DreamWorks' Katzenberg on the future of movies, Shrek 3

Jeffrey Katzenberg, CEO of DreamWorks Animation, laid out the issues facing the movie business during a panel at AMD's Global Vision Conference. "The rate of change in the industry is unprecedented, and with it comes enormous opportunities," Katzenberg said. "Many of the old school approaches will turn into dinosaurs, and those who jump on the bandwagon will prosper the most."
He explained how the movie going experience is challenged today by other forms of distribution, but more directly from the customer experience in theaters today.  "The environment of movie theaters has been compromised by an enormous amount of advertising," Katzenberg said. "You paid $10 to go to a movie and watch TV commercials that you can watch at home for free--that's crazy." This is also my main complaint about movie theaters. I am willing to pay the $5 for 2 cents worth of popcorn, but I didn't pay to be blasted with commercials. The first rule of commerce--don't alientate the customer.

Some movie theaters are addressing some of the customer experience issues, but most are not the greatest place to be in general, Katzenberg said. Flat screen TVs are also a challenge to the movie theater experience. "It's a life changing experience--the [picture] quality and sound are remarkable," Katzenberg said, citing the flat screen TVs as the number one aspiration purchase among Wal-Mart shoppers. Digital delivery of content is both a challenge and opportunity, putting movie products in the hands of more people with greater convenience and a good value proposition. "At some point the consumer will become more empowered, and will make a decision [on what way to consume movies] for themselves," he predicted. The types of movies that will succeed in the marketplace is changing as well, Katzenberg said. He is still a believer that big family entertainment can be a great experience. "People like shared experience. The long tail doesn't work. If you look at it today, whether "American Idol" or "Pirates of the Caribbean," bigger things are even bigger. Cultural and social connection are part of what entertainment offers. Spoken like a true studio exec. He also mentioned the new Wii Nintendo system, calling it an incredible experience that will revolutionize games and broaden them out. Compared to the forthcoming PlayStation3 and xBox 360, the Wii is a lower cost system that doesn't the envelope on performance, but has a nifty wireless controller.
 

Katzenberg has to trust his instincts in coming up with the kind of entertainment that will keep the head of the tail bushy. In the next two months, he and his team are scheduling movie releases for the second half of 2010 and the first half of 2011. Katzenberg's output at the head of the tail has a long gestation period that will likely be compressed as technology advances and as competition from the longer, faster tail vies for the consumer attention.
Finally, Katzenberg previewed a few minutes of Shrek 3, which is due in theaters in May of 2007. The animation was stunning, with what he called "smushable" fur, a wider array of fabric and clothing patterns, more realistic skin, and more life-like hair. Even the story line was compelling. No doubt, Shrek 3 will go right to the head of the tail as a summmer theater blockbuster, and you will sit through several minutes of unwanted commercials as a bonus feature.