put the emphasis more on the first half of it than the last in truth, and the erosion of the old studio system also makes something of a mockery of it. Especially as two paragraphs later, Katzenberg notes that “this does not mean offering talent total creative freedom”. Instead, “it means offering them a framework in which they can be challenged, nurtured and have a real shot at success”. So, a lower bill, and we’re still in charge.

The rise of the independent production company in the 20 years plus since Katzenberg wrote those words clearly impacted on his intentions and – in line with many industries – movie studios became far more interested in short term contracts than long term commitments. Sure, there are still vestiges of the old ways – Warner Bros likes to ink longer term deal with key directors, for instance – but Disney eventually had to throw in the towel a little, and pay up for the names it wanted.

“To make it all work requires that we pay maniacal attention to every facet of our operation”, said Katzenberg, acknowledging that “this hands-on approach may be a source of irritation to some”. It was.

It should be noted that, against the thrust of what Katzenberg’s words on the surface appear to be saying, he uses the word ‘talent’ frequently as if it’s a commodity, rather than something individual. Granted, this may be more his reputation coming through: he’s renowned as a man who can tell you how much each of his productions has earned. But for all the ambition of his memo, the key theme continues to be ‘we overspent on Dick Tracy, we ain’t doing that again’.


Katzenberg raises lots of other issues across the memo. That kids films should be family films, that people should have access to the higher-ups at the studio, and that consideration should be made for how material will look on small screens as well as large. But then he ends on the section that was most lampooned: passion.

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“It is magical for the audience, and it should be magical for us”, he argued, before switching the attention to himself.

“Passion is the only word that can explain why one would choose to burrow through 10-15 scripts every weekend on the chance of uncovering something great. Passion is the only word that can explain why one would spend a 60-hour week at a studio and then, for fun, on the weekend go see three movies. Passion, however misdirected, is the only word that can explain why a lot of otherwise rationale individuals would get caught up in the blockbuster mania that has engulfed our industry to such lemming-like effect”.

A spoof version, substituting the word ‘passion’ for ‘greed’ swiftly did the rounds in Hollywood.

But then is that fair? Katzenberg is no great filmmaker, nor would he contend to be. He’s always been at the business end of the movies, and is to this day. And yet he’s shepherded, and fought for, many interesting projects. He still does, and he continues to be successful in a business where many people who, er, ‘didn’t get on with him’ have taken a back seat.

What’s interesting though is that Katzenberg, in large parts, was right about the questions he asked in his memo, even if he regularly missed the mark on the answers. His solutions were idealistic, and in his remaining years at Disney, he would try and implement them. But it never really gelled in the way he envisaged, and when Joe Roth ultimately came in to head up the live action slate, he gambled – and generally succeeded – in just the kind of area that Katzenberg had cautioned against.

Katzenberg would leave Disney a few years later, with his failing relationship with CEO Michael Eisner ultimately at the heart of it. It’s hard to think that the memo helped in that regard, and Katzenberg would settle his eventual lawsuit against the studio for a reported $250m, money he used to help finance DreamWorks, alongside David Geffen and Steven Spielberg. It’s interesting, looking back, at just how much he called correctly. Not for the first time though, the person speaking bits of truth was the last person to be listened to…

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